Postcastabulous – Liberty Panacea

Postcastabulous – Liberty Panacea

Sunday night I co-hosted the Liberty Panacea podcast with Matt McKibbon for the second time.

It’s a call-in show, so if you’d like to know when I’ll be on next, follow the show on Twitter.

Listen below, or here.

Online Politics Radio at Blog Talk Radio with Liberty Panacea on BlogTalkRadio
Why Are Bitcoiners Going to Jail for Money Laundering While Big Banks Walk?

Why Are Bitcoiners Going to Jail for Money Laundering While Big Banks Walk?

BitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, the firm paid a fine of $1.9 billion. Authories made no arrests, and HSBC still turned a $13.5 billion profit that year.

Rolling Stone’s Matt Taibbi detailed the crimes HSBC helped fund, including “tens of thousands of murders” and laundering money for Al Qaeda and Hezbollah. By contrast, Silk Road users have only been shown to have bought and sold drugs. (The six murders-for-hire commissioned by alleged former Silk Road head Ross Ulbricht were never carried out.) In fact, by moving transactions online, Silk Road likely decreased the violence associated with the drug trade.

Again, no individual associate with HSBC paid any money or spent a day in jail. Shrem is currently in custody. Why is there such a disparity? Clearly the size, scope, violence or effect of the crime can’t justify the discrepancy in response. The Justice Department explained it by saying that HSBC is, in essence, Too Big to Jail.

“Had the US authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer during the announcement of the HSBC settlement. ”HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized.”

What are the moral and practical underpinnings of a law whose punishments are harshest for those who violate it least? The Justice Department is here admitting that the costs of fairly enforcing the money laundering laws as written—potentially shaking up a major bank—outweigh the benefits.

Charlie Shrem founded BitInstant, a service that let users quickly buy into Bitcoin, in his family’s garage with $10,000 of their money while still in college. He became a founding member of the Bitcoin Foundation and served as vice chairman of the board—a position he’s since stepped down from. But his startup was plagued by regulatory troubles from the start, fueled by a lack of clear regulation pertaining to Bitcoin. In a trailer for the Bitcoin documentary “The Rise and Rise of Bitcoin,” Shrem claims to spend “thousands of dollars on lawyers every day just to make sure that I’m not gonna go to jail.”

While Shrem operated in regulatory uncertainty, and didn’t know the charges against him on the day he was arrested, HSBC received 30 different formal warnings in just one brief stretch between 2005 and 2006. Even then, HSBC was openly flouting the rules. The bankers knew, for instance, that they were funneling money for people such as one of 20 early financiers of Al Qaeda, a member of what Osama bin Laden himself apparently called the “Golden Chain,”according to Taibbi. Another customer was powerful Syrian businessman Rami Makhlouf, a close confidant of the Assad family.

Some, including Tiabbi, have called for equal jail time for all offenders. There is no doubt that the Justice Department is overstating the lasting, worldwide effect of justly applying money laundering laws. However, the drawbacks to enforcing laws against what’s estimated to make up a third of all transactions are very real. In this reality, it’s legitimate to ask whether laws against money laundering should be applied to anyone.

Money laundering is, simply, the process of concealing sources of money. While the standard image of money laundering involves murders, Mexican narco-gangs, and Al Qaeda, in reality there are many reasons that normal people would want to keep their transactions anonymous—which is a big reason why Bitcoin gained popularity with libertarians in the first place.

As J. Orlin Grabbe wrote, ”Anyone who has studied the evolution of money-laundering statutes in the US and elsewhere will realize that the ‘crime’ of money laundering boils down to a single, basic prohibited act: Doing something and not telling the government about it.” Criminalizing this means that by default government has the right to know the source of all of every citizen’s money. In some jurisdictions, money laundering can be just using financial systems or services that do not identify or track sources or destinations.

Writing in American Banker, Bitcoin advocate Jon Matonis explains that “from President Roosevelt’s 1933 seizure of personal gold to the Nazi confiscation of Jewish wealth to the recent deposit theft at Cyprus banks, asset plundering by governments has a long and colorful tradition. Protecting wealth from oppressive regimes continues to this day.”

In that piece, Matonis calls money laundering the thoughtcrime of finance, a sentiment that’s gained traction in libertarian circles. Hiding or failing to report where money comes from is, in and of itself, a victimless crime. The theory is that everyone owes it to the government to make enforcing laws against violent crime easier. But that’s not really accurate, as most of the laundered money is used in other crimes whose violence stems from their being illegal, such as gambling and the drug trade.

This reporting to the government comes at a significant cost, both in terms of resources and privacy.

The Economist has estimated the annual costs of anti-money laundering efforts in Europe and North America to be in the billions. Even its most legitimate function, trying to keep people from financing terror, has been deemed a costly failure by the magazine. Curiously enough, the Economist concedes that efforts to reduce identity theft and credit card fraud are most effective at combating money laundering.

