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Holy Nerdvana.
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Holy Nerdvana.

Started by Bitcoin, Jul 13, 2020, 07:49 am

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Bitcoin

Holy Nerdvana.
Wednesday, May 15, 2013.
Analyzing the Effects of the MtGox and Dwolla "Seizure" on Bitcoin.
You're receiving this notice because our systems have indicated that you've processed and completed a real-time Dwolla-to-Dwolla payment to Mutum Sigillum LLC ("Mt. Gox") within the last 24 hours.
Due to recent court orders received from the Department of Homeland Security and U.S. District Court for the District of Maryland, Dwolla is no longer legally able to service Mutum Sigillum LLC's account.
This is a courtesy email encouraging you to follow up on any uncompleted orders with Mutum Sigillum LLC as Dwolla is now unable to move money to and from Mutum Sigillum LLC's Dwolla account.
Dwolla is not party to this matter nor does it have any information or further insight into the situation. We strongly encourages those with questions to contact Mutum Sigillum LLC.
Note: Dwolla requires a court order before honoring requests such as seizing funds or revoking access to an account.
On behalf of Dwolla, we apologize for this inconvenience.
MtGox has read on the Internet that the United States Department of Homeland Security had a court order and/or warrant issued from the United States District Court in Maryland which it served upon the Dwolla mobile payment service with respect to accounts used for trading with MtGox. MtGox takes this information seriously. However, as of this time MtGox has not been provided with a copy of the court order and/or warrant and does not know its scope and/or the reasons for its issuance. MtGox is investigating and will provide further reports when additional information becomes known.
What's more, either thanks to the news or just as an opportune time to launch a DDoS attack, MtGox's website is largely inaccessible today. And then there have been the news stories about the "seizure of funds", money laundering, and so forth. Some of these are better than others -- Ars Technica for instance explains the reason for the seizure, and others basically parroted that around the Internet. The real question however is what this means for Bitcoin, particularly in the USA.
Ironically, I suspect this will have the opposite effect of shutting down Bitcoin (or Litecoin or other crypto-currencies). By taking this action, all that the DHS has really done is grabbed a bit of money and made some headlines that tell a bunch of other people that Bitcoin is real and people are using it. The main crime committed by MtGox isn't the use of Bitcoin; it's that they failed to register as a money transmitting service with the US government, who could then seize their funds. In fact, there are still plenty of ways to get money out of MtGox (or Bitcoin): wire transfer, OKPay, and Liberty Reserve to name just three. That mostly means that instead of paying Dwolla $0.25 for a withdrawal, you'll be paying a minimum of 1% or $25 for the same thing now, which sort of stinks but hardly makes Bitcoin any worse.
As noted above, the initial reaction was a fast drop in BTC prices, but think about this: a bunch of people have money on MtGox, and they might want to get that money out. What's the fastest way to do so? In many cases, it's going to be buying BTC and transferring the coins to another exchange (or just taking them offline to wait and see what happens). Instead of a steady drop in price, we may see the opposite effect: a slow but steady increase, especially if more people get interested in Bitcoin thanks to the news -- no such thing as bad publicity, right?
If you're still concerned about the long-term prospects for Bitcoin, consider how successful the government has been at stopping piracy (of software and music), or shutting down BitTorrent and other file sharing networks, or even the war on drugs. The thing is, all of those are blatantly illegal activities, and the government has still failed to keep them from proliferating. Bitcoin on the other hand might be in a somewhat grey area (thanks in part to the way many people tie it to Silk Road), but as yet there seems to be nothing inherently wrong with the idea of a digital currency -- the worst thing about it for people with money is that it's not controlled by the banks or other large corporations, or in other words they can't make tons of money off of Bitcoin because they don't control it and they didn't create it!
Google, Amazon, and other companies seem to be trying to create something similar, but it's always tied to their other products (and you can probably guess how I feel about those). It would be like creating a digital currency backed by the US government: it would basically be the same as the dollar. Bitcoin on the other hand remains in the control of the wild west of the Internet, where those with the most technical savvy tend to win out. Short of the Internet collapsing, Bitcoin is here to stay and remains the front-runner for a "free" digital currency.
BTC: 1JSrAuxPUhD2rS6yYLiPPT6X8fvz7c7k1W LTC: LXpEZcNJtikd263z7Ha3vrdYDcLU7hiKWv.

