Homeland Security's ICE Group Cuts Off Dwolla Bitcoin Transfers

from the no-explanation dept

Wed, May 15th 2013 8:36am — Mike Masnick

Update: The DHS has released a copy of the warrant, which claims probable cause to believe that Mt. Gox is engaging in money transmitting without a license.

We've discussed in the past how the government seems very skeptical of Bitcoin, and now it may be doing something about it. As a whole bunch of you have sent in, ICE (Immigrations and Customs Enforcement), a division of Homeland Security -- best known around here for its cowboy attitude towards censoring websites with no basis -- has cut off Dwolla transfers to Mt. Gox, the biggest Bitcoin exchange, preventing Dwolla from processing any Bitcoin transfers. According to Declan McCullagh at News.com:

The U.S. Department of Homeland Security confirmed it has initiated legal action that prompted the Dwolla payment service to stop processing bitcoin transactions.

Nicole Navas, a spokesperson for U.S. Immigration and Customs Enforcement, confirmed the legal action to CNET this afternoon.

Chris Coyne, from Ok Cupid, posted a screenshot of an email from Dwolla claiming that ICE had "seized" the account of Mt. Gox:

Mt. Gox, for its part, claims this is the first it's heard of anything:

MtGox has read on the Internet that the United States Department of Homeland Security had a court order and/or warrant issued from the United States District Court in Maryland which it served upon the Dwolla mobile payment service with respect to accounts used for trading with MtGox. We take this information seriously. However, as of this time we have not been provided with a copy of the court order and/or warrant, and do not know its scope and/or the reasons for its issuance. MtGox is investigating and will provide further reports when additional information becomes known.

I would imagine there will be a lot more to this story, but for the moment details are scarce.

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Filed Under: bitcoin, homeland security, ice
Companies: dwolla, mt gox

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out_of_the_blue, 15 May 2013 @ 8:41am

Bitcoin is essentially a pyramid scheme.
There's no visible backing to this "currency", not even the nearly exhausted "full faith" of the US gov't, less than that. It's a scam. The amounts cannot be verified. Even if otherwise legit, since totally unrelated to materials, gov'ts can and will invisibly tweak the numbers. And of course the recent crash proves it's sheer speculation.

Bitcoin is the kind of casino scam that gov't SHOULD be shutting down -- instead of allowing on Wall Street.
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Anonymous Coward, 15 May 2013 @ 8:42am

Re: Bitcoin is essentially a pyramid scheme.
What governments can do to indirectly 'tax' it is they can mime their own coins I suppose.
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Zakida Paul (profile), 15 May 2013 @ 8:44am

How long before crowd funding business lending platform, Funding Empire, is targeted?

We all know that anything that remotely threatens the established way of doing business is evil and must be crushed.
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Zakida Paul (profile), 15 May 2013 @ 8:45am

Re: Bitcoin is essentially a pyramid scheme.
"Wall Street is the kind of casino scam that gov't SHOULD be shutting down -- instead of allowing in the world."

Fixed
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Zakida Paul (profile), 15 May 2013 @ 8:46am

Re:
For those not familiar with Funding Empire

http://www.fundingempire.com/
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Anonymous Coward, 15 May 2013 @ 8:47am

Re:
I agree, it's a shame that almost everything the U.S. does is self interested.
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rw (profile), 15 May 2013 @ 8:47am

Huh?????
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Anonymous Coward, 15 May 2013 @ 8:47am

Re: Re:
U.S. govt. *
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Anonymous Coward, 15 May 2013 @ 8:57am

Re: Bitcoin is essentially a pyramid scheme.
This is straight out of the anti-Bitcoin talking points book.

Bitcoin is not a pyramid scheme, nor a scam, stop spreading FUD.

While you are entitled to your opinion, such outright hatred is unwarranted. Bitcoin is a valid alternative currency with plenty of smart people behind it as well as using it.
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Anonymous Coward, 15 May 2013 @ 8:57am

Re: Bitcoin is essentially a pyramid scheme.
Fiat currency is a way to measure the relative value of a product against that of other products, so that you can trade a product for currency, and vice versa, which removes the inefficiencies of a barter economy. Bitcoin is no different from any other fiat currency. If people want to exchange products and services for Bitcoin, or trade Bitcoin for government-back currency, then that's their choice.
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Anonymous Coward, 15 May 2013 @ 8:57am

Re: Bitcoin is essentially a pyramid scheme.
Money is a scam so of course any currency is also a scam.

