Bitcoin_inc CEO Arrested For Selling Bitcoin

  • Bitcoin_inc CEO arrested for four days for selling bitcoin on localbitcoins.com
  • Evidence points towards coordinated attempts from Homeland Security to arrest Morgan
  • Morgan's court hearing is on Thursday 22/2/2018 and is likely to set precedent

Comment of the Day @lopp

The Bitcoin ATM creator @NODEfather was recently arrested and held in jail for 4 days (9/2/18 - 12/2/18) under allegations of violating the following law:18 USC 1956 - Money Laundering Instrument. The tweet below shows his custody report that confirms the arrest and the charge against him. He has been released on bond and is awaiting a hearing on Thursday (22/02/2018).

In the US you can send under $10,000 before being required to register as a MSB (money service business). MSB is a legal term used by financial regulators to describe businesses that transmit or convert money. If you classify as a MSB you must adhere to AML legislation and rules which is where the case against Morgan lies.

The Case

The court documents show Morgan sold 9.98 BTC Bitcoin for $14,500 to a homeland security agent using localbitcoins.com in late 2016. However, the coins had an aggregate value of $9,200 at the time and Morgan said he repeatedly asked the buyer for the correct amount of $9,200. Regardless, Homeland Security sent the $14,500 which coincidentally places the amount above the $10,000 MSB threshold.

The DHS (Department of Homeland Security) also claim that they told Morgan the bitcoin was going to be used to buy a machine which manufactures 'hash oil'; this type of machine is supposedly illegal at the federal level, but not in many states. Morgan claims that the DHS didn't specify what the bitcoins were going to be used for prior to the sale and is looking to argue this in court. 

Entrapment?

They briefly detained Morgan almost a year later in September 2017 when he travelled to San Diego after he had been promised investment in his company from a stranger for over 6 months. The stranger based in San Diego turned out to be the DHS.  They detained him and questioned him for three hours asking how many bitcoins he owns amongst other questions. Ultimately they let him go as they didn't have any grounds to arrest him.

On February 9th the DHS arrested Morgan in his Las Vegas residence where he spent 4 days in jail. On Thursday's hearing Morgan will need to prove he made every attempt to sell for under $10,000 and that the buyer had not given him an indication that the bitcoins where going to be used for the purchase of a 'hash oil' machine. What is clear is that the DHS was desperately trying to entrap Morgan and it's a worrying story for bitcoin holders over the US.

There has been significant support for Morgan and he has raised some money for legal fees. @ToneVays and @RichardHeart are two of the biggest Twitter accounts to spread the word. 

Needless to say there have been some trolls, the bitcoin parody account, @buttcoin and @iajanus accused Morgan was trying to raise bitcoin whilst 'conveniently' not being able to access his own funds. After the numerous scams plaguing the crypto Twitter space, it's understandable that people who don't know the details may be suspicious. Once more, facts emerge after Thursday's hearing and hopefully doubts can be put to rest as more details emerge.

The Bigger Picture

Perhaps Bitcoin's most important innovation is providing the first non-state controlled method of storing and transacting value since fiat money was created. This has huge implications on the control of governments and the efficacy of their monetary policies. If nothing else, this case shows the distrust government organisations have of people that choose to store their wealth outside the fiat system.

This is certainly an important case for the bitcoin ecosystem as it sets the precedent for the way in which the US government can treat those who choose bitcoin over fiat. The bitcoin revolution allows citizens to choose the monetary system they want to participate in; one ruled by a powerful elite that favors their interests or a trustless system that runs on code and cryptography. Each citizen has a right to participate in either system without scaremongering tactics that one could consider this case to be.

Support

Morgan has hired David Chesnoff and Richard Schonfield as his legal team and he says DHS has locked him out of his phone meaning he can't access his BTC to pay for legal fees so he is asking for donations or loans backed by his verified Counterparty address.

Alternatively, if you are near San Diego go and show your support in person!

How Bakkt Can Bring the Crypto Space an Institutional Investor Influx

Cryptocurrency enthusiasts have for years been waiting for institutional investors to enter the space. While the introduction of bitcoin futures contracts on regulated exchanges in late 2017 didn’t gain a lot of traction, but Bakkt may.

Bakkt is a long-awaited bitcoin futures exchange and on-boarding platform from the Intercontinental Exchange (ICE) - the parent company of the New York Stock Exchange – and it’s set to launch this year. Bakkt itself has remained tight-lipped over the precise launch date after delaying its launch last year, with ICE CEO Jeff Sprecher in February simply saying “later this year.”

It’s possible that this quarter may see the launch or at least more news about when the exchange is finally coming. At the end of March, Bakkt CEO Kelly Loeffler explained:

While we’re not yet able to provide a launch date, we’re making solid progress in bringing the first physical delivery price discovery contracts for bitcoin to the U.S.

Bakkt’s launch could be a major milestone for the cryptoasset industry. A venture backed by Microsoft and Starbucks, its institutional pedigree alone will switch many cautious investors on. Specifically, the firm is set to help consumers pay for goods and services with cryptocurrencies, with Starbucks being the flagship retailer in its arsenal.

Bakkt’s Bitcoin futures contracts will be the first physically-settled derivatives on a regulated trading platform. This means investors will receive the contract’s underlying asset, bitcoin, when it expires.

Currently the Chicago Mercantile Exchange (CME) offers cash-settled bitcoin futures contracts, meaning investors get the equivalent of BTC’s value in fiat when the contracts expire. This is seen by some as a major development in the cryptocurrency space, as it shows traditional finance is willing to interact with the nascent cryptoasset industry.

It’s worth noting that earlier this year the ICE’s CEO called Bakkt a “bit of a moonshot bet,”  as it was organized in a way “very different than the way ICE typically does business.” The firm has its own offices and management team, and could undergo more rounds of financing in the future.

Bakkt And a Potential Bitcoin ETF

What’s significant about Bakkt’s launch beyond this, is that it may bolster the chances of a Bitcoin Exchange-Traded fund (ETF) being approved. Such a product would make it easier for institutional investors to gain exposure to cryptocurrencies.

In August, the US Securities and Exchange Commission (SEC) rejected nine other ETF applications, in particular highlighting how those applying hadn’t provided evidence that “bitcoin futures markets are of significant size’” for an ETF to be launched.

Once Bakkt is launched its trading volumes may very well help quell the SEC’s concerns over the bitcoin futures markets’ small size as institutions and other investors may feel comfortable entering it. Larger futures contracts trading volume, increased liquidity and a well-established company involved may prove enough to convince the SEC that the time is right for a Bitcoin ETF.

Bakkt therefore represents a very significant milestone for a maturing cryptoasset industry and may well herald the “institutional influx” that many have been anticipating since 2017. Despite the markets remaining relatively flat throughout 2019 these looming decisions in the U.S. have the power to move the entire industry forward, for better or worse.