The Bitcoin company BitInstant is now facing a class-action lawsuit, as well as federal felony charges against their CEO Charlie Shrem. Included below is a BitInstant presentation describing the company’s business operations as of 2012. Of particular interest is this quote:
“BitInstant is not a money transmitter and does not interact directly with regulated financial institutions, instead using intermediary bodies to process fund transfers and acts as a third party to accelerate transactions. All of BitInstant’s transactions are Closed Loop, meaning all monies cannot be withdrawn without proper AML and KYC measures being taken as outlined in our ALM compliance policy. Customers cannot simply cash out of Bitcoins as all of the exchanges with which BitInstant works have strict limits and AML procedures. Additionally, BitInstant does not store any customer funds and does not engage in currency exchange.”
Compare to BitInstant’s FinCEN registration data below, which was supplied to FinCEN by BitInstant, and clearly lists it as a “money transmitter”. The Brooklyn registration address is listed under Charlie’s father Alan Shrem; according to Reuters, he will be confined there under house arrest until his trial.