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Bitcoin Crime The Almighty Buck

Bitcoins Seized In Drug Bust 198

Posted by samzenpus from the funny-money dept.
First time accepted submitter Salo2112 writes "In a case believed to be the first of its kind, federal authorities have seized a Charleston man's virtual currency due to an alleged drug law violation with possible links to a shadowy online black market. From the article: 'The U.S. Drug Enforcement Administration recently posted a forfeiture notice indicating that agents had seized 11.02 Bitcoins worth $814 from 31-year-old Eric Daniel Hughes for allegedly violating the federal Controlled Substances Act. No other details were provided.'"
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Bitcoins Seized In Drug Bust More

Bitcoins Seized In Drug Bust

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  • It was bound to happen (Score:5, Insightful)

    by mcgrew ( 92797 ) * on Sunday July 07, 2013 @09:29AM (#44208971) Homepage Journal

    I'm surprised it took so long.

    • He should have encrypted his computer.

      • Re:It was bound to happen (Score:4, Insightful)

        by Anonymous Coward on Sunday July 07, 2013 @09:40AM (#44209037)

        And have a good backup. Even if the seized money is encrypted, it's still seized and unlikely to be returned.

      • Re:It was bound to happen (Score:5, Interesting)

        by killkillkill ( 884238 ) on Sunday July 07, 2013 @10:24AM (#44209269)
        Most likely it was a sting operation and he sent the funds to an address the DEA had created. There was a transaction [blockchain.info] for that amount on the day they were "seized" linked to his account. If they seized the wallet on his computer I imagine it would have been more than that.

        • If they "seized" his wallet, wouldn't they be unable to get the money as it's encrypted?

          • That may be inconsequential. In the past, the main goal of seizing drug money (in this case, the bitcoins) has been to gain evidence in building a drug case. Namely, that the physical set of bills was "sent from" a buyer and "received by" someone in exchange for illegal narcotics. The usage of said money to buy new jerseys for the police softball team was always a perk, but ultimately not relevant.

            Thing is, this guy must not have used The Silk Road, all transactions there are put through a so-called "tumbl

            • Re:It was bound to happen (Score:4, Informative)

              by HairyNevus ( 992803 ) <hairynevus@gm a i l . com> on Sunday July 07, 2013 @03:29PM (#44211315)
              Actually, I didn't see the second link. After following the four links [1] [blockchain.info] [2] [blockchain.info] [3] [blockchain.info][4] [blockchain.info] on that page (starting right under the picture) it might be that the tumbler system was exactly what they traced. I'm still trying to make heads or tails of these links in combination with this transaction [blockchain.info] provided above [slashdot.org] which seems to show the DEA account (1ETD...) sending money.

            • In the past, the main goal of seizing drug money (in this case, the bitcoins) has been to gain evidence in building a drug case. Namely, that the physical set of bills was "sent from" a buyer and "received by" someone in exchange for illegal narcotics. The usage of said money to buy new jerseys for the police softball team was always a perk, but ultimately not relevant.

              Do you actually believe this? I find it hard to believe that anyone could be so naive. Maybe I'm just missing the sarcasm.

              Or maybe you're talking about police in your home country. Here in the U.S.A. police routinely seize valuables with little or no justification, relying on the threat of violence to get what they want in the street and then relying on their privileged positions within the legal and political systems to make sure no one can do anything about it.

              Departments are routinely allowed to k

              • Re: (Score:2)

                by gd2shoe ( 747932 )

                I used to think this position was paranoia*, but then I saw an episode of COPS (which I don't normally watch) where narc officers were selling something that looked like drugs, and then seizing the buyer's vehicles as forfeit. That's not what these forfeiture laws were originally intended for. Apparently, it does happen, at least in some places.

                *(I still believe that most cops either don't know, or are unwilling participants during normal confiscation proceedings.)

                • Re: (Score:2)

                  by Fjandr ( 66656 )

                  There are many police departments around the country which receive most of their funding from selling assets seized in civil forfeiture laws. It has become the norm in many places, rather than the exception it used to be.