Bitcoin

Dwolla Ends Support for Virtual Currency Bitcoin.
By Kevin Woodward.
Person-to-person and mobile payments company Dwolla Corp. is ending support for Bitcoin and other virtual currencies effective Oct. 28, Dwolla announced on Friday.
Less than 0.1% of Dwolla's merchants use virtual currencies, Des Moines, Iowa-based Dwolla says in a statement. "Dwolla has notified the few affected merchants and is working to ease the transition for them and the few users affected by the decision," Dwolla says. "Dwolla does not sell, accept, mine, value, take possession of, or hold Bitcoin or any other virtual currency product. None of Dwolla's users transact business with Dwolla using Bitcoin or any other virtual currency product.
" Bitcoin is an electronic currency developed and maintained by a decentralized network of cryptologists and application developers. It offers anonymity, international utility, and inflation protection, and has no connection to existing payment systems. Users can download software from a number of so-called exchanges that provide Bitcoins at prevailing exchange rates. Specialist processors serve merchants.
To send Bitcoins, users enter the recipient's e-mail address and the amount to be transferred. The user's computer then digitally signs the transaction and sends the information to the Bitcoin network. The network verifies that the person sending the Bitcoins is the current owner. Once the transaction is validated, recipients can spend the Bitcoins. The process, which typically takes a few minutes, is not reversible.
In May the Department of Homeland Security ordered Dwolla to cease wire transfers between itself and Mt. Gox, a large Bitcoin exchange, which enables users to buy and sell Bitcoins. DHS also seized funds belonging to a subsidiary of Japan-based Mt. Gox held in a Wells Fargo & Co. account that was used to accept funds in U.S. dollars. Mt. Gox allegedly violated federal law by operating through an unregistered money-transmitting business, according to DHS.
A Dwolla spokesman would not comment beyond its statement. "As Dwolla gears up for its next stage of growth and offerings, it's essential that company resources remain focused on the deadlines, products, partnerships and users that will help grow the company, and that regulators have a firm understanding of our technology and its potential inside existing U.S. financial systems," Dwolla says.
Dwolla's concern is the lack of a clear understanding of the risk of dealing with a Bitcoin transaction, says independent payments analyst Beth Robertson. "There's a lot of unknowns in the realm of virtual currencies, and that can relate to current and additional legislation, and its potential use for illegal and money laundering services," Robertson says.
Such risk potential merits Dwolla's hesitation regarding virtual currencies, says Aleia Van Dyke, a payments analyst at Javelin Strategy & Research, Pleasanton, Calif. Managing security and risk are paramount for emerging payment schemes, she says. "For any of the new top payment platforms, they have to pick their battles wisely," Van Dyke says. "They're trying to make sure they are presenting an image that will be sustainable in the long term."

Bitcoin

Bankrupt Bitcoin exchange Tradehill suing red hot payment startup Dwolla for $2M.
One of the reasons that small startup are loathe to announce big funding rounds is that plaintifs and patent trolls always come out of the woodwork. Payment startup Dwolla, which recently closed a $5 million round of funding led by Union Square Ventures, is now defending itself against a $2 million lawsuit from defunct Bitcoin exchange Tradehill, as first reported yesterday by Betabeat.
Tradehill alleges that it went out of business in large part because of "chargebacks", payments that Dwolla cleared and then took back. It says that this fraud amounted to $94,000 in losses, and that Dwolla also refused to release an additional $70,000 of funds it had in a Dwolla account. How does that add up to $2 million in damages? Tradehill says that these losses contributed directly to the company's bankruptcy and forced them to sell valuable domain names for which they had traded $1 million in equity.
Dwolla's CEO Ben Milne released a statement last night saying that it has not been served formal notice, and that Tradehill is attempting to smear it in the press:
First and foremost, it is important to note that neither Dwolla, nor any of its management or investors, have been served formal notice of any potential lawsuits. It is also noteworthy that a party making unfounded allegations would likely notify the media of litigation prior to advising the party that it says caused it harm. That said, if served, we will vigorously defend all allegations of wrongdoing in the traditional venues of the judicial system.
It does seem that a suit was filed in California, a copy of that can be found here.

