Cryptocurrency and Money Laundering… Again

Once again, money laundering has reared its head to conjure fear and curry favor for new regulations and controls in the crypto world.

January 23, 2023

B​y: Bobby Casey, Managing Director GWP

money laundering Our good friend Money Laundering has resurfaced because of course.

Every time this comes up, my eyes roll further back. As if the way in which money laundering is presented as some nefarious crime weren’t enough, the people who just buy into it only further fuel this delusion.

“He went away for…. money laundering!!!”

*Gasp* *Pearl Clutch* “Get the smelling salts! We did Uncle Jerry in!”

It’s as if someone said the name Voldemort at Hogwarts, only Harry Potter was a dramatic work of fiction!

I’ll shut up when everyone else does on this matter. But so long as people insist upon calling money laundering a crime, I will indeed be there to throw cold water on that hotbed of nonsense.

Money laundering is the bastard child of prohibition. It was begotten from an orgy of government regulations, restricting everything from drugs and gambling, to prostitution and guns, and everything between. Because we can’t have them, sell them, or use them, any money procured from associated activity is evidence of said activity. Hence, civil asset forfeiture.

Money laundering hides the source of the money. It takes money from a drug deal and “cleans” it through a legitimate and legal entity. The only reason someone needs to hide the source of their income is if the source itself is illegal.

In before, “what about bribery and contract killing?”. While they could be masked in that way, the issue is the bribe and murder, not hiding the source of funding.

T​hat would be like criminalizing hiding a weapon involved in a murder. They hid the weapon in a false compartment in the closet. That’s not felonious. Hiding anything isn’t felonious. It’s not even criminal to hide something. If it were, why is concealed carry mostly permitless, while open carry requires licensing? Hiding a weapon is legally encouraged!

Remaining silent is a constitutional right in the US. Meaning you don’t have to reveal anything that would incriminate you. You can withhold any responses that could incriminate you.

Y​et, hiding the source of ill-gotten gains is portrayed as being on par with murder, rape, and grand larceny? It’s as irrational as the “pre-crime” nonsense where you’re charged for possession of something because it could lead to an actual crime. It’s accessorizing criminal law with things that in fact are not criminal.

I​f the purpose of money laundering is to conceal the source of the revenue, then every dime government spends is laundered stolen money. Try telling Congressmen and Senators that their benefits and salaries are all funded through theft.

Why not tell all the corporations that are subsidized by government they are thieves. No! Of course not. They don’t steal from each of us. Neither does the congress that voted for the allocation. The IRS steals the money. Everyone is “just doing their jobs”.

People have even alleged that the whole proxy war in Ukraine is just an elaborate money laundering scheme. But yes, by all means, come for some randos and make a spectacle of them, so as to deflect any attention from the criminality happening at a much larger scale under the cloak of law and order.

Money laundering is a crime for the same reason tax evasion is a crime: you hit the government right in the revenue satchel. The only reason government wants to know where you got the money is because it wants its cut and feels entitled to know everyone’s financial business. And when it can’t have that, you become the criminal. It’s that simple.

W​hat has me holding this line? This is precisely the argument being used to usher in a cashless society and more regulations on cryptocurrencies. They trot out the terrible “criminals” to keep people fearful. By having people clamoring for more security, they tend to ignore the stampede on civil liberties.

Once you say the government has a right to know about your financial dealings, you’ve all but thrown a welcome party for the surveillance state. Money laundering is a benign act posing as a public threat.

T​hat sort of “Good German Citizen” behavior is what the government counts on, and I’m not here for any of it.

A recent headline read, Justice Department Announces Major International Crypto Enforcement Action on Coinbase.

T​here wasn’t much to the article other than all the officials in attendance at the announcement. But if you listen to the five and a half minute reaction video in this link, go to the last 45 seconds or so. That’s exactly what I’m worried about: What is happening behind the scenes? What is happening that they aren’t telling us about?