                  Here is one example of many: http://www.aclu.org/blog/criminal-law-reform/easy-money-civil-asset-forfeiture-abuse-police [aclu.org]

                • Re:Which country do you live in? (Score:5, Insightful)

                  by AK Marc ( 707885 ) on Sunday July 07, 2013 @10:39PM (#44213323)
                  The other issue is that seizure is without proceeding. If you don't declare your cash when traveling across borders, they'll presume it's illegal and seize it until you prove otherwise (and that's long and expensive). If you do declare it, they'll likely seize it as well, they'll just know how much and where to look.

                  There have been more than one case of a police officer (often chief or higher-up) that ordered a raid of a house, no drugs found, house still seized, then used as an undercover or safe house that made it functionally that officer's house. When you give financial incentive to bad behavior, then the bad behavior is encouraged, even if that wasn't the goal.

                  There are simple fixes, but the governments don't ever agree to them. They like the for-profit seizures and tickets. The agency issuing fines (or seizures) shouldn't be the agency keeping the money. When you separate the money, you'll change the behavior. No matter how many speeding tickets the town issues, there will be no income from it. You'd see the speed traps decrease, and a greater focus on safety, rather than revenue. Make percentage-take camera systems illegal (where the company running the cameras gets a portion of the revenue). There are documented cases where they shortened yellow lights to catch more people, decreasing safety to get more revenue.

                  Money is causing corruption, so remove the money from the equation.

    • Re:It was bound to happen (Score:4, Insightful)

      by Anonymous Coward on Sunday July 07, 2013 @09:36AM (#44209013)

      Yes, but only because the USA's Federal Government hates competition.

      • Re:It was bound to happen (Score:4, Insightful)

        by pecosdave ( 536896 ) on Sunday July 07, 2013 @09:59AM (#44209161) Homepage Journal

        Why is this statement modded down? It's a perfectly legitimate assessment of the flow of money and labor. If people were allowed to trade their own labor or goods without having to invoke the mandatory use of Federal Reserve notes/bits it would be much more difficult for the USA's Federal Government to put a toll on that transaction. Indeed Bitcoin is a competing currency that allows people to bargain directly with one another which the Federal Government would interpret as competition - in much the same way Taxi unions in Houston declared bicycle rickshaws as "stealing" from them and had the rickshaws regulated out of existence. The US Government - unlike the Taxi Union - sees ALL business transactions done without them as competition and since they have direct law making power will address such things directly.

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          Which part of "Bitcoins seized in drug bust" did you and GP miss to dive into "It's a plot against Bitcoin!" rant? What would you rant about if the title was "VPN access credentials seized in drug bust", "Truecrypt volumes seized in drug bust", "Microsoft Windows installation seized in drug bust", "iPhone seized in drug bust", "Pair of blue socks seized in drug bust", ...?

          I'd say mod whole this story as offtopic.

        • There is no such mandate. If you want to trade goods for goods, the government will not interfere with that. However, if you use such trading to generate income, it's taxable just as if you had used cash. There are minimum wage laws, though and they exist to protect workers from exploitation and to prevent tax evasion.

          • As with everything else there's a form for that! [irs.gov] We should charge the feds for doing paperwork for them all the damned time.

            Also, they're serious about it [lasvegassun.com] even ignoring the face value of legal US tender to prosecute.

          • Re: (Score:2)

            by jythie ( 914043 )
            While people might rant about the philosophy behind it and feelings of control, the core motivation is that tax part. There has been a pretty strong anti-tax movement over the last few decades and this is just another front in that movement.

        • Re:It was bound to happen (Score:5, Interesting)

          by cold fjord ( 826450 ) on Sunday July 07, 2013 @11:22AM (#44209643)

          If people were allowed to trade their own labor or goods without having to invoke the mandatory use of Federal Reserve notes/bits it would be much more difficult for the USA's Federal Government to put a toll on that transaction.

          Yes, we get that Bitcoin is potentially useful for tax evasion. Can you spell out why that is socially desirable?

