This is going to hit home for allot of P2P and OTC traders. Bradley Anthony Stetkiw was arrested and charged with operating an unlicensed money transmitting business.
The allegations state that Stetkiw exchanged bitcoin for cash illegally in Bloomfield Township.
Most Localbitcoins traders know Stetkiw as "SaltandPepper" ("S&P") and his QRCode avatar.
Again, its the HSI setting traders up. They conducted over $55,000 dollars worth of cash/bitcoin trades with S&P.
[UPDATE 10/28/2017]
For clarity in regards to the amount of transactions exceeding thresholds that necessitate reports. In S&P's the aggregated amounts would potentially be accrued over a period of 12 months.
However, these transaction began with a single cash transaction in the amount of $12,000 which in itself exceeds the both the $3,000 and $10,000 thresholds for CTR's and $2,000 threshold for SAR's.
For clarity in regards to the amount of transactions exceeding thresholds that necessitate reports. In S&P's the aggregated amounts would potentially be accrued over a period of 12 months.
However, these transaction began with a single cash transaction in the amount of $12,000 which in itself exceeds the both the $3,000 and $10,000 thresholds for CTR's and $2,000 threshold for SAR's.
Case filings state that S&P was not in compliance with 31 § USC 5330 which require certain businesses (most) and individuals conducting transactions considered "regulated activity" to register with the Financial Crimes Enforcement Network ("FinCEN").
Case Details
Like with defendant Louis Ong, who is up against this and additional charges facing serious penalties if convicted of money laundering, S&P's own words and disclosures may prove to be his own worst enemy as the HSI further polishes their investigation routines as evident of the last two arrests and indictments.
Authorities obtained S&P's phone number through a subpoena which led them to additional information and claim that S&P was operating unlicensed and unregistered for the activity conducted in exchanging bitcoin for cash, GreenDot, MoneyPak, and PayPal. Note this is the first time I believe PayPal has been listed as a trading method within an indictment or complaint.
MoneyPaks, however, were also present in the Louisiana Lords case filings which resulted in both men going to prison.
S&P said to undercover HSI agents, on August 15th, 2015:
"I'm just going to say this and don't tell me what you're doing with your coin because if you do, and it's something bad, then I can't sell to you"You have to ask, you have to know. Being without this knowledge does not absolve you of wrongdoing.
The second you learn of illicit activity you need to file a SAR, and you most likely need to be registered with the damn Financial Crimes Enforcement Network unless you can unequivocally prove that you customer is not doing anything illegal with bitcoin that you sell to them, its going to them and only them, they are not turning around and selling it or sending it to someone else, and you're in a state that allows this activity because about half of them do not.
Unfortunately people only hear what they want to hear and there are a couple Localbitcoins traders that run around the platform adamantly telling traders they don't have to worry about federal or state laws.
S&P Not Guilty? Very Possible.
Despite the fact that S&P wasn't registered federally, a charge he is unlikely going to be able to get out of, the unlicensed money transmitting charge may not hold water.
Fortunately S&P had enough brain power to acknowledge the law. Responding to a question on the legality of "buying bitcoin" opposed to "money laundering" with"
"The law varies" and "over a certain amount it is money laundering".
The latter is inaccurate, it would actually be considered a transaction that needs to be reported with identification collected. However, not money laundering and not even money transmission, it's merely a cash transaction requiring a report on form FINCEN 8300 (in S&P's case being unregistered). The first statement of variation is very accurate and this at least shows S&P's intent to comply with the law.
Here's some potential good news.
Here's some potential good news.
This activity is governed by the Michigan “Money Transmission Services Act” (“ACT”) 1, Act 250 of 2006 § 487.1001 - 487.1047.
"Virtual currency” is not recognized as currency in the United States or any other government and is not considered money by the state of Michigan pursuant to § 487.1003(b) of the ACT.
As defined at 487.1003(b), "Money" is “means a medium of exchange authorized or adopted by the United States or a foreign government as a part of its currency”¹ and “Money Transmission Services” as defined at 487.1003(c) means “...selling or issuing payment instruments or stored value devices or receiving money or monetary value for transmission. The term does not include the provision solely of delivery, online, or telecommunications services or network access.”²
S&P did not sell payment instruments (as defined) and virtual currency does not meet the definition of a “payment instrument” or “outstanding payment instrument” as defined at § 487.1003(d)-(e) of the ACT. and S&P did not (1) sell Bitcoin for a specific fee, rather, the amount of bitcoin sold is done so at a price with an additional mark up percentage as a retail transaction, (2) sell bitcoin to one individual or entity with the intention of sending that value to another individual or entity, or (3)
accept payment for bitcoin from one person or entity and send bitcoin to another person or entity.
This according to Michigan state law and regulations in the ACT. S&P would not meet the criteria for being defined as a "money transmitter service".
If S&P's defense can argue this in court, its rather possible this charge could be thrown out leaving only the lesser unregistered operation charge on the federal level on the table to deal with. That one is going to be harder to get out of.
Prediction
Depending on how the indictment goes. It is very possible the "unlicensed money transmission" charge can be beaten. However failing to register with FinCEN is going to likely stick.
Verdict prediction: Plea Bargain with an admission of guilty or no contest to a single charge of operating an unregistered money services business.
Granted this can still carry up to 5 years in prison, however, it's more likely that S&P will receive probation and a fine.
The only concern there is the amounts they have evidence of him trading. They will put him in a more severe classification of sentencing options.
We'll keep a close eye on this one and wish the best of luck to S&P.
The only concern there is the amounts they have evidence of him trading. They will put him in a more severe classification of sentencing options.
We'll keep a close eye on this one and wish the best of luck to S&P.
Article by dinbits
Image Credits:
Banner Image by dinbits.com staff
REFERENCES:
1. Federal Regulations (BSA)
12 U.S.C. ch. 13 § 1724
Footnotes:
REFERENCES:
1. Federal Regulations (BSA)
12 U.S.C. ch. 13 § 1724
12 U.S.C. ch. 16 § 1813
15 U.S.C. ch. 2B § 78a
31 US Code 1022.380 - Registration of money services businesses
18 U.S. Code § 1960 - Prohibition of unlicensed money transmitting businesses
3. Additional case references
15 U.S.C. ch. 2B § 78a
31 US Code 1022.380 - Registration of money services businesses
18 U.S. Code § 1960 - Prohibition of unlicensed money transmitting businesses
3. Additional case references
Federal case 2:17-cr-00191-RSL-1 - United States of America Vs. Louis Ong
Federal care: 2 17-mj-30566 - USA Vs. Bradley Stetkiw
Federal care: 2 17-mj-30566 - USA Vs. Bradley Stetkiw
Footnotes:
1. Michigan Act 250 of 2006 § 487.1003(b), definition of “Money”
2. Michigan Act 250 of 2006 § 487.1003(c), “money transmission services” definition
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