Blue you jus' mad today bro.
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Anonymous Coward, 15 May 2013 @ 9:10am

Re: Bitcoin is essentially a pyramid scheme.
"There's no visible backing to this "currency"..."

There's no visible backing of the Dollar, other than the fact that people are willing to trade something else for it. In that regard, BitCoin is exactly the same thing as other forms of currency.

The Gold Standard is long gone, you know.

"It's a scam"

From a technical point of view, it most certainly is not. You can analyse the protocol yourself, and see that it is resilient to all kinds of fraud.

"Even if otherwise legit, since totally unrelated to materials, gov'ts can and will invisibly tweak the numbers."

Unlikely. BitCoin is worth whatever people are willing to pay for it. The supply is steadily (but slowly) increasing and will plateau at some point. Unless you hoard (virtual) tons of BitCoins, your power to control them will be limited. But if you do that, people will just stop using BitCoin altogether.

"And of course the recent crash proves it's sheer speculation."

On this, I will agree with you, to an extent. BitCoin suffers from a problem: It is extremely volatile. Its value fluctuates too much, making it terrible for storing value. But that is not a problem endemic to BitCoin. It is merely a symptom of not having a centralized entity controlling it and keeping its value artificially stable. That's free market for you...for better of for worse.
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TheLastCzarnian (profile), 15 May 2013 @ 9:14am

Re: Re: Bitcoin is essentially a pyramid scheme.
Former brokerage employee here - I can affirm this.
There is nothing behind Walstreet values except the CONfidence of investors.
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Anonymous Coward, 15 May 2013 @ 9:35am

Re: Re: Bitcoin is essentially a pyramid scheme.
Well, the lack of solid knowledge about who is behind the system is relatively concerning to most serious investors, which is limiting its potential some. Not dooming it though. oh no!
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Anonymous Coward, 15 May 2013 @ 9:40am

Re: Bitcoin is essentially a pyramid scheme.
oh youre just mad because people put value into BITcoin but not the bits in your crappy sound recordings
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vastrightwing, 15 May 2013 @ 9:44am

Centrally controlled fiat currencies are a pyramid scheme
That's a better headline. If you want a good example, no need to look at exotic new currencies, just look at what's in your wallet. That fiat currency is just a plain bank note, controlled by a cartel of 12 big banks. The more people that use their bank notes, the more its worth. The supply is controlled by 12 key people. They can manipulate the wealth of everyone who uses their currency at their pleasure. In fact, by storing their bank notes in a controlled institution, they can even steal it from you with a government's duplicitous sanction (yes, I remind you of Cyprus).

Bitcoin shares none of these attributes: it is not controlled by anyone. It is a computer algorithm. There are a known number of bitcoins in existence. How many bank notes are there in existence? Oh, there is no data on that? Too bad. Bitcoins can't be manipulated; however, the exchange rate can be once you try to convert it to a centrally controlled currency. Since you carry your bitcoins in an encrypted file on your mobile device or printed out paper instead of a centrally controlled bank, no one can steal your bitcoins unless you leave your files in clear text or lose your device without a backup.
Back to the pyramid scheme, fiat currency is exactly that. Charles Ponzi would be proud of the banks for creating the ultimate scheme. They keep getting people to believe in the currency by coercing as many people to use their fiat currency as possible. People who want to trade in competing currencies are dealt with in the harshest possible way; often replaced by more compliant people who are willing to play along.

Using Bitcoin is safe, fast and universal all over the world. Please explain where I'm ignorant here. I need to know. Anyone?
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Chris Rhodes (profile), 15 May 2013 @ 10:04am

Re: Re: Re: Bitcoin is essentially a pyramid scheme.
Bitcoin is a protocol, not a program, and as such is completely transparent to anyone who cares to look. Even the reference implementation of a client using the protocol (Bitcoin-Qt) is open source and available to anyone to peruse.
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Chris Rhodes (profile), 15 May 2013 @ 10:07am

The First (?) of Many Roadblocks
To truly be successful, Bitcoin has to be able to route around attempted government interference. Things like this will not stop, as entrenched interests continue to kick and scream themselves into irrelevancy.

I think it will ultimately succeed, but it's going to be a wild ride in the mean time.
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Richard (profile), 15 May 2013 @ 10:29am

Re: Re: Bitcoin is essentially a pyramid scheme.
On this, I will agree with you, to an extent. BitCoin suffers from a problem: It is extremely volatile. Its value fluctuates too much, making it terrible for storing value.