T​his announcement isn’t some olive branch, middle-ground concession in defense of crypto. It’s an acknowledgment that FinCEN can’t stop block chain activity so its only recourse is to try to regulate it.

Here’s the story that precipitated this decision by the DoJ in the US:

The U.S. Justice Department and Treasury Department have charged Bitzlato Ltd. with money laundering and arrested its founder [Anatoly Legkodymov] in Miami, officials said at a press conference in Washington on Wednesday.

Bitzlato, a Hong Kong-based platform, has been effectively shut down…

The little-known cryptocurrency exchange offered peer-to-peer services and hosted wallets of criminals buying and selling illegal goods, according to Justice Department officials, involving $700 million in direct and indirect transfers in the last several years. FinCEN said the company played a key role in handling illicit transactions for ransomware actors in Russia, including those connected to the Russian government.

A​s if it wasn’t bad enough that they were buying and selling ILLEGAL goods… they were doing that with RUSSIANS! That’s like focusing on the immigration status of a criminal.

All this is meant to get a rise out of people. We are supposed to be upset that the goods were “illegal” and we should be more upset that the participants were Russian.

But what sort of emotional currency is that, really? The sale of improperly packaged lobsters from Honduras is a felony by US standards, for which people are actually serving time. So before we get our panties in a twist over “sale of illegal goods”, perhaps we should ask what those goods are, exactly. Last I heard, the “Fast and Furious” scandal involved the sale of illegal firearms into the hands of known criminals, and the US government was the proprietor. Yet no new laws resulted from that little adventure.

$​700 million over several years is chump change, if we’re being honest. If this is what is causing the upset in the crypto world, then you can bet that the regulations will reflect that level of pettiness.

The charges listed against SBF in the indictment are conspiracy to commit wire fraud on customers, wire fraud on customers, conspiracy to commit wire fraud on lenders, wire fraud on lenders, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering and conspiracy to defraud the United States and violate the campaign finance laws.

H​ow is it somehow okay to fund a proxy war with Russia and fund the very political party responsible for that war, and then lose OVER $8 BILLION in client money, yet call “the crackdown against Bitzlato was the most significant U.S. action against a crypto criminal network to date” according to the Deputy Attorney General of the US, Lisa Monaco?

Former billionaire Sam Bankman-Fried, founder of cryptocurrency exchange company FTX, funneled millions of dollars to Democratic campaigns, becoming one the party’s largest donors, second only to George Soros.

Bankman-Fried donated nearly $38 million during the midterm cycle, according to Federal Election Commission data. His company also reportedly set up a website, Aid for Ukraine, to raise funds for Ukrainians amid the ongoing war against Russia. The initiative was powered by the Ministry of Digital Transformation of Ukraine, FTX and Ukrainian-web company Everstake.

Cryptocurrency donations were sent to the National Bank of Ukraine. The 30-year-old crypto financier wrote on Twitter in early March he was “excited and humbled to be working with the Ukrainian Ministry of Finance and others to support crypto donations to Ukraine.”

S​o we have some undisclosed regulatory wave coming for cryptocurrency that will no doubt be tailored around what Bitzlato did, while still making allowances for what FTX did.

Here’s the thing. This announcement of new global crypto regulations in light of some $700 million money-laundering scheme has much greater implications. They found this guy and SBF without those regulations and got them on existing criminal acts.

Putting MORE regulations on it won’t make crypto any better or trust-worthy or reliable. There’s no way an antiquated government that customarily runs years behind any innovation in the private sector is going to get ahead of the problems. It’s only place in this is response and reaction.

T​he Panama Papers showed us how little the yield is on the criminal activity within these supposed breeding grounds for criminality. The Epstein and Maxwell investigations never got us lists.

Expect a LOT of money and government manpower to be put behind these exploits. And expect that the big shots will be left alone, the government will always be innocent, and some dude who decided to try crypto for the first time loses everything. That’s how it is with the drug war, and that’s how it will be in the crypto war.

Keep an eye out for further announcements on this. Keep your assets, wealth, and privacy protected.

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