Perhaps this cost could be justified if the information gathered through the reporting requirements was used to cut off funds to terrorists. But as the HSBC case shows, that’s not the case. After getting notice after notice about failing to properly report on its customers, HSBC simply hired former call center employees to “investigate” cases of money laundering to unsavory characters. And when one employee actually did, he was fired.

Besides costing billions, efforts to stamp out money laundering also erode privacy. Ensuring every transaction is above board forces banks to be cops through so-called “know your customer” laws. These laws essentially conscript private businesses “into agents of the surveillance state,” according to the American Civil Liberties Union. Bitcoin offers an interesting counterpoint: Even if accounts may be anonymous, transactions are all public, which is a level of transparency not seen in the fiat currency system.

So why does alleged Bitcoin laundering deserve jail time? On a pure cost-to-benefit basis, perhaps it makes sense to jail Shrem while giving HSBC executives a slap-on-the-wrist fine. Revoking the bank’s license would rock the entire financial system, while Shrem’s enterprise was already on hold at the time of his arrest.

However, laws which result in jail time for minor infractions while the worst offenders walk free deserve their own cost/benefit analysis. If money laundering laws are worth their cost to companies, to the government, and to privacy, surely they are worth applying fairly and evenly. If not, perhaps its time to rethink whether they make sense at all.

This post originally appeared at VICE Motherboard.

Co-Hosted Liberty Panacea

Co-Hosted Liberty Panacea

Sunday night I co-hosted the Liberty Panacea podcast with Matt McKibbon. Matt and I have great chemistry, and similarly nerdy interests, so of course it was a great time. Really hoping I can join him again soon.

It’s a call-in show, so if you’d like to know when I’ll be on next, follow the show on Twitter.

Listen below, or here.

Find Additional Radio Podcasts with Liberty Panacea on BlogTalkRadio
Podcast Interview with Don’t Worry About the Government

Podcast Interview with Don’t Worry About the Government

Chris Novembrino from Don’t Worry About the Government was kind enough to have me on his show.

In this installment, Chris is joined by Cathy Reisenwitz from Sex And The State. In addition to the content found at “Sex And The State,” they discuss ‘thick’ and ‘thin’ libertarianism, slut shaming, the Republican primaries, and why Cathy is losing her passion for the ‘hate watch.’

Will she get it back?

There’s only one way to find out…

Listen here. Had a really great time.

And Like Chris’ Facebook page.

And follow him on Twitter.


Open Letter to President Obama Re: SOTU

Open Letter to President Obama Re: SOTU

We’ve got another awesome Sex and the State guest post! If you would like to submit a guest post, please fill out my contact form with an brief outline of what you want to write about.

Mr. President –

To say that I have low expectations for the State of the Union address would be putting it mildly. It, frankly, deserves to be approached with a certain level of cynicism. With every passing year, it has devolved from a platform to launch and promote new policy initiatives to a reality distortion matrix and majority party circlejerk. It would be naïve to expect any President to declare the state of our Union as anything but strong, to present the nation anything but the rosiest portrait of the status quo, or to remind voters of the failures or shortcomings of the executive.

I expected your nauseating rhetorical devices – when you say, “Let me be clear,” you can be certain that whatever follows will absolutely not be. You’ve mastered the Norman-Rockwell-esque portraits of americana romanticizing a reality far less pristine – the selflessly sacrificing public school teacher, the hard-working auto factory line worker ground by the gears of globalism, the night-shift single-parents dreaming of a better life for their children. I wasn’t surprised by your misleading use of statistics – the maximally optimistic figures that try to paint the ObamaCare rollout as anything but a clusterfuck, or the long-ago debunked claim that women are paid 77 cents for what men are paid a dollar for.

Like anybody who has paid close attention to your administration’s record, I’ve come to expect your doublespeak – when you state a value or policy objective as if that’s the star guiding your administration’s policies and actions, and then actually do the exact opposite – and it really doesn’t bother me most of the time like it should. You said in your address, “Our alliance with Europe remains the strongest the world has ever known,” but I’d wager Angela Merkel and other European leaders would disagree strongly. You extolled our opportunities to, “do good and promote understanding around the globe… to free people from fear and want,” but your record achievements in drone strikes with expansively inclusive target definitions have sown more fear than they have freed people from. And I know you may want us to believe you’re pro-immigration, as you said “it is time to heed the call… and fix our broken immigration system,” but you do realize you’ve deported more people and broken up more families in doing so than even your predecessor, Mr. Bush, right? Doublespeak is your stock in trade. I understand that.

But Mr. President, you just had to go and talk about inequality and opportunity.

You see, we Americans with libertarian leanings will generally agree that free-market capitalism, on its way to being the most potent engine for creating abundance, value, and quality of life, necessarily includes a measure of inequality; that this is a feature, and not a bug, because the possibility of enriching oneself is motivational. However, we also concede that for this inequality to be just, we must design our society with maximal equality of opportunity; that your station and circumstances at birth are, to whatever extent as human nature allows, not determinative of your potential; that you’re not defined by privilege or lack thereof. The injustice of inequality is negated when the marketplace ensures good ideas, executed well, will win out in the marketplace, regardless of who had them.