No Bitcoin is not volatile. The dollar is volatile - when measured against Bitcoin...
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uRspqF7L (profile), 15 May 2013 @ 11:03am

floored!
i can't believe Mike reported this "story" as if it's true! we already know from much prior commentary & reporting on this site that Bitcoin is inevitably destroying national currencies and that government can't control it. Ipso facto, this story is false.
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Anonymous Coward, 15 May 2013 @ 11:11am

Re: Re: Bitcoin is essentially a pyramid scheme.
It is hard to stop someone spreading FUD when they speak it fluently.
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Anonymous Coward, 15 May 2013 @ 11:16am

Re: floored!
Provide a link to backup your claim.
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Anonymous Coward, 15 May 2013 @ 11:22am

Re: floored!
Give some evidence to your claims.
Otherwise, its hard to hear you over the facts supporting Bitcoins.
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zerostar83 (profile), 15 May 2013 @ 11:57am

Both Ways
It seems like the Feds have had in interest in this Bitcoin situation because Mt. Gox has been deceptive on whether Bitcoin is either a product or a currency. I got the impression they label their transactions whichever way makes them more money (or costs less taxes). Perfect example would be people who claim certain income to get approved for loans but omit those incomes when they're looking for welfare or lower taxes.
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Lorpius Prime (profile), 15 May 2013 @ 12:44pm

Re: Centrally controlled fiat currencies are a pyramid scheme
Yeah, static currencies are great until you run into a balance of payments crisis or deflation.

I remind you that the government of Cyprus didn't steal anyone's money. The banks were bankrupt, they couldn't honor all the deposit accounts. The government actually borrowed a huge amount of money in order to guarantee depositors retained more of their savings than they would have otherwise.

Everyone could do with a reminder that their bank deposits are loans, not cash vaults. Those investments can sometimes fail. Nor is currency a good way to store your wealth, anyway. It is a means of facilitating exchanges, preserving value is not its purpose.
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Anonymous Coward, 15 May 2013 @ 1:03pm

Re: Bitcoin is essentially a pyramid scheme.
Hurp de durp Bitcoin is like a casino, it's a pyramid scheme, it's not 'currency' (even though man websites accept it as a method of payment).

Do you even fucking read up on any subject that you profess your bullshit theories on, or do you just deepthroat the dictionary and spout the first few meaningful words that formulate sentence structures before you regurgitate them via your keyboard?
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John Fenderson (profile), 15 May 2013 @ 1:21pm

Re: Re: Re: Bitcoin is essentially a pyramid scheme.
Bitcoin is a decentralized currency. There is nobody "behind" it. This is one of its strengths.

Personally, I'm kindof happy that serious investors are shy about it. Serious investors tend to ruin everything.
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John Fenderson (profile), 15 May 2013 @ 1:26pm

Re: Re: Centrally controlled fiat currencies are a pyramid scheme
Everyone could do with a reminder that their bank deposits are loans, not cash vaults. Those investments can sometimes fail. Nor is currency a good way to store your wealth, anyway. It is a means of facilitating exchanges, preserving value is not its purpose.

Which simply underscores the pyramid-like nature of fiat money. (Although fiat money is not actually anything like a pyramid scheme, it does share a few attributes with them).

Or to put it another way, isn't there something wrong with a monetary system that provides no real way of preserving value?
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Lorpius Prime (profile), 15 May 2013 @ 1:42pm

Re: Re: Re: Centrally controlled fiat currencies are a pyramid scheme
No. Economies are active things, people need a constant supply of goods and services to fulfill both basic needs and more frivolous desires. Given that reality, trying to preserve "wealth" in the form of completely inactive assets (like a big pile of gold) is a bad thing, it does no one but the owner any good. Instead, you want people to preserve their wealth in the form of productive assets, stuff which has value to other people because of what it does for them, things like equity in businesses or investment loans.

From a monetary perspective: trying to give people ways to save wealth that doesn't involve any risk encourages people to use those methods, which drains money from the credit market that would otherwise be used to invest in new enterprises.

To put this in context of the Bitcoin issue, I want to be clear that I have no objection to Bitcoin. In fact, I'm kind of hoping that it ends up taking on the role that gold has been serving for a while, as an inert asset with stable supply that's popularly believed to have uses an alternative currency. Then at least we could free up the supply of gold for other, more useful things. Bitcoin does potentially have a role to play in the economy, but it's as a complement to fiat currencies, not a replacement.
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Paul (profile), 15 May 2013 @ 2:34pm

Re: Re: Bitcoin is essentially a pyramid scheme.
Actually....