Bitcoin

Feds Seize Cash from Major Bitcoin Exchange's Dwolla Account.
The U.S. Government has taken a significant action against the web's top Bitcoin exchange by seizing funds from its mobile payment services account as part of a criminal investigation.
As Bitcoin develops into a currency to be reckoned with, increasing numbers of netizens are seriously considering this pseudo-anonymous payment option.
However, just as more and more torrent sites begin to utilize Bitcoin as a viable donation platform, a new and worrying move by U.S. authorities has come to light.
According to a report confirmed by Betanews, the Department of Homeland Security has targeted a Dwolla account operated by Mt. Gox, the largest Bitcoin exchange.
"MtGox has read on the Internet that the United States Department of Homeland Security had a court order and/or warrant issued from the United States District Court in Maryland which it served upon the Dwolla mobile payment service with respect to accounts used for trading with MtGox. We take this information seriously," the exchange said in a statement.
"However, as of this time we have not been provided with a copy of the court order and/or warrant, and do not know its scope and/or the reasons for its issuance. MtGox is investigating and will provide further reports when additional information becomes known."
A spokesman for Dwolla confirmed the existence of a court order and said a 'Seizure Warrant' had been issued for the funds held in the account.
"In light of the court order, procured by the Department of Homeland Security, Dwolla has ceased all account activities associated with Dwolla services for Mutum Sigillum [MtGox] while Dwolla's holding partner transferred Mutum Sigillium's balance, per the warrant."
The Dwolla platform was one of the key ways for users to purchase Bitcoins so the developments of the last 24 hours will be seen as a blow to the fledgling currency.


Bitcoin

Dwolla closes down bitcoin and virtual currency services.
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In another big hit on virtual currency, Dwolla has shut down its services that work with virtual currency exchanges. The online payment provider emailed its customers which.
US government behind Dwolla's actions?
operate companies related to bitcoin and other virtual currencies to inform them of the withdrawal of its services as of 28th October.
In an email, the company made the following statement:
"Recent interest involving virtual currency and its exchanges has created uncertainty and confusion around virtual currency, and Dwolla's relationship with a small number of its exchanges. This has forced Dwolla to reassign resources, funds, and services.
As Dwolla gears up for a new stage of growth, we recognize that we can no longer sustain this merchant base (0.1 percent of Dwolla merchants) and its unique needs, and that attempting to do so jeopardizes both of our communities' starkly different, but similarly ambitious, vision for improving payments."
The company is to gradually wind down the services available to its virtual currency customers over the two-and-a-half weeks before cutting them off completely. From today, for example, only existing Dwolla users will be able to send funds to the businesses in question, while on 15th October, those bitcoin businesses will no longer be able to receive money through Dwolla and will only be able to send it - until 28th October, when these business accounts will be fully suspended.
The full email from Dwolla to its virtual currency customers can be found here.
This move comes shortly after Capital One closed the bank account of a company after it started selling purely commemorative silver and copper bitcoin coins. According to Mulligan Mint's CEO Rob Gray, the bank hadn't bothered to do their research properly, as merchant services said the account was cancelled because the company was selling bitcoin.

Bitcoin

Dwolla Releases Statement on That Bitcoin Lawsuit.
Dwolla CEO Ben Milne.
Dwolla has sent over a statement responding to the $2 million lawsuit filed yesterday by the Bitcoin exchange TradeHill. Dwolla says it has not been formally served notice of the lawsuit yet.
First and foremost, it is important to note that neither Dwolla, nor any of its management or investors, have been served formal notice of any potential lawsuits. It is also noteworthy that a party making unfounded allegations would likely notify the media of litigation prior to advising the party that it says caused it harm. That said, if served, we will vigorously defend all allegations of wrongdoing in the traditional venues of the judicial system. What we will not do is provide specific comment on specious allegations made by those who have a self-serving interest in seeking publicity.
In the interests of transparency, we'd like to say a few high-level things: Dwolla has always worked closely with merchants to rightfully identify and protect the victims of identity theft. Every day, thousands of users log thousands of successful and legal transactions in one of the industry's safest ecosystems. Unfortunately, as is a reality with all financial services (e.g. banks, credit cards, etc.), predators can use stolen identities to create fraudulent accounts without a victim's knowledge. That's why Dwolla requires numerous identification and verification steps.
A necessary byproduct of this kind of fraud is bank-level reversals, "chargebacks" issued by the institutions on behalf of the victim, not Dwolla. With that said, we will not play accomplice to sources of ongoing fraud. In such cases, we move quickly and act appropriately to facilitate restitution on behalf of the financial institution and its members (the victims). This is required by federal and state consumer protection laws, but more importantly it's the right thing to do.
Most all merchants are well aware of the problem, which is why we've always had something in our terms of service about chargebacks since Day One. Notably, there are certain types of businesses and marketplaces that are continued targets for illegal activity and, just like we work hard to protect and improve our community, a similar expectation should be assumed on behalf of merchants participating in high-risk industries. If any merchant continues to be a source of systemic fraud and we cannot come to an agreement, we will always take the appropriate actions.
In the event that a user or merchant feels as though they have been wronged to the point of litigation, we'll be happy address their concerns or issues in the court of law. It is their right to do so, as it is our right to rationally and reasonably present our side. So while people may throw a bit of mud on us, it's important to let the appropriate parties figure this stuff out. This will allow us to focus on what we do best: Build.
In the meantime, Dwolla continues to be a source for hundreds of thousands of transactions, all safe, legal, and cost-effective. Please, don't hesitate to drop us a line.