So when you said, “Inequality has deepened,” you’re correct, without a doubt. You also said, “Upward mobility has stalled,” which pretty much everybody else agrees hasn’t, but let’s just go ahead and agree that it could be better. You might expect me to be cheering on your stated interest to create more equality of opportunity. But instead, I found myself livid, yelling at my television set, incredulous at your audacity, because on this point, your doublespeak and outright hypocrisy are just too much.

The war on drugs stifles economic mobility more than other cause. Executing this war has condemned people to poverty or recidivism, has institutionalized the oppression of minorities, has broken stable family units, and has pushed America into leading the world in incarceration.

But you smoked weed, sir.  You’ve done cocaine, sir. You’ve gone on late night television and joked about it in order to appear “cool”. You said in your address that, “I want every child to have the same chance this country gave us ” and extolled an America in which, referring to yourself, “the son of a single mom can be President of the greatest nation on Earth.” But to be frank, sir, you got lucky in a way that the current generation of young men of your complexion do not. One recent study found nearly half of black men have been arrested by age 23, and for Hispanics, that number only falls to 44%. The FBI reports over 1.5 million drug arrests a year. Those young men, who get arrested for mere possession of the drugs you admit to having used, have massively diminished prospects for success. They have a harder time getting a job, as background checks turn up even arrests. They are ineligible for financial aid to go to school. Some can no longer get professional licenses. Some can no longer vote. If they’re seeking citizenship or a work permit, a mere arrest can dash those hopes. And those drug laws are grossly disproportionately enforced against minorities – worst of all in New York City, where 90% of those arrested on drug charges are minorities. There are hundreds of thousands of Americans currently incarcerated for drug law violations. These are non-violent crimes, crimes without victims, crimes you yourself found no moral wrong in committing nor shame in admitting.

And yet your administration engages in the same deceptive doublespeak. Out of one side of your mouth, you state marijuana enforcement is a low priority for your administration and that you favor treatment versus prosecution. Yet your Department of Justice conducted more raids on medical marijuana clinics and patients and levied more drug charges than your predecessor’s, leaving Congress-critters from these districts to plead with your U.S. Attorneys to simply stop. You, sir, had opportunity despite your recreational drug use, and that’s a privilege literally half of young black men are flat out denied.

And the solutions you did trot out for addressing inequality and for promoting economic mobility? – those solutions were the same, tired waves of the hand that would borrow more dollars to hand down to your favored special interests – who consistently fail to use them to create any public good: public sector, teachers, and manufacturing unions; and green energy companies.

Really, it doesn’t take all of that. All you have to do is reclassify drugs to different “schedule” levels in the Controlled Substances Act. I’d even just settle for rescheduling only marijuana. It’s currently a Schedule I drug, which means you believe it has no medicinal purpose whatsoever, despite the 20 states and the District of Columbia that have passed laws condoning medical use. The Controlled Substances Act permits you through your Attorney General to reclassify any drug you wish. You could do this today.

I have to offer you rare but sincere praise for your Attorney General’s new directive to U.S. Attorneys on avoiding triggering mandatory minimums for low-level, non-violent drug offenders. That’s a tremendous step toward justice and liberty in this country. So why not take it to the logical next step and commute the sentences of every federal prisoner who was slammed with a draconian mandatory minimum sentence who would not have merited it under this policy?

See, you don’t have to waste more of our money trying to solve a problem that you’re actually exacerbating. You can simply stop implementing a misguided policy that gets people killed, destroys futures, breaks families, and perpetuates state-sponsored racism.

But you’re not going to do that. Despite knowing fully well that your own drug use constituted a felony that would have kept you from college, law school, and public office you are perfectly happy to criticize, hunt, arrest, and prosecute those who did no more than you did. Despite knowing fully well that America would support you in that decision and that it would be more of a political risk for you to endorse the theory of evolution. And instead you’re using the damage caused by this failed prohibition to justify dumping more money into special interest labor groups that overwhelmingly donate to the Democratic Party.

Creating greater equality of opportunity by ending a drug war whose only victims are those prosecuted by it, overwhelmingly poor and minorities; not pouncing eagerly on the opportunity to use the carnage to justify favors to your party’s supporters; having the humility to recognize how crushed and destroyed your own life would be had you felt the full force of the power of the state – this would be leadership and courage. You, sir, have neither.

So with all due respect, fuck you, Mr. President. It’s remarkable that a cynic like me with the lowest of expectations from national politicians, especially during an event that is the apex of political theater, can be so incensed as to be compelled to put pen to paper to tell you so. You’re a hypocrite in the most vile of ways, you’re an opportunist in the most crass political fashion, and you’re a coward unfit to lead the ship of state. I look forward to your Presidency ending soon and to it being even sooner forgotten.


Joshua Ginsberg is a software architect living in Washington, DC. He is a machine that transforms bacon, beer, bourbon, and coffee into wit, shenanigans, and the occasional profanity.