bitcoin, the empire strikes back! ullbricht convicted

dilbert_bitcoinhi all its hard to keep up with bitcoin these days. this post collects dozens of links/ highlights over the last few months and is admittedly barely scratching the surface. you know its truly hit social critical mass if it makes it into a dilbert cartoon.

latest development (triggering this blog installment), Ross Ullbricht alleged Silkroad mastermind found guilty. currently expected to get a very harsh sentence in ~May. some are talking about a possible life sentence. its bad international PR for bitcoin but also a simple case of “if you play with fire, you might get burned.”[a]

the Silk Road tale is quite the lurid story, wonder if it will be turned into a movie, it has all the right hollywood elements. but lets also keep in mind that its also revealing extraordinary digital innovation such that it might be regarded as the worlds 1st virtual corporation (strong parallels to wikileaks). a complex topic being written about in bits elsewhere… more on that radical/ gamechanging/ paradigmshifting concept in a future blog.

saw a great movie/ documentary “rise & rise of bitcoin”, nice coverage, interviews top leaders such as Charlie Shrem CEO Bitinstant and Jered Kenna CEO of Tradehill, which was once the 2nd highest volume exchange after Mt Gox. surely the documentarians did not envision at the beginning of the movie the two would be involved in serious problems by the end of the movie. both fledgling companies shut down and Shrem was just sentenced to 2 years for money laundering. wow. Kenna said once he had more lawyers than engineers attempting to setup compliance but in the end it was apparently not enough.[l4][l5][m]

the other shoe has dropped and FinCen has clamped down in the last year and there is a lot of corresponding Fear Uncertainty Dread in the bitcoin arena. startups that previously could transact over bank accounts have had them closed based on FinCen classifications and there are tighter regulations. this caused an immediate out-of-country flight of some bitcoin startups.[d]

it sounds straightforward (news articles simply announce accounts are shut down based on legal/ regulatory criteria) but theres actually an amazing subtlety and opacity to these operations/ gyrations. what exactly “causes” accounts to be shut down, what is the legal/ governmental public-private process/ procedure? possibly the FBI is involved behind-the-scenes or presumably FinCen sends letters to banks in the background, off the record, and there is no such thing whatsoever as “due process”.

outsiders might think the concept of money laundering is straightforward but its actually a very complex set of laws and conventions, some written and some unwritten & probably bears some similarity to the legality of insider trading regulations. aka “know your customer,” a concept that is not actually that old. it is presumably somewhat bizarrely similar to the way wikileaks got denied transactions by major bank card companies Visa/ Mastercard.

to my knowledge the background dynamics that epochal event has never actually been reported/ documented or even attempted to be pieced together anywhere. the laws are complex and seemingly have almost never been challenged in court. the constitutionality of these machinations wrt due process seems highly questionable. ❗

entire treatises could be written on the legal aspects/ dynamics of bank account closures, so far none have, but it seems likely they will be eventually. doesnt this issue utterly cut to the heart of the concept of private property in a so-called free country? its amazing these startups would spend so much on lawyers and legal fees on compliance (presumably millions) but immediately fold like a flimsy house of cards at the slightest government challenge.

apparently the mere event of a court case/ challenge must be perceived by them as as utterly catastrophic and unsurvivable. my hope is that a powerful bitcoin entity or corporation some day gets some serious cojones and legally challenges the constitutionality of government overreach which very much takes on orwellian aspects when examined closely in details/ particulars (which few actually do). hey it totally has the smell of supreme court case doesnt it?

because at times the private/public industrial complex sometimes seems to nearly amount to the prosecution of illegal use of money. this distinction will only grow over the years that bitcoin use continues to expand. and the more the US govt attempts to squeeze it, the more it will slip out of its fingers. theres a new game in town….

these events have already pushed FinCen into headlines and the limelight, a role that it obviously does not savor whatsoever, quite to the contrary its like FinCens worst nightmare; it runs better in the shadows for the Powers That Be (oligarchic! plutocratic!) when it can make decisions without anybody noticing (public, corps, congressmen, president, etc)! you know, extremely powerful yet unaccountable to democratic government… just like the NSA… and the Fed! oh yeah and internet providers!

winklevoss twins (immortalized forever in the facebook movie Social Network) were invested ~$1.3M in BitInstant. is it still in business? did they lose all their money?

however at this point there are tens, possibly hundreds of millions $ of VC capital riding on bitcoin startups. highly connected individuals and investment firms are going to do everything possible to ensure acceptance, conform with regulations etc.

apparently somewhat in response to bitcoin, the US Fed has announced some effort to come up with some improvements in the US payment system. am rather skeptical of the outcome on that one. the bureacratic inertia/ resistance factors are extremely high in this area. there are other noises/ emanations by other central banks all over the world wrt bitcoin & digital currency in general, not sure any are meaningful at the moment.[i]

bitcoin continues to be a case of “irresistible force meeting immovable objects” and sparks really flying. a few groundbreaking books now published to help figure it all out, including “the complete works of Satoshi” (all his collected online writing), and theres also been a sizeable flurry of bitcoin conferences internationally.[h]

many large companies now accepting bitcoins, eg Microsoft made an announcement. Apple, Paypal, Ebay,, Dish. but in other headlines, strong cases of pushback. Mastercard, HSBC.[e]

there are some efforts to build other versions of bitcoin that are even more untraceable so called “dark money”.[k]

and there was a lot of “wheres waldo” type media on nakamoto since the last installment. it looks like the media has given up at this point and the wild goose chase is possibly over indefinitely.[b]

bitcoin has been in a gradual decline for over a half year but at this point its like the energizer bunny, still moving forward even with less battery. the future currently looks innovative and optimistic but also with further major govt/ statist conflicts.[f][j] an important basic property of currencies is that they are stable and bitcoin at least has not been spiking upward.[g]

a. silk road/ ullbricht
b. nakamoto
c. mt gox
d. law/ regulation/ taxes
e. (non)acceptance
f. future
g. stability/ safety/ security
h. analysis
i. fed/ central banks
j. new tech
k. dark money
l. history
m. leaders

2 thoughts on “bitcoin, the empire strikes back! ullbricht convicted

  1. amg

    The only relevant question is whether people, who never owned bitcoins before, could be motivated to buy them for any reason other than speculation. Now there is no such motivation, so wider acceptance can only drive the price lower (old-timers will dump more through shopping) and return it back to a double-digit level. After that watch for all those VCs to abandon their projects and write off their losses.


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