Producer Of Physical "Casascius" Bitcoins Is Being Targeted By The Feds

Tyler Durden's picture

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…

 

Screen Shot 2013-12-12 at 12.54.04 PM

From Wired:

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.

 

Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.

 

Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.

Caldwell doesn’t accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.

 

So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That’s worth about $82 million at today’s exchange rate.

 

Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.

What a complete and total joke this government is. Don’t they have anything better to do?

Full article here.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
robilla's picture

Heeeey there

Edit: that's to you Mr. NSA

fonestar's picture

Sweet!

I get to watch the Fed shadow boxing Satoshi! 

ElvisDog's picture

Did you know about FINCEN before reading this article, fonstar? I sure as hell did not, but it was out there waiting to go into action. And before you start your usual "No one cares about the U.S. or its laws" rant, I'm sure there is a Canadian, or Euro, or wherever you call home equivalent to FINCEN. 

As to the conclusion of this article, "why doesn't the U.S. go after money laundering banks instead of little bitcoiners", in the words of the late, great George Carlin, "It's a big fucking club, and you ain't in it"

TheHound73's picture

Lol, FINCEN's been on Bitcoin's ass for a long time.  They are why it is so difficult to purchase bitcoins for 'Mericans who haven't gotten the fuck out already.

DoChenRollingBearing's picture

With creativity you can buy BTC for CA$H, a topic I am looking into...

Handyman's picture

Hey...you got BitCoin in my Precious Metal.....no, you got Precious Metal in my BitCoin.....

 

mmmmmmmmm....

 

Is it the next great, yummy treat???

Dear Infinity's picture

Empress Yellen? She's wearing a toga and rocking out to Dancing Queen while Timmy lubricates the printing press.

So it goes...

zaphod's picture

This just shows how if Bitcoin was anything other than a decentralized protocol that the FEDs would have shut it down a long time ago.

If they have someone to go after, the bullies in DC go after them. These types of actions are simply harassment by DC and not based on any proven law. 

But bitcoin is proving to be bigger than the FEDs and larger than what they can control, so instead of going after Bitcoin they're just rolling over and accepting it. 

Manthong's picture

I am not into Bitcoin..

but I am considering some just because it pisses them off.

Boris Alatovkrap's picture

Angry state will make it example of Bitcoin advocate... How dare to replace fiat currency for limited fix token of value!

GetZeeGold's picture

 

 

Angry state will make it example of Bitcoin advocate

 

I'm just wondering what took them so long?

 

I am considering some just because it pisses them off.

 

Well yeah.....there is that. Throw me a double-dog dare....you know I'll do it.

nmewn's picture

Kinda with ya on that.

Outside of it being a genuinely stupid idea of him having access to hundreds if not thousands of keys...it is just a novelty item not meant to be spent or compete against.

They may have just tipped their hand on what next step they're going to take.

nmewn's picture

lol...when we are just digits in the cloud, no one will hear us scream ;-)

Race Car Driver's picture

What would Kurtzweil say?

kralizec's picture

Indeed, Boris.  Makes one want to rush out a get a few of these coins just out of pure undiluted spite!

palmdetroit's picture

Bitcoin Is up 5% today but the fun is in the alts.. 80% in 24h on PHS (priced in BTC) maybe just multipy those or something , fiat what?

https://www.cryptsy.com/markets/view/86

palmdetroit's picture

A down vote? 3 days and 250% ago I posted BTFD on PHS now wait a day and BTFATH.

GetZeeGold's picture

 

 

3 days and 250% ago

 

What's that in doggy years?

nmewn's picture

"Money" and/or "currency" shouldn't fluctuate 250% in three days...it is unusable as a medium in that state.

fiftybagger's picture

Thanks for the tip.  I'll keep my eye on that one.  Right now I'm all in on DGC and IXC. 

BTW, SXC sexcoin made a nearly 100 fold move.  People paying for adult items anonymously.  Nah, I can't see any demand for that.

The Bitcoin Channel

palmdetroit's picture

I think these physical coins might appreciate quite well in the future.

Exponere Mendaces's picture

@ElvisDog

You are correct, by having a physical presence and a business that had physical items, it was just a matter of time. The perception can't be that someone has the freedom to do what they want. And that is what should be focused on here. Regardless if it was BTC or Gold, or Silver. You are a citizen, and they come in and say you can't.

That is a bunch of complete fucking bullshit, whether you bank in bits, lose them in a boat accident, or quietly stack on the side.

 

Prisoners_dilemna's picture

27 June 2013 MtGox BTC exchange registers with imperialist agency

http://www.coindesk.com/mt-gox-registers-with-fincen-as-a-money-services...

 

23 August 2013 MtGox BTC exchange and its customers have funds seized by other imperialist agency

http://techcrunch.com/2013/08/23/feds-seize-another-2-1-million-from-mt-...

 

Why?

“root out illegal activity.”

 

And BTC keeps rising. 

The empires days are numbered. I hope!

Pseudonymous's picture

You are probably just numb scared, but you come out as one of the fascists you probably fear so much. Your words sound as an advertisement for the big club, the one that wouldn't even exist if it wasn't for people acting like you do right now.

