Media Law Project Proposal

Team Panthers: Ashley Blanco, Andrew Campbell, Sina Eslami, Kevin Keenan, Jonathan Persson,
Brett Renkert, Matthew Rosado, Brian Schaffnit, Brittanie Walko
Area of Law: Financial and Commerce Law
While the deep web is home to many people looking to acquire or offer illicit goods and services, its
clandestine nature requires paying with a digital currency that can be very hard to track - Bitcoin. While the
legal grey area within which Bitcoin exists is currently being debated amongst several government agencies, its
usage is currently being regulated within the US by the Financial Crime Enforcement Network (FinCEN).
FinCEN passed guidelines under which virtual currency markets can be described as Money Transmitting
Businesses (MTB). MTBs must adhere to anti money-laundering laws along with Know Your Client measures,
which requires businesses to be able to identify the people they are doing business with. This project will aim
to explore the ongoing legal developments surrounding the regulation of Bitcoin in the United States, focusing
on the pending litigation surrounding the Silk Road website, whose founder is being accused of running a
billion dollar drug ring that used Bitcoin as its primary method of payment.
Local Angle: One area of the Internet that has started to become controversial is the deep web, with a focus on
local cases such as the Silk Road and bit coins. Because the deep web is so undercover and not brought to
attention every day, it seems to go unnoticed. We will look into how the deep web is regulated in the
Jacksonville and St. Augustine area and how larger stores are accepting the bit coin as a form of currency. We
will also look into how deep the deep web goes and talk with local authorities about recent cases regarding bit
coin laundering and any experiences they have had with them and how exactly they regulate them.
Current Internet Law: At present, users who obtain virtual currency (VC) and then use it in exchange for
goods and services through major retailers or websites such EBay, Reddit, or PayPal, are not in violation of the
law. Users who collect VC that in turn sell it for real world currency or its equivalent then become money
transmitters, according to the FinCEN guidelines - a point of contention amongst those who participate in this
activity, and an issue that is ongoing within the courts. Exchanges are another matter entirely, and VC
exchange firm BitInstant found this out the hard way. Money laundering laws that apply to any brick and
mortrar business transaction can also be carried over to the internet, which has led to indictments by the
government. In the Silk Road case, the CEO of BitInstant was charged with money laundering after he
allegedly took real world money and turned it into Bitcoin currency, which was then used by Silk Road patrons
to purchase any number of illegal substances. US money laundering laws require companies like BitInstant that
provide currency exchanges to customers to collect information about them, monitor transactions within the
business, and report suspicious transactions to the government. BitInstant did not do this, leading to the
indictment.
National Law: The government created the Deep Web more than ten years ago but it has now turned into a
nightmare for the FBI, CIA and other federal agencies. As a source for any and every sort of criminal activity,
websites such as Silk Road have made the Deep Web nearly impossible to control.
Depending on what is being achieved using alternative currency and anonymous profiles, not every user is
necessarily breaking any rules. What most people dont realize is the amount of personal information that can
be accessed through generic websites such as Google, Bing, etc. Because of this, the Deep Web is becoming
much more appealing to the common user.

Based on our national laws, such as the 1968 Electronic Communications Privacy Act, using the Deep Web to
simply remain anonymous is not a crime in itself. The issue is found in the activities that occur through these
websites (hiring hit men, buying illegal drugs, and other horrific acts.)
Bitcoin usage is relatively new but it is rapidly progressing. The problem is regulating it and deciding what is
proper use of the Internet currency and what is not. The Bank Secrecy Act of 1970 requires financial
institutions to assist U.S. government agencies in detecting and preventing money laundering. Bitcoin users are
considered to be money transmitters and can therefore be held subject to money transmitter laws. According to
FinCEN, an administrator or exchanger
(1) accepts and transmits a convertible virtual currency or
(2) buys or sells convertible virtual currency for any reason
While the U.S. government works on finding a way to regulate Bitcoin usage, FinCEN has released a guidance
to help determine when the BSA can be implemented. A user of Bitcoin is not considered to be an MSB
(money services business.) In other words,
Bitcoins are said to be used for such purposes as
1) paying for the purchases of goods or services, pay debts or make distributions
2) to purchase currency that is used to make a payments
Including a third party (sellers, creditors or counterparties) could cause the Bitcoin user to be found under strict
scrutiny and could risk them being defined as a money transmitter.
As it stands currently, there is no concrete outline into national policies concerning the use of the Deep Web.
Legal action has taken place surrounding the more popular Deep Web sites such as the recent case concerning
Roger Ulbricht and The Silk Road racketeering site. However, the alleged criminal acts were not found guilty
due to policies concerning the Deep Web. Ulbricht was found guilty by violating federal laws concerning the
selling of illegal goods.
With all malicious endeavors set aside, the Supreme Courts ruling, as a result of the 1995 case McIntyre v.
Ohio, states Anonymity is a shield from the tyranny of the majority. The right to remain anonymous may be
abused when it shields fraudulent conduct. But political speech by its nature will sometimes have unpalatable
consequences, and, in general, our society accords greater weight to the value of free speech than to the
dangers of its misuse. This statement supports anonymous activity so long as it doesnt shield fraudulent
conduct. The problem lies in the fact that the anonymous transactions, legal or not, cannot be traced back to
the original source via deep web browsers such as TOR.
Local Law: Upon researching for laws concerning the Deep Web and the internet, it became apparent that
there were no local or state laws that directly regulate the internet in general, let alone the Deep Web. However,
recently the florida legislature passed a bill called HB 155 that effectively banned all computers and
smartphones on the grounds that they could be used as illegal slot machines. The following is an excerpt from
that bill:
As used in this chapter, the term "slot machine or device" means any machine or device or system or network
of devices... that is adapted for use in such a way that, upon activation... such device or system is directly or
indirectly caused to operate or may be operated and if the user, whether by application of skill or by reason of
any element of chance or any other outcome unpredictable by the user him or her, may....

(a) Receive or become entitled to receive any piece of money, credit, allowance, or thing of value, or
any check, slug, token, or memorandum, whether of value or otherwise, which may be exchanged
for any money, credit, allowance, or thing of value or which may be given in trade; or
(b) Secure additional chances or rights to use such machine, apparatus, or device, even though the
device or system may be available for free play or, in addition to any element of chance or
unpredictable outcome of such operation, may also sell, deliver, or present some merchandise,
indication of weight, entertainment, or other thing of value. The term slot machine or device
includes, but is not limited to, devices regulated as slot machines pursuant to chapter 551.
Because this is one of the only Florida laws regulating electronic devices and the Internet, it will probably be
best to utilize federal laws regarding this case.
Sources: Agents from the Secret Service field office in Jacksonville, FL who prosecute money laundering and
other financial crimes related to Bitcoin.
Local defense attorneys who have defended money laundering cases preferrably involving VC. If not, we will
seek comment on the money laundering laws in general and the ramifications of the Silk Road litigation.
Someone involved in The National Taxpayer Advocate, an organization that has been very active in 2014 in
pushing the IRS and government for clarity about legitimate businesses reporting VC earnings, among other
things.

Deep Web Survey

1. Are you familiar with the Deep Web?
Yes

No

2. Do you have a basic understanding of the Deep Web?

Yes

No

3. Have you ever 'surfed' the Deep Web?

Yes

No

4. Are you familiar with internet law?

Yes

No

If Yes, which ones?

5. Have you ever purchased Bitcoins?
Yes

No

6. Do you know what Tor means?

Yes

No

7. Are you up to date with the Bitcoin issues?

Yes

No

8. Do you know of any local companies using them?

Yes

No

If Yes, which ones?