Bitcoin

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.

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localbitcoins

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.

NEXT: Sessions' Escalating Drug War Causing Cold Feet Over Safe Injection Centers

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  1. First they make up a bunch of fiat currency, then they get pissed if we actually try to use it! How does this make any sense?

    1. Just don’t use it in blocks of more than $10,000 without filing reports to the proper authorities.

      1. Nice try. The $10,000.00 limit was publicized widely. Other required reports were not so widely advertised.
        A suspicious activity report (SAR) must report any cash transaction where the customer seems to be trying to avoid BSA reporting requirements by not filing CTR or MIL, for example (no amount limit at all)
        A monetary instrument log (MIL) must indicate cash purchases of monetary instruments, such as money orders, cashier’s checks, and traveler’s checks valued between $3,000 and $10,000.
        An entire industry has developed around providing software to analyze transactions in an attempt to identify transactions or patterns of transactions called structuring, which requires SAR filing. (no amount limits, just “patterns”)

    2. First they make up a bunch of fiat currency, then they inflate the shit out of it, then they get pissed if we actually try to use it!

      Amirite?

  2. Providing cash in envelopes …, in coffee shops and restaurants, is no way to conduct legitimate business

    Oh, FFS! Go after the ATMs next!

    1. My ATM doesn’t hand me cash in envelopes. LEGIT.

  3. I yearn for the day when free Americans have all the bitcoins they can carry, and Jeff Sessions lives in a Trader Joe’s paper sack down by the river.

    1. So when he’s buried with full regalia in a state funeral, it’s gonna hurt, huh?

      1. Only until i eat a shitload of beets and asparagus and piss all over his grave.

        1. Don’t forget to wash it all down with lots of dark beer.

  4. would not conduct customer due diligence

    So let me get this straight. The government is supposed to protect customers who can’t possibly perform all the due diligence required to determine the safety or authenticity of the product they are potentially buying. BUT, the government will come down like a ton of bricks on the customer who does not perform due diligence of all the government laws and regulations meant to protect the customer who could not possibly perform all that due diligence. Have I got that right?

  5. Are these dipshits even taking these cases to trial?

    Demand a speedy jury trial and find an attorney that will explain to the jury how the government is violating the Constitution. If you cannot find an attorney, represent yourself and tell the jury during your opening statements.

    There is no authority in the Constitution for the government to make cash business transaction illegal. Zero.

    1. Yeah that may work in some cases but I think the average American probably wouldn’t buy it when dealing in millions in cash, bitcoins and gold bars. They may just see a sleezy drug dealer and throw the book at you. Not saying that is right but jury nullification works both ways.

      1. but where were the drugs? no drugs no crime no matter how much cash you have on you. thats rhetorical because we all know that most jurors are just sheep and believe everything the government says. unfortunately

        1. HAVE YOU NOT SEEN THE LAST 28 SEASONS OF LAW AND ORDER??! DRUGS PIMPS BOOGERMEN!

    2. There’s zero authority in the Constitution for the government to make heroin transactions illegal. Zero.

      But you’d have a hard time finding a competent attorney who would advise your strategy.

  6. defendant has pleaded guilty

    Damn. I guess she knew there was no way she’d win at trial.

    1. Really couldn’t know how long it would take to get a trial and didn’t want to wait.

      1. At least at a trial, all this ridiculousness could be aired out, but something tells me the judge wouldn’t take kindly to that and she’d get 10 years or something.

        1. More like two consecutive life terms plus 20 years.

          She was dealing Bitcoin, which everybody knows is more dangerous than heroin.

    2. See Martha Stewart.

      Even if Tetley wins the trial, the prosecutor would just keep throwing charges until she gives up.

      1. This. Essentially, my interpretation is the cops smelled something illegal, couldn’t find it, so they charged her with technical reporting violations. Three felonies a day.

    3. Probably because she did break laws. It’s hard to parse from this article– but there are all kinds of crazy “reporting” requirements. She’s essentially going to jail because she didn’t have the proper forms. The speculation of illegal activity is being used as window dressing or icing on the cake… so to speak.