Bitcoin

Dept. of Homeland Security freezes accounts between Dwolla and bitcoin exchange Mt. Gox.
By Michael Carney , written on May 14, 2013.
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From The News Desk.
In the first governmental action against bitcoins, the Department of Homeland Security served the Dwolla mobile payment service with a court order requiring it to immediately cease all account activities with the Mt. Gox bitcoin exchange. Dwolla has complied with this order.
The news was first reported by Betabeat citing an email that OkCupid co-founder Chris Coyne received from the Dwolla and posted to Twitter. Other users have subsequently reported receiving similar communications from the federal agency and having difficulty accessing funds transferred to Mt. Gox from Dwolla in the last 24 hours.
There are certainly more questions than answers at this stage. We are prompted to wonder whether this is this the first of a series of governmental assaults on the exchanges? That's what they'd target if they want to put the kibosh on bitcoin. Or, is this a case where DHS is investigating some individual or organization who may have used bitcoins, via Dwolla, for some potentially nefarious or terroristic reasons?
Members of the PandoDaily team have spoken to sources close to the bitcoin ecosystem and have been hearing that it's likely the former.
As Adam Penenberg wrote recently:
It's conceivable the government will try to either regulate or destroy it if it becomes widely adopted. With more than $1 billion worth of Bitcoins in circulation that could happen any time now. In the past the government has aggressively fought back threats to the U.S. dollar's preeminence. There's the lesson of Bernard von Nothaus, a "monetary architect" who created his own currency based on precious metals called the "Liberty Dollar." After von Mothaus managed to inject some $60 million of his homemade currency into circulation, a government prosecutor accused him of "domestic terrorism" for attempting to undermine the government. Unlike with Liberty Dollars and Wikileaks, there's no single person identified with the movement.
Most recently, just 10 days ago US-based bitcoin exchange startup CoinLab sued Mt. Gox for $75 million alledging breach of contract related to a partnership between the two companies. According to the lawsuit, CoinLab entered an agreement to license Mt. Gox's technology, including "exclusive right to certain intellectual property" to exclusively provide exchange services Mt. Gox's North American customers. The plaintiff, which is backed by Tim Draper, Geoff Entress, Peter Vessenes, and others, claims that Mt. Gox breached this agreement by dealing with North American customers directly and failing to share data as stipulated under this agreement.
There's no immediate link connecting the Coinlab lawsuit to today's Department of Homeland Security action regarding Dwolla, but the timing of both events raises some questions.
The IRS and Financial Crimes Enforcement Network (FinCEN) have also been looking closely at the bitcoin ecosystem and the adherence - or lack-thereof - of leading companies in the space to relevant tax laws. Numerous companies have started offering to pay employees in bitcoin, and small businesses are accepting the virtual currency for the purchase of goods and services. While bitcoin is popular for its pseudo-anonymity, Uncle Sam is obviously less than pleased with the idea of being cut out of the payment loop.
FinCEN regulations state that bitcoin exchanges and miners must register as Money Services Businesses (MSBs) and comply with anti-money laundering regulations, although everyday bitcoin users do not. Whether today's action has any connection to these inquiries is currently unclear, but even if not, such action is likely to come shortly.
We have reached out to a number of bitcoin investors, entrepreneurs, and otherwise informed observers for their thoughts on today's events. This is obviously an evolving situation and we will strive to update the situation as more information becomes available.