          Indeed Bitcoin is a competing currency that allows people to bargain directly with one another which the Federal Government would interpret as competition

          People do bargain directly with each other now. The government isn't involved in that. But if good or services are sold, that transaction tends to be subject to taxes, although not always. And that does ignore the underground economy that tends to involve cash transactions.

          I don't think you are showing much of a case here.

          • Re: (Score:2, Informative)

            by Anonymous Coward

            Yes, we get that Bitcoin is potentially useful for tax evasion. Can you spell out why that is socially desirable?

            There are massive arguments in favour of tax havens. Most effect and help people who don't use them more then you would ever think.
            The biggest one in my opinion is that it creates competition for governments. You might think this is a bad thing if you are a big and unwieldy government, who isn't providing visible value for the taxation. But if you are a normal person, then it means that there is downward pressure on the government to provide value for the money it is stealing from its citizenry.
            Forbes: W [forbes.com]

          • Re: (Score:2, Interesting)

            by Anonymous Coward

            Yes, we get that Bitcoin is potentially useful for tax evasion. Can you spell out why that is socially desirable?

            It is socially desirable to avoid paying taxes because the goverment just hands it over to the NSA to spy on us.

            And they have yet to produce anything of value from all that money.

            Hows that...

          • Re: (Score:3)

            by pla ( 258480 )
            Can you spell out why that is socially desirable?

            Because some people don't approve of robbing from the poor to give to the rich.

            Simple as that.
          • It is socially desirable because the plain fact is, the Federal government SHOULD NOT BE INVOLVED IN EVERY TRANSACTION. Every time money moves, the government gets a cut? WHY?

            • Re: (Score:2, Insightful)

              by Anonymous Coward
              Do you like having hospitals? Well, you're American, bad example, you might not.

              How about roads? What about an army? Or police? Fire departments? Those come from taxes. And if you try to argue "every transaction", then just think about how eager people are exploit every loophole they possibly can -- you exempt things from taxes, and people use those to the fullest (as they already do for deductions).
              • There is a vast difference between paying our government's bills and allowing them access to every transaction ever made. The method we have now is why we are trillions of dollars in debt and spend absurd money on the military.

          • "If you punish ordinary opposing views in debate you aren't committed to free speech. Prove me wrong."

            http://cryptome.org/2012/07/gent-forum-spies.htm [cryptome.org]

          • Yes, we get that Bitcoin is potentially useful for tax evasion. Can you spell out why that is socially desirable?

            Tax evasion isn't what's "socially acceptable". Unrestricted trade is. The United States has become the 300 pound gorilla in the room, telling telecommunication companies to sign secret agreements to tap all their lines, even when they aren't in the US. They freeze accounts of political enemies. And that's not even touching on all the trade restrictions from patent and copyright law, etc.

            A currency controlled by no government is immune to all of these problems, and while tax evasion is a side effect of this

            • The IRS can want all day long.

              What the IRS gets is the pertinent question. No paper trail, no transaction.

          • Re: (Score:3)

            by mjwx ( 966435 )

            People do bargain directly with each other now. The government isn't involved in that. But if good or services are sold, that transaction tends to be subject to taxes, although not always. And that does ignore the underground economy that tends to involve cash transactions.

            Not sure about where you live, but here in Oz sales in non-cash forms can still be taxed.

            I.E. if I paid you in chutney, the govt will still demand 10% (well 10% of the market value of the chutney).

            Same for income, but we have a progressive rate for income tax, sales is a flat 10% so it's an easier example.

            I could conduct business in foreign currency, bit coins or pig shit, this does not free me from tax obligations (and the ATO knows it).

        • Re:It was bound to happen (Score:5, Interesting)

          by Kjella ( 173770 ) on Sunday July 07, 2013 @11:46AM (#44209805) Homepage

          Because it's totally off topic, this has nothing to do with what bitcoin is. If you get busted for drugs, the police will cease anything of value including cash, real estate, possessions, if you buy gear for your WoW character or land in Second Life with drug money that has resale value they can in theory cease that one too. The point is that bitcoins have been hyped up as anonymous money to buy drugs so lots of dealers should have bitcoins which makes it surprising that they haven't found any to cease before. Nothing here happened to his bitcoins that wouldn't have happened to anything else he owns.

