Bitcoin Magic and the Criminal Mind (yours).

by Paul Creech on Thursday, January 8, 2015

If you were born after the Berlin Wall fell then it is likely that you have a view of the world that is far different from those people that make up the average Federal jury (white, rural, over 50). Among the many things that you and yours view differently is the internet and everything connected to it. But, I don’t mean to suggest that you carry a more complete, correct or right viewpoint based on knowledge and experience. Or that they (the average Federal criminal jury) are wrong or confused being lamer, less smart and more out-of-touch than you and your generation is, having grown up in a world before even dial-up (if you know what that is). [pullquote_left]I merely suggest that you don’t actually understand the internet and feel comfortable stealing from people and generally breaking the law. [/pullquote_left]I merely suggest that you don’t actually understand the internet and feel comfortable stealing from people and generally breaking the law. You see, you never paid $15 for a crappy cassette tape just so you could listen to one song on side B. In your world, when you want a song, or software, or a movie, you go to the www interwebs and download it. If you can’t find it free, then you steal it. Sometimes, when you have to, you pay for things. Now a lot of you are adults and it turns out that you are the ones that need some lessons on how cyberspace works.

For starters, the internet does not exist in a cloud, in the sky, floating above nations and borders and governments and free and beautiful and everywhere and nowhere. It exists where you are pointing, clicking, typing, downloading, uploading and posting sick-ass duck-face selfies–let’s call this place Easton, Kansas. Now, everything you do online, that would be illegal if you were doing it on the mean streets of Easton, is also illegal in your mom’s basement in Columbus, Ohio or at Starbucks in Glendale, Arizona. Want to engage in the commerce of cocaine, sex, naked pictures of people not yet 18 years-old, movies and music for which you lack the property rights, or sports gaming? If it is illegal in Easton, then it is illegal for you to engage in that conduct no matter where the other parties are.

Where is the other person(s) that you are interacting with? Because you may be committing a crime there. And, where are the servers of the website at? ‘Cause you may be committing a crime there. It is also possible that all of these things are happening and are all of the people you are interacting with (including you) are outside of the United States of Awesome and that you are committing a crime for which you will be prosecuted within the U.S.A. You may also be breaching the terms and conditions of various contracts you or Mom have made, like with your internet service provider, Dropbox, Gmail, etc. So have fun explaining to Mom why you can’t have WiFi anymore, you should have plenty of time to think of how while you are doing two-to-ten up-state.

But wait old dude, we totes use Bitcoins. I’m not betting, pimping, or pirating for dollars. I’m using an anonymous cryptocurrency.

Bitcoins are not a magic cloak that wraps otherwise illegal activity invisible to law enforcement.

The law prohibits the sale of cocaine. Sell the cocaine for Bitcoins, legal right?

The law prohibits prostitution in most jurisdictions. Sell sexual favors for Bitcoins, legal now?

The law prohibits the use of wires for the transmission of sports betting data. Set up an online sports book for Bitcoins, legal?

The law requires those who engage the business of selling securities to be registered with the Securities and Exchange Commission (SEC). Public offerings must also be registered with the SEC. Now, let’s change the facts to cloak them in the Bitcoin magic. Set up an exchange were stocks of companies listed for trades in Bitcoins instead of dollars, the initial public offerings are for Bitcoins instead of dollars, and the dividends from the companies are paid to shareholders in Bitcoins. All the companies listed on the exchange are in Bitcoin related businesses, and do all their own commerce in Bitcoins–never using dollars for any purpose. Don’t register any of it with the SEC because of the Bitcoin super magic, cyberspace without borders, and Guy Fawkes masks. Totes legit, right?

In fact my dear friends, if you are engaging in Bitcoin transactions in order to disguise the source of the funds used for a crime or that are proceeds of a crime, i.e., that it is in fact you, Ms. Darlene J. McFrazoronee, who is purchasing that sweet California Kush on the dark web, then you may be committing an additional crime: money laundering.

But who has jurisdiction? These transactions take place on the world wide interweby www dot cloud dot awesome, so like, it’s happening virtually, man. If you do this all online is it even happening at all? *Keanu Reeves meme face*

You are the jurisdictional element. Where you are right now (look down or check your phone for current location), if that conduct would be illegal there (refer to phone again), then it’s illegal. That’s just some short-hand walking around knowledge about laws that might be useful. If you are engaging in activities that are illegal where you are (such as selling cocaine, engaging in prostitution, operating a sports book, selling unregistered securities, etc.) then it is illegal where you are. Therefore, the law enforcement agencies that have power over where you are  (state, county, provincial, municipal, paypal, parish, etc.) that enforce laws (state, county, provincial, municipal, etc.) can enforce them against you.  [pullquote_right] That’s just some short-hand walking around knowledge about laws that might be useful.[/pullquote_right]  If you are online, then you are most certainly using what we call ‘the wires’ and that means that you are doing something that ‘touches’ on interstate commerce, and that means that the Feds may decide that you are low hanging fruit that is ripe to be plucked. Heard of ‘too big to fail?’ There is no ‘too small to prosecute.’ It just means that you are defenseless puppy, and you don’t want to know what the Feds do to puppies.

Stay safe out there kids, wear a cup, and don’t do anything online that you wouldn’t do on Main Street, downtown Easton, Kansas, United States of Awesome.

These materials have been prepared for general informational and entertainment purposes only and are not intended as legal advice.

Paul Creech
Paul Creech is an attorney living in Houston, Texas. Paul has baccalaureate degrees in philosophy and political science from Utah State University, and a juris doctorate degree from Houston College of Law. He is a former U.S. Marine. Besides the law, Paul's interests include sports, art, and food.