Friday, April 17, 2020

U.S. v. Costano (9th Cir. - April 17, 2020)

I'm not normally a big television series watcher, but during the quarantine, I have started watching a bit of Ozark, which is about a "normal" family that launders drug money.  Today's opinion from the Ninth Circuit is also about someone who laundered (fictional) drug money, and who was convicted of that offense.  So perhaps for that reason, my interest was piqued.

The (fictional) money laundering in the series happens the old-fashioned way; e.g., mixing illegally obtained money with money from legitimate businesses.  Here, by contrast, the defendant did things in a somewhat higher-tech way, but at the same time, did the same thing that lots of people do.  All he did was to allow people to purchase bitcoins with cash.  Period.  He's just a broker.  Lots of people do the same thing.  He's got some bitcoins, and if you want to get some yourself, you go to people like him (or companies like him).  He doesn't do anything different than any of these other individuals or entities.  So he's very much not like your traditional money launderer who's doing something illegal per se.

The reason the guy gets treated differently -- i.e., arrested and convicted -- is because he allegedly knows that the cash that's buying his bitcoins comes from drug sales.  Because that's what the buyers expressly tell him.  Mr. Costano isn't actually involved in the drug sales or the like.  And, in reality, there aren't actually any drug sales at all; it's all made up.  But the undercover agents tell Mr. Costano that the cash comes from drug sales, he says he doesn't care one way or the other where the money comes from, and so he's convicted of money laundering.

Fair enough.  Even if you run a legitimate business, you can't facilitate a drug business by taking their money and converting it into bitcoin.  That's understandably a crime.

At the same time, however, I look at the sentence Mr. Costano receives.  It's three-plus years in federal prison, plus another three years of supervised release.  Now, that's not a super long sentence by any stretch.  But for your normal person with a normal life, that's a long time.  Away from your family and friends, away from freedom, etc.  Plus all the stresses and the like of a federal criminal trial.  All for converting what was, in fact, not drug money into bitcoin.

Though, to reiterate, it's not a super long time.  And it may deter others from similar conduct.

But the consequences nonetheless seems somewhat arbitrary, and the deterrent effect perhaps incredibly minimal in the real world.  The reason that Mr. Costano gets jammed up is solely because he gives a remarkably stupid response when the agents set him up.  It's only money laundering (in situations like this) if you know it's drug money; otherwise, trading bitcoin for cash is perfectly legitimate and legal.  So the agents, of course, expressly tell him that it's drug money.

In response, any half-smart person is going to say:  "Oh, shucks.  Then I can't sell you the bitcoin.  I can't sell you it if I know your cash comes from drugs."  Then the other side is going to say (if they're in fact drug dealers):  "Oh, I'm sorry, I misspoke.  The money is from legitimate activities; I said the money was from 'slugs,' not drugs, but you must have misheard me.  I'm a slug dealer.  I buy and sell exotic pets.  The money's from that."  Or they get some other totally unrelated guy to come back in later who says he's using the bitcoin for investments or whatever.  In short, the transaction happens, and the bitcoin dealer gets his money, and no one gets convicted.  That's what you'd tell the bitcoin dealer if you were his lawyer:  "Don't sell to anyone who expressly tells you it's for drugs."  Those are the guys who are either FBI agents or who might otherwise get you in trouble.  It's fine if you have a lingering suspicion that it might be drug money.  They can't get you for that.  But when they come on out and expressly tell you it's drug money, that's the telltale sign of an undercover cop.  Back out.

Which makes putting the guy in prison for years and years seem so random.  It's like it's just a tax on incredibly stupid criminals.  Anyone half-smart goes totally free.  And convicting the guy doesn't put even a dent in actual drug laundering one bit.  Because people who are actually using drug money to buy bitcoins do not moronically tell their bitcoin broker that that's what they're doing.  Nor do people who normally sell bitcoins to drug dealers do it as stupidly as the defendant here.

So, yeah, the guy committed a crime, and so he goes to prison for a bit.  I'm okay with that.  But I do not think that stuff like this really has any practical effect at all.  Deterrent or otherwise.  It just puts people with potentially legitimate businesses into a situation