Wake up, or go ahead towards your own ruin. I don't have any preference one way or the other. Just whichever comes sooner.

DoChenRollingBearing's picture

I am still trying to get up to speed on BTC.  I got the following link from "Bitcoin Insider" that allows ANYONE to go and make a SHA-256 hashed out put from an input.  It's FUN, check it out!

TRY, just try, to get an output starting with 14 "zeros" (how you get a solution by "mining").  I believe THIS is part of the math (looks pretty secure to me) behind Bitcoin.

http://www.xorbin.com/tools/sha256-hash-calculator

An example.  This input: 111006pagameputaz141003

Yields this output:

0cb03ee037b2139b6b3c58160c9bb1dd6ba6e1b11d965df4d2427be6e6f5faa5 

Note output has ONE zero at the start.

Prisoners_dilemna's picture

+1

Dude,

Im really impressed.

First you pioneer an AU purchase with BTC.

Now your schooling people on SHA256 (the deciding factor in whether ZHers "get it" or not.

 

 

Way to school me in how to reach out to others. i'm humbled.

DoChenRollingBearing's picture

Then you'll like THIS article that had the above link that B.I. also sent me:

 

http://www.reddit.com/r/Bitcoin/comments/18q2jx/eli5_bitcoin_mining_xpost_in_eli5/

Enjoy!  It's pretty easy, all things considered, smile,,,,,

 

EDIT:

I'll feel better when I get the gold I ordered...  

"Pioneers are the guys who get the arrows in the back."

-- an old saying

 

Prisoners_dilemna's picture

Can you also explain to us all what ECDSA and RIPEMD160 are?

Those are the other two forms of encryption used within bitcoin.

:)

DoChenRollingBearing's picture

Ahh, nope!  Beginning Bitcoiner Bearing...

Soon I will ask B.I. for other information though.

zaphod's picture

ECDSA (Elliptic Curve Digital Signature Algorithm) is the cryptography that is used to prove ownership of individual bitcoins. 

In ECDSA there are 2 keys, a public key and a private key. Basically an address is the public key and the private key is what you keep secret, essentially posession of the private key equals posession of a bitcoin. 

The way transactions work is you create a public/private key pair and then provide the public key (actually the hash of the public) as the address to "recieve" bitcoins. When someone sends you a bitcoin they create a transation that specifies your address (public key) as the receiver of X bitcoins. Once that transaction is recognized by the network, the only way to release those bitcoins in your address is to sign them with your private key. Now when you want to send the bitcoin you recieved, you use your private key to create a unique signature on the previously recieved coins. The way ECDSA works is anyone with the public key (your address) can verify that the signature is correct, however the only way to create the signature requires the private key. 

This is a great walkthrough of ECDSA if you are interested in the concept. Will take a few hours to absorb the concepts/math.

http://kakaroto.homelinux.net/2012/01/how-the-ecdsa-algorithm-works/

DoChenRollingBearing's picture

 

 

Thanks mucho, zaphod!

It looks very hard, but I will take a look at the document.  There may be similar articles that (maybe?) explain it easier, even if not quite correctly or fully.

"Quick and dirty" sometimes works out OK for Bearings.  Not usually, but sometimes...

zaphod's picture

Hashing such as SHA256 is a relatively simple concept, a hash generates a unique random value for any given set of data, and for the mining process you keep generating random hashes until you find one below a given difficulty. You don't really have to understand how SHA256 works underneth to understand what it does.

The ECDSA signing process is more compicated and you really have to learn a few concepts to "see" how it works. The article above only summarizes the math concepts absolutely needed and is about as high level as you can get without parts looking like a black box.

Don't worry, if you are interested and take your time, you can understand it in a few hours max.  I was able to teach it to my wife, and she can barely add....

DoChenRollingBearing's picture

Zero Hedge members "zaphod" and "Prisoners_dilemna"!  

You both contributed to my blog article, which because most of it is mathematical in nature (although mostly not that hard) I decided to finish with brief descriptions of the above two methods (ECDSA and RIPEMD160) you discuss/mention.

My thanks to you both, and of course, "Bitcoin Insider".

"Fun With Bitcoin for Beginners: Part Four"

http://tinyurl.com/lq667xz

fourZero's picture

Check that link out in Safari on an ipad. You have to scroll down hundreds of pages to see the content.

Prisoners_dilemna's picture

The section on RipeMD160 is pretty... non-existant, so anything I say here has gotta be an improvement  :)

All of this was taken from bitcoin.it, stackexchange.com, and wikipedia.org.

