Thursday, June 13, 2024

Dave's Narrative

Show Me
This is a request and a description

Part I
(in which I try to help you)

The opportunity here is to help each other. I face adversity because I advertised my desire to buy and sell crypto for a small premium or discount. My lawyer and I discussed the "Money laundering" issue:

I said "It's like with apples: There are people eating apples and people growing apples. The government sees that the people eating them have money that ends up in the hands of the people growing them, and concludes that there is a money transmission business between them." Nathan (my lawyer) said "Yes, but bitcoin is not apples. It's money."

I eventually got him to explain that he is presenting everything from the government's point of view, so what he meant is that the government views bitcoin as money.

I will continue using this metaphor, so keep it in mind. Some of the money that people use to buy apples is stolen, or extorted, or otherwise the proceeds of crime, and so the truckers and grocery stores are helping to launder the money those criminals spend (on apples). The apple industry doesn't need to worry about this because apples are not money.

Under this view that every bitcoin purchase or sale is potentially helping to launder money, my potential co-defendants include everyone I've ever traded with. We will have to wait until the contention that bitcoin traders are helping to launder money is resolved, or the government relieves me of the responsibility to remain incommunicado with my past trading partners before we communicate again. Or I could go back to jail and write y'all letters, but then I need your address, some way to maintain the muscles in my writing hand (since I'll be writing them with a short pencil), and whatever I tell you, I'll be telling them too.

Part II
(with info on how to stay informed)

If you use PACER or RECAP (part of where documents that should be public can be made public by anyone willing to pay to get them from PACER), you will find two cases with "David Scotese" in them. The first is the prosecution of some cash that was mailed to me by Woody Ochle in 2017, who was under investigation for drug trafficking at some point. The documents I filed do not include all my research, and I forget the reference, so it's possible that I'm misremembering, but I wanted to know how to buy and sell crypto without violating the law (specifically against operating an unlicensed money transmitter business), and to see if I was really doing that. What I remember is that "money" is issued by a central governing authority, which excludes bitcoin, both because anyone can mint it (run a bitcoin miner) which makes it decentralized, and because it is "issued" by anyone who finds a block, it's issued by someone other than a governing authority (most of the time… I have not heard of governments doing bitcoin mining, but now we're getting into weeds).

The second docket you'll find is about my current case. It's June 17, 2023, and I don't think there's anything in there yet from me or my lawyer, so that is the government's version. This is like a reverse class action lawsuit brought by the government against the entire peer-to-peer crypto trading community.

Part III
(in which I pontificate)
Laundering money requires knowledge. In the apple example, the truckers and grocery stores don't usually know whether or not the apples were grown illegally or will ultimately be purchased with ill-gotten gains, and this lack of knowledge means they are not laundering money, but if they do know and it was illegal, then they are laundering money, even though apples are not money.

Money transmission, according to the law as I read it, requires a transaction that is dependent on another transaction. You could view the handing over of a bag of apples to be one transaction and the handing over of $5 as another one, but that is wrong because that would mean every grocery store is a money transmitter. Each transaction has each party receiving one thing and giving up another, and for money transmission, the transmitter is a party to two of them, and one of them is dependent on the other. To me, this means that if the first transaction fails, then the second must be reversed if it happens to succeed. I have actually explained to some of my customers that this is the case when we discuss details of trades. I have not resolved this discrepancy with Nathan because I think it doesn't matter to the government: If I sell some bitcoin to someone who gives me cash in return, there is no second transaction that needs to be done. The government may plan to play fast and loose with the definition of "dependent" in the definition of money transmission. On the other hand, I may be remembering FinCEN guidance rather than statutory language, in case one takes precedence over the other.

Obeying laws is nearly always a good idea, but that requires clear laws. FinCEN exists and publishes guidance on what laws mean specifically because this isn't the case. There is a legal principle called "void for vagueness" which is intended to protect those who attempt to obey laws from getting trapped by poorly written laws. Why would that happen? Because large financial interests recognize threats and motivate legislators to write laws which must not violate the Constitution, but which they want very much to violate the Constitution. Monopolies fail in free markets. If you can scare people into avoiding the exercise of rights you wish they didn't have, that's just as (or even more!) effective as making laws to prevent them from such exercise.

Part IV

(how to stop scammers)

Here is a quote from a letter I send to everyone who mails me cash, or at least to those whose cash comes in an envelope with a return address: "There are few things I want to prevent: A) Scams involving bitcoin, B) conversion of stolen cash or proceeds from the sale of stolen goods into crypto, and C) people like yourself expecting something they will never get."

