Recently, Trump’s United States Department of Justice (DOJ) decided to sue BTC-e, a crypto exchange, one of the earliest in fact. With the recent developments in Washington and Trump’s comments, this move has raised some alarm bells. This is especially worrying to many as BTC-e is now largely defunct, and going after a closed exchange has made some speculate that maybe the DOJ might go after the early users of Bitcoin. The DOJ has filed a $100 million civil complaint against the digital currency exchange BTC-e and Chief Owner-Operator Alexander Vinnik, but the story has some really interesting twists.
The complaint seeks to enforce monetary penalties FinCEN assessed against BTC-e and Vinnik for alleged violations of the Bank Secrecy Act (BSA), 31 U.S.C. §§ 5311-14 and 5316-32. The Department of Justice filed a civil complaint in federal court against digital currency exchange BTC-e, also known as Canton Business Corporation, and one of its chief owners and operators Alexander Vinnik.
According to the complaint, FinCEN assessed penalties based, in part, on the following conduct:
- Failure to Register as an MSB: BTC-e did not register with FinCEN as a Money Services Business (MSB). The BSA defines an MSB and requires, among other things, MSBs to register with FinCEN within 180 days of beginning operations.
- Failure to Establish Anti-Money Laundering Programs and Procedures: Under the BSA, an MSB must develop, implement, and maintain an effective anti-money laundering (AML) program that is reasonably designed to prevent the MSB from being used to facilitate money laundering and the financing of terrorist activities
- Failure to File Suspicious Activity Reports: Under the BSA, an MSB must file a suspicious activity report (SAR) if it becomes aware of transactions that the MSB “knows, suspects, or has reason to suspect” are suspicious where those transactions involve the MSB and aggregate to at least $2,000 in value.
There are serious problems when it comes to the prosecution of this case. First, getting anyone other than Alexander Vinnik to the US. Secondly, getting Alexander Vinnik himself to US. Well there is a really small technical problem with his extradition. Alexander Vinnik was arrested in Greece while on vacation and so far, the Greek courts have made conflicting rulings regarding Vinnik’s extradition. In October 2017, one court approved Vinnik’s extradition to Russia. Another court, however, gave the go-ahead for his extradition to the U.S. To complicate matters further, the Greek Supreme Court ruled that he should be extradited to France last year in December. Finally, getting hands on any material evidence will be a hard task, as many have reported the operation were mostly based outside of the US. Till now there is no clear clue as to where exactly their servers and equipments were based out of and if any evidence can still be gained from them. Prosecution can be done without these evidences but it will complicate the process of getting a conviction.
A really big concern of crypto users in the US is that if the authorities start cracking down on exchanges and other crypto business due to compliance reasons, such companies might just refuse services for US clients leaving them to rely on illegal services. A law passed by the US called the Foreign Account Tax Compliance Act (FATC) has a similar effect. This law required that banks all around the world send information about their clients who are US citizens to the IRS. Failure to do so will mean that banks will be cut out from the US financial market. This has forced banks to stop giving services to US citizens.
Many believe that such crack downs and strict enforcement will make the US a hub for legal crypto investments, but given the fact that most lawmakers and the President himself does not favour crypto, it might not materialise. Also, this might cause a flight of skills and capital from the US that might end up causing other countries to overtake America technologically. Let’s end on a positive note, most people who used crypto in its early stages have nothing to be afraid of. Most exchanges didn’t have KYC during that time and without that, it is impossible to track such people. Finally, everyone should be happy that BTC-e is being prosecuted. They have facilitated the laundering of Mt. Gox’s stolen funds, and was involved in a number of such criminal acts.
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