          • The point is that bitcoins have been hyped up as anonymous money to buy drugs so lots of dealers should have bitcoins which makes it surprising that they haven't found any to cease before. Nothing here happened to his bitcoins that wouldn't have happened to anything else he owns.

            (cringes at typo) Okay, it's not anonymous money exactly, but it is money that can be traded without being associated with a real world identity. As far as "dealers" and "drugs", that's separate -- bitcoin is popular because it's resistant to seizure -- once a sale is made, the government has to seize the account it currently resides in. It can't simply go to a bank, serve a warrant, and say, "all your base are belong to us." A far cry from, say, Paypal or any other financial service. And large amounts of c

            • Actually, if he managed them properly (i.e. encrypted the wallet so authorities don't have access and backed it up to a location he can access later, e.g. email it to an anonymous webmail account) they really haven't "seized" anything. He can simply unseize them the next time he has unrestricted internet access. This is just another reason Bitcoin is better than cash. If you know what you are doing it cannot be confiscated or stolen, only transferred with your consent or by coercion.

        • Why is this statement modded down? It's a perfectly legitimate assessment of the flow of money and labor. If people were allowed to trade their own labor or goods without having to invoke the mandatory use of Federal Reserve notes/bits it would be much more difficult for the USA's Federal Government to put a toll on that transaction.

          *Sigh*. I've said it before, but it doesn't appear to be penetrating the tinfoil.

          The US goverment doesn't care whether you conduct your transactions in dollar, Bitcoin

  • Public Record (Score:5, Funny)

    by bill_mcgonigle ( 4333 ) * on Sunday July 07, 2013 @09:36AM (#44209009) Homepage Journal

    They'll have to enter the hash into the court records as evidence.

  • Who Cares?? (Score:2, Insightful)

    by Anonymous Coward

    Why is every minutiae associated with Bitcoin posted on the front page here?

    This is not news for nerds. Criminals will always look for ways to hide money, whether it is in hard cash, diamonds, or even bitcoin it is not new.

    Stop this nonsense now.

    • Why is every minutiae associated with Bitcoin posted on the front page here?

      Just like Linux, Bitcoin is the little man's fight against the big entities. I believe this is the reason.

  • Business models (Score:5, Interesting)

    by Dunbal ( 464142 ) * on Sunday July 07, 2013 @09:41AM (#44209051)
    Ahh the joys of self-financing government departments. "We believe those assets were used in connection with a crime". Suddenly, they don't have to prove anything, they just have to seize it and it's theirs. Nice and convenient. Can they even prove where the bitcoins came from?

    • don't be ridiculous, the $800+ is nothing, chump change. The DEA will not be able to finance itself taking small amounts of bitcoins.

      • Re: (Score:3)

        by sjames ( 1099 )

        Of course not. They take the smaller amounts for spite when they don't get the big bux they were hoping for.

        • that's not how the War on Drugs makes money, the kind of operations talked about in this article are paid for with tax dollars, not confiscated goods. The big bucks in the War on Drugs would be big pharmy, illegal CIA/armed forces working with drug lords (e.g. afghanistan), the prison system business, the "defense contractors" who outfit DEA and other statsi with gear

          • Re: (Score:2)

            by sjames ( 1099 )

            of course. They get to use other people's money to cover operation costs and use the confiscated money for the hookers'n'blow fund.

    • Can they even prove where the bitcoins came from?

      The sad irony is even if they cannot, the burden of proof is now on their former owner. If he takes the time, money, and council to prove these assets didn't come from nefarious activity, well, he'll likely be in the red recovering his eight hundred and change.

    • Re: (Score:2)

      by Hentes ( 2461350 )

      Theoretically they can. The Bitcoin network keeps the history of transactions. But to check that they needed to seize the coins. It's not just money, it's evidence.

