One of the key aspects of the Charlie Shrem and BTCKing money laundering case is that anonymous individuals were able to go to various banks around the United States and make deposits of less than $1,000 to bank accounts owned by BitInstant. BitInstant was not required to collect information on people who wanted to buy less than $1,000 worth of bitcoins per day, and the banks allowed anonymous individuals to make deposits into bank accounts controlled by BitInstant. It seems that Chase is implementing a new system to prevent cash deposits to bank accounts from anonymous individuals, but for some odd reason, there weren’t any bank executives listed in the criminal complaints against Charlie Shrem and BTCKing.
The Banks Were Complicit
The form of “money laundering” allegedly used by Charlie Shrem and BTCKing to sell bitcoins would not have been possible without cooperation from banks who were accepting cash deposits from anonymous individuals. The banks are now making changes to make sure anonymous individuals cannot make deposits to another person’s bank account. This is somewhat similar to BitInstant breaking off their relationship with BTCKing in October of 2012. Both the banks and BitInstant made changes to block so-called “bad actors” from sending money to another party in an anonymous manner, but the CEO from BitInstant is the only one facing jail time right now. To be clear, it seems that the banks were in the same boat as Charlie. They were not breaking the law because the anonymous individuals were not making large cash deposits.
Two Versions of the Law
This is a beautiful illustration of how there are two versions of the law. One version of the law applies to large corporations, while the version of the law applies to small startups, such as BitInstant. This is another point that validates the idea that financial regulations in the United States work under a Corporatist model. If Shrem is guilty of laundering money based on the facts in the criminal complaint, then the banks also need to be punished. My view is that neither of them deserve any kind of criminal prosecution, but violations of the law should be dealt with in an equal manner. At the end of the day, it seems that the problem was with the law and not the individuals involved in this case. If the regulators wanted to block anonymous purchases, then they should have blocked anonymous cash deposits. You can’t fault anyone for money laundering when it seems like they were playing by the rules.