A bitcoin public address (what we provide to others so they can pay us BTC) is in fact the hash of an ECDSA public key, computed this way:

Version = 1 byte of 0 (zero); on the test network, this is 1 byte of 111
 Key hash = Version concatenated with RIPEMD-160(SHA-256(public key))
 Checksum = 1st 4 bytes of SHA-256(SHA-256(Key hash))
 Bitcoin Address = Base58Encode(Key hash concatenated with Checksum)

Here's the same thing in step-wise fashion;

0 - Having a private ECDSA key

18E14A7B6A307F426A94F8114701E7C8E774E7F9A47E2C2035DB29A206321725

1 - Take the corresponding public key generated with it (65 bytes, 1 byte 0x04, 32 bytes corresponding to X coordinate, 32 bytes corresponding to Y coordinate)

0450863AD64A87AE8A2FE83C1AF1A8403CB53F53E486D8511DAD8A04887E5B23522CD470243453A299FA9E77237716103ABC11A1DF38855ED6F2EE187E9C582BA6

2 - Perform SHA-256 hashing on the public key

600FFE422B4E00731A59557A5CCA46CC183944191006324A447BDB2D98D4B408

3 - Perform RIPEMD-160 hashing on the result of SHA-256

010966776006953D5567439E5E39F86A0D273BEE

4 - Add version byte in front of RIPEMD-160 hash (0x00 for Main Network)

00010966776006953D5567439E5E39F86A0D273BEE

5 - Perform SHA-256 hash on the extended RIPEMD-160 result

445C7A8007A93D8733188288BB320A8FE2DEBD2AE1B47F0F50BC10BAE845C094

6 - Perform SHA-256 hash on the result of the previous SHA-256 hash

D61967F63C7DD183914A4AE452C9F6AD5D462CE3D277798075B107615C1A8A30

7 - Take the first 4 bytes of the second SHA-256 hash. This is the address checksum

D61967F6

8 - Add the 4 checksum bytes from point 7 at the end of extended RIPEMD-160 hash from point 4. This is the 25-byte binary Bitcoin Address.

00010966776006953D5567439E5E39F86A0D273BEED61967F6

9 - Convert the result from a byte string into a base58 string using Base58Check encoding. This is the most commonly used Bitcoin Address format

16UwLL9Risc3QfPqBUvKofHmBQ7wMtjvM

 

Now in order to unlock the public address above to get the private keys (and spending rights to the BTC), we just need to do these steps in reverse. Eezy Peezy. I'll be back in 4 centuries when humanity figures out how to do that.

 

So we see RIPEMD160 used ONLY to generate public addresses. Nowhere else is it used within the BTC protocol.

Why is it used there and only there?

"It is worth noting that Satoshi could've used SHA2-256 twice and truncated the second digest to 160 bits. The fact that he didn't I think is some evidence to show that Satoshi's decision was a conscious decision to use RIPEMD-160 over the NSA suit of algorithms." username liamzebedee from stackexchange.com

I tried reaching out to Satoshi for an answer but I had even less luck with that than I have trying to find private keys from public addresses.

I can only speculate and so here it is courtesy of wikipedia;

" RIPEMD-160 was designed in the open academic community, in contrast to the NSA designed SHA-1 and SHA-2 algorithms."

also

"RIPEMD-160 is not known to be constrained by any patents."

My conclusion/opinion is that should SHA256 be broken or have a backdoor, RIPEMD160 would protect private keys while developers swapped out SHA256 for SHA512, or another open source method of encryption.

Finally,  Satoshi could've written the protocol such that the ECDSA public key doubles as the public address for receiving BTC. However hopefully it is apparent now that while it is nearly impossible to derive an ECDSA private key from its public counterpart, its IMPOSSIBLE^GOOGLEPLEX to derive the ECDSA private key from the completely jumbled hash that we know as the BTC public receiving address.

fiftybagger's picture

People waking up and seeing the elegant mathematical beauty of Bitcoin and the sheer genius of Satoshi.  It's a better feeling than getting rich.

The Bitcoin Channel

GoldMeUp's picture

14 zeros.. that's a 1 in 2^56 chance, which is equivilent to cracking a DES cipher :)

 

Just some random trivia..

sessinpo's picture

And simply confiscating and erasing the computers of those involved make all those codes: 0

Game over

Scarlett's picture

you have to get them ALL.  Once surviving copy and the network is back on a flash.  A single copy.  One.

Alfred's picture

I'm having a hard time getting my mind around using BTC to buy gas or milk. Then there's the idea that governments (or 1%) could usurp our virtual currency for theirs, then lastly, and to your SHA256 point there is this from Karl Denninger...

http://market-ticker.org/akcs-www?post=226678

 

 

Alfred's picture

duh... too many clicks...

 

 

xxxxx's picture

Looks like the FED won.

TheHound73's picture

I'd love to see this one go to court.

silvertrain's picture

 He just needs to take Bitcoin or another alternative for his services and NOT CASH, problem solved..

TheHound73's picture

Looks like you didn't read the article:  

"Caldwell doesn’t accept U.S. dollars or any type of fiat currency...  he runs a bitcoin-only business,  there’s no Casascius bank account for authorities to seize."

bitcoinbear's picture

Home of the brave and land of the FED. 

putaipan's picture

numismatic bitchez! i love to look at my lil' casascious 2011 series 2 purchased while btc was 12$ for 17$. sure people like 'errors', but 11000 of those originals were made. there are only 1000 of these.

 

p.s. anyone feelin' stupid lucky loaded in btc and wants to diversify into a numismatic investment let me know.