A "Man in the Middle" (MITM) scam is what it's called when the victim receives instructions to pay for something by mailing a payment to the address of a legitimate seller (of something else). The man in the middle doesn't have the thing the victim wants to buy, but they say they do. They also don't get the payment, the legitimate seller of something else (often crypto) gets it. Once the legitimate seller of crypto has been paid, they send the crypto to whoever answered their ad, and that happens to be the middleman, in a MITM scam.

When this happens, it's too late for my letter to help, so why do I send it? I send it because it also recommends that the victim consider the possibilities and be more careful, just in case they didn't actually answer my ad and in case they are being scammed. I have one letter from a victim of this scam, and it is the copy of my letter that I sent her, with some notes she wrote on it. Typically, a MITM scammer will collect and milk victims with sob stories and explanations of how the previous amount still wasn't enough, or whatever. My letter, I like to think, often breaks that cycle. If the scammer moves on to a new victim and uses me again, the new victim gets the letter too. I imagine this pattern may frustrate the scammer out of scamming.

When you get hurt, it sucks, but it also gives you a lesson. You will eventually learn how to avoid getting hurt in that specific way, but that lesson sometimes comes only after you make the same mistake several times. If and when there is an opportunity for me to see that this is happening to someone who sends me cash, I will consider how to approach it with them. In many cases, the victim and I have conversed on the phone for a while before I was able to convince them to find a better way to help their "friend". I am in the difficult position of helping them to see something ugly where they thought was just some suffering that they could have helped to relieve.

Part V
(Brink of Second Bailout)

What is the point of bitcoin? The very first block has a clue: "Chancellor on Brink of Second Bailout for Banks". The value of any particular stuff is inversely proportional to how much of it there is, and this is true for money too. If counterfeiting were not illegal, a lot of people would counterfeit money instead of doing useful work to earn it. Misrepresenting something cheap as something expensive has always been that particular form of fraud called "counterfeiting", even before any government anywhere wrote a law against it.

After many goldsmiths were hanged because they spent receipts that they wrote up themselves without having received any gold, society craved a better solution. The government stepped in and created the idea of a bank which would fulfill the role of receiving gold, writing receipts, and then managing things ethically. Except it wasn't ethically, and so there were bank runs because the government allowed banks to hold less gold than the receipts they had issued said they held (aka "fractional reserve"), and when people caught on, they scrambled to get their gold before the bank ran out. I think some of those bankers were hanged. I'm not sure. The "federal reserve" is supposed to be the bank that solves this problem, but instead, they made it worse. Austrian Economics describes it pretty well in the Austrian Business Cycle Theory. The "roaring twenties" demonstrate the first stage in which overspending occurs, and the "gr eat depression" demonstrates the second stage. I don't like the see-saw, and it seems Satoshi didn't either. The people who like it like it because they have their hands on the levers and know when to buy and when to sell to milk everyone else. They don't like bitcoin. They are large financial interests and they recognize bitcoin as a threat.

I still want to help them, but not to kill bitcoin. I want to help them leverage their useful skills like security and records maintenance, and to abandon their uglier skills, like getting vague laws passed to weaken the networks and technologies that spring up to alleviate the suffering of my species that results from greed and politics.

Part VI
(is this my fault?)

At the north end of the street on which I grew up (Bellflower Drive), there was a bush with long cylindrical leaves that looked like alien hands. I broke one of these leaves open, curious about what was inside. It was a white fluid called latex. I put a tiny bit of it on my tongue, which immediately got inflamed. I felt the burning travel slowly down my throat as I spit and exhaled violently trying to get the poison out of me. I walked home, still spitting, with a sore throat.

What did I learn? I looked up the plant and discovered that it was one of the most poisonous plants we know about. I encountered it in the wild and survived without hospitalization. I and my brain and instincts worked well enough to keep me alive despite my potentially deadly curiosity. I hurt the people who love me a very tiny bit because they knew I had a sore throat. Otherwise, it was a huge positive. I was already that way before I almost accidentally killed myself, but it suggested something to me: People don't trust themselves as much as they should. A.A. Milne said it through Christopher Robin at the end of Winnie the Pooh: "You're smarter than you think, Braver than you believe, and Stronger than you seem." He also told the bear, "I will be with you always."

There are bad people in the world who are doing bad things and we do have some responsibility to avoid helping them do the bad things. However, I think we have more responsibility to protect ourselves from the bad things they do. I have revised the version of the letter I send to everyone who mailed me cash from the original which you can read here. If you are interested in exploring how I view the world and relate to it in more depth, feel free to search this blog for any term you want.

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