      1. Papers, please.

  7. First amendment – going
    Second amendment – gone
    Third amendment – irrelevant (so far)
    Fourth amendment – gone
    Fifth amendment – gone
    Sixth amendment – going (18 months is a speedy trial when the fix is already in?)
    Seventh Amendment – hanging in there
    Eighth amendment – up for grabs (is three years cruel for a non-crime?)
    Ninth amendment – gone
    Tenth amendment – gone

    Welcome to the revolution.

    1. Seventh Amendment – gone!

      Despite the assurance that “no fact tried by a jury shall be otherwise re-examined”, the Feds can re-try the facts determined in a state case that led to acquittal (as in the Rodney King case against LAPD.)

      NY state has also asserted its authority to try Trump for any crimes for which he has been pardoned.

      Also, as a practical matter, the right of trial by jury is just barely preserved. That’s why Bitcoin Maven copped a plea for the “mercy” of the court.

      Eighth Amendment – gone! Two consecutive life terms plus twenty years for the non-crime of running a website that facilitated voluntary exchanges is most certainly cruel and unusual.

      Ninth Amendment – an inkblot.

  8. A paperless money society is a society where freedom is essentially a notion without any underpinning. Of course, this all started with non-convertible fiat currency in the first place. Convenience trumps privacy, security trumps privacy, and really anything at all trumps privacy. This isn’t even necessarily a problem of government, it’s a problem of our society not giving a shit about privacy. That it’s reflected in our government should surprise no one.

    1. What baffles me is that all of the fear is focused on bitcoin which short of extraordinary measures is a fairly easily traceable currency where as cash is not. There has been a war on cash for some time because it affords privacy, the resistance to cryptocurrency must be that it is not a government controlled cryptocurrency.

      1. “There has been a war on cash for some time because it affords privacy…”

        It also makes negative interest rates on bank accounts more difficult to implement.

        1. No, the simplest way to implement negative interest rates is to inflate the money supply at a higher rate than the banks pay interest. This hits currency hardest of all – and it’s been done in the USA more than once in my lifetime.

  9. The obvious solution is to bypass U.S. currency altogether. Get paid in cryptocurrency, pay in cryptocurrency. No funny money necessary.

  10. “Why Shouldn’t a Free American Carry Hundreds of Thousands of Bucks in a Trader Joe’s Paper Sack?”

    “reasonable gun control” is why.
    If the cops don’t rob you first, someone else will – – – – – – – – – –

  11. Is it against US law to complete ANY transaction over $10,000 in cash without notifying federal authorities?

    Like, would it be illegal to accept $10,001 in cash for a car? How about $10,001 in cash for a sack of diamonds?

    1. The looters actually busted a passenger who was carrying just under ten grand. Once they emptied his pockets and dug through carry-on luggage, the change added up to a few cents over ten g and out came the order to “stand and deliver.”

  12. The same thing happened after the 1927 Manly Sullivan decision overturning the 5th Amendment defense. Many European stock markets immediately began a steady decline, and the spaghetti hit the fan when Herb Hoover’s enforcers began using entrapment to lure people into prison time over beer and plant leaves. After the Crash and another 3 years of economic collapse caused primarily by asset-forfeiture looting, the lame duck Republican Congress deleted all funding for bait-and-snitch programs. Did they teach you different in History or Political Economy?

  13. I’m not for the government providing ‘free’ services, so I’m not advocating this, but:

    Why are people so focused on free health care? Why aren’t they focused on free legal care? Health care has no constitutional government role, whereas law is what the government exists for.

    I’m far more afraid of getting tangled up in our legal system than I am about my health. I have no control over the former and have quite a bit of control over the latter. There doesn’t seem to be any limit to the damage even a nonsense prosecution can do.

    I’m old enough that a large percentage of my best days are behind me, and my legal strategy at this point is to kill myself in the most government damning fashion I can if I get sucked into our court system for any reason.

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