Tuesday, 21 August 2018

Why Shouldn't a Free American Carry Hundreds of Thousands of Bucks in a Trader Joe's Paper Sack?

Entrapment prosecution of bitcoin exchangers highlights government's war on privacy.
Theresa Lynn Tetley has been sentenced to a year and a day in prison, plus a $20,000 fine and three years of supervised release. Her crime: exchanging U.S. currency for bitcoins with federal agents who went out of their way to suggest that maybe they'd gotten their bitcoins by committing crimes. Federal prosecutors say this is the first time a bitcoin-for-cash exchanger will be going to jail for such an act in the central district of California.

The U.S. Attorney's office had asked for a far longer sentence of 30 months in prison. They also, in the course of the arrest and prosecution, stole nearly $300,000 in cash and 25 gold bars from Tetley.

The most telling thing about the entrapment prosecution is the sentencing memo, which blatantly lays out the feds' fear and contempt for any attempt to keep a financial transaction private, whether or not anything inherently illegal is happening.

Whether or not someone doing the honest public service of exchanging U.S. cash for bitcoin is aware that the bitcoin may be the result of some b.s. crime, the sentencing memo insists that they act as if they do. Tetley's failure to "register with the federal government," the memo says,

signaled to her clients that she was unconcerned with the government's regulations concerning money laundering, and thereby would not conduct customer due diligence or report to the government suspicious transactions or certain transactions over $10,000. Customers, regardless of the source of their funds, could then utilize her services, exchange Bitcoin for cash or vice versa, without fear of being the subject of reports filed with the federal government for certain transactions that otherwise would be reported.

Defendant charged a premium to these customers seeking to avoid the regulated financial system, and collected higher fees for her services than those charged by regulated exchangers. For this conduct, defendant has pleaded guilty to 18 U.S.C. §§ 1960 [prohibition of unlicensed money transmitting] and 1956(a)(3) [laundering of monetary instruments].

Convicting Tetley, who provided her services under the name "bitcoin maven" at localbitcoins.com, did not require her to know or think that the cryptocurrency came from selling drugs or anything illegal at all, according to the memo. That was just an "aggravating factor for sentencing."

The document drips with the government's desire to know everything we do involving money. At one point it makes a point of noting that she brought the cash for one of her federal agent customers in two Trader Joe's paper bags, as if that is inherently outrageous to public order.

"Unlicensed exchangers such as defendant generally do not conduct customer due diligence, file transaction reports for cash transactions in excess of $10,000, or file suspicious reports," they claim. (In most cases, such reports merely gives government snoops a chance to know what we are doing, whether or not it is inherently criminal.) Thus, the U.S. attorney insists, "failure to register as a money transmitting business is a serious offense, and not a simple administrative oversight of failing to file a form with the federal government."

In the government's eyes, apparently,

Providing cash in envelopes (and in the significant amounts she did), in coffee shops and restaurants, is no way to conduct legitimate business, certainly when that volume exceeds the millions, and someone such as defendant—a former stockbroker and real estate investor—was certainly aware of that.

That Tetley "proceed[ed] in this manner highlights the seriousness of the offense that warrants a custodial sentence of 30 months."

At least the judge didn't agree with that superpunitive sentence. That the government goes out of its way to criminalize innocent activity because it has the potential to make it harder for cops to do their jobs is heinous. As J.D. Tuccille and I have both pointed out previously in Reason, applying such money transmitter laws to bitcoin exchangers arises not from a desire to make the world safer for honest people who haven't harmed anyone but from a desire to ensure we can't have any financial transactions outside the eyes and arms of the state. It's an ugly sentiment, and the authorities apply it to old-fashioned cash as much as they do to the exotic new financial instruments of the blockchain age.


By Brian Doherty 
source: reason.com 
Legal disclaimer: The insight, recommendations and analysis presented here are based on corporate filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. They are presented for the purposes of general information only, and all the information belongs to the original publishers. These may contain errors and we make no promises as to the accuracy or usefulness of the information we present. You should not make any investment decision based solely on what you read here.

Creamcoin Marketcap