    • Ahh the joys of self-financing government departments. "We believe those assets were used in connection with a crime". Suddenly, they don't have to prove anything, they just have to seize it and it's theirs. Nice and convenient. Can they even prove where the bitcoins came from?

      As someone who's dealt with seized assets before (not for myself, for another employee in a previous job), "seizing" does not mean it's "theirs", unless you've been watching too many crime dramas on TV.

      The seized assets have to be proven to be used in a crime as part of a conviction, otherwise they are returned. In our case, the seized assets were returned to us after the trial. The only catch was we archived everything that was seized in case additional evidence was needed later.

      Only in Hollywood does the

      • There are many cases of people having assets seized, found not guilty and they get nothing back.

      • Re: (Score:2)

        by Fjandr ( 66656 )

        No, proof is not necessary. That statute uses "a preponderance of evidence" as the bar in forfeiture cases, which is a much lower burden to establish. You also must file a claim within 35 days to contest the seizure before it is permanent, and you must do so at your own cost. For amounts 4 figures or less, the cost of filing a claim will amount to more than the value of the seizure.

    • they also have to return it unless proven guilty if they do not they can be sued for it.

  • How to make money selling drugs. (Score:5, Interesting)

    by six025 ( 714064 ) on Sunday July 07, 2013 @09:57AM (#44209151)

    Anyone under the misapprehension that the drug war is about catching scum bag drug users or dealers should watch this excellent documentary:

    http://www.imdb.com/title/tt1276962/ [imdb.com]

    You'll learn who the really big players are. Hint: it's not who you think it is ;)

    Peace,
    Andy.

    • And featuring prominently in the credits is 50 cent.
      This documentary just lost all credibility with me.

      • And featuring prominently in the credits is 50 cent.
        This documentary just lost all credibility with me.

        I bet he'd feel the same way about your slashdot comments, if he had any idea who you were, or what slashdot was.

        • FYI 50cent is the rapper that sued 'Hanzis matter' for accurately reporting that the Chinese character 'Mad Flow' tat on his shoulder actually reads 'Crazy Diarrhea'.

          He's no more relevant then Streisand.

          Actors/Muscians politics need to be ignored.

  • Re: (Score:2, Informative)

    by account_deleted ( 4530225 )
    Comment removed based on user account deletion

    • Re: (Score:3, Insightful)

      by AthanasiusKircher ( 1333179 )

      Can we at least make sure stuff is adequately summarized before it hits the front page?

      As already said, you must be new here.

      For the record, it was in South Carolina.

      Umm, what the heck? When a name like "Charleston" is just given without any other qualifier, it's obviously referencing the most well-known city with that name, i.e., the one in South Carolina.

      Given that the "U.S. Drug Enforcement Administration" is explicitly mentioned, the summary automatically rules out your localities in Australia, Canada, New Zealand, and the UK, so listing those as possible interpretations of the summary is ridiculous and ignorant.

      And while,

      • I live close enough to the Charleston in TN that I have gotten used to checking whenever the word comes up without more info.
        You, yourself admitted that at least one item on Kr1ll1n (579971)'s list was reasonable.
        Other people are even now pointing out that what you claim was obvious is not obvious.
        I supect you'll be surprised how many people who don't live in the US also don't find ANYTHING about which Charlston is largest obvious, and in fact you'll probably hear from people who only know of a handfull of

      • Re: (Score:2)

        by Alsee ( 515537 )

        Given that the "U.S. Drug Enforcement Administration" is explicitly mentioned, the summary automatically rules out your localities in Australia, Canada, New Zealand, and the UK

        How quaint, assuming that U.S. laws and U.S. Law Enforcement still stay within U.S. borders.

        -

    • Can we at least make sure stuff is adequately summarized before it hits the front page?

      :D

  • >11.02 Bitcoins worth $814

    In a case believed to be the first of its kind, the reported "street value" of the Bitcoins seems pretty accurate.

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