Bitcoin is very different than traditional fiat currency in that you can use it to buy products *without* banks and credit card companies getting a cut.

That's 16 percent of the world economy, and growing.
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Paul (profile), 15 May 2013 @ 2:36pm

Re: Re: floored!
Thier's law
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Wolfy, 15 May 2013 @ 4:09pm

Paul nailed it. The banks and financial firms own a good chunk of congress, bought and paid for, and Bitcoin is a huge threat to them, because it bypasses them completely. Another obsolete business model bites the dust. Instead, those financial and banks are going to use their government tools to go after Bitcoin indirectly.
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Anonymous Coward, 15 May 2013 @ 4:31pm

Re: Re: floored!
I'm pretty sure the original comment was sarcasm
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out_of_the_blue, 16 May 2013 @ 1:39am

Re: Re: Bitcoin is essentially a pyramid scheme.
What is read?
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John Fenderson (profile), 16 May 2013 @ 1:47pm

Re: Re: Re: Re: Centrally controlled fiat currencies are a pyramid scheme
What you say may be largely true, and is a good explanation of what is wrong with our economic system.

Instead, you want people to preserve their wealth in the form of productive assets

That's not preserving wealth, though, that's risking it. It's an important and valuable thing, to be sure, but there should be some way of being able to hold on to what you've earned without risk.

Preserving wealth is as important as generating wealth. Without that ability, we are all but indentured servants.
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Anthony Alfidi, 16 May 2013 @ 2:20pm

Google beats Bitcoin
Google Wallet and Gmail will be disruptive to remittance, scams, and hawala. This is a much better tech than Bitcoin.
http://alfidicapitalblog.blogspot.com/2013/05/social-implications-of-integrating.html
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Lorpius Prime (profile), 16 May 2013 @ 6:36pm

Re: Re: Re: Re: Re: Centrally controlled fiat currencies are a pyramid scheme
That's not preserving wealth, though, that's risking it. It's an important and valuable thing, to be sure, but there should be some way of being able to hold on to what you've earned without risk.

Why? Value isn't static. Think about pre-currency economies running on barter. Cows are still the primary means of exchange in a lot of east African communities. How do you preserve the value of a herd of cattle? You can't just lock them in a pen for as long as you want, they'll die and begin to rot. You'll have to care for them yourself, or lend or sell them on to someone else in return for something else, such as a contract for future goods or services.

There's no good reason that anyone should expect currency-based economies to function any differently at a fundamental level. Trying to lock up wealth into no-risk hoards is a recipe for stagnancy at best, and we're all be better off with the vitality of constantly fluctuating credit markets. Yes, there is uncertainty and risk from having to invest your savings, but that's simply a reflection of the nature of life and reality, the world around us is constantly changing and we could all die tomorrow. At the moment, the best we can do is pretend that some assets are risk free, such as with insured deposits. But the truth is that such schemes merely move the risk around so that it's borne by other parties, such as governments or private insurers. Even precious metals aren't risk-free, you're counting on other investors and metal brokers to keep up the price for you.

Without that ability, we are all but indentured servants.

Indentured to our own need for scarce resources in order to survive, perhaps. But there's no financial scheme at all which can hope to solve that, it's the fundamental economic problem. There's just no way out until our production becomes unlimited.
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tselleck, 17 May 2013 @ 7:58am

End of the market and inevitable.
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Bitcoin Rob, 15 Jul 2013 @ 2:06pm

Glad to see there was a few people commenting in this thread with half a brain. It's frustrating seeing people criticize Bitcoin without even educating themselves prior to posting.

Most simply regurgitate what they've read somewhere and dismiss it as a viable idea.

If you take a moment of your day to spend time learning about what you do not know, you may begin to develop an open mind.

And then maybe... just maybe... you'll stop getting your opinions from the television.

Digital currencies are the future. Look around you: are lives become more digital everyday.
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Bitcoin Web Host, 20 Sep 2013 @ 5:32pm

Governments are sceptical of bitcoin because it gives the power back to the people and takes it away from the central banks. Imagine a world where the people had control over their money and didn't have to live in fear of governments printing more money and wiping out the value of your savings . . . oh dear, that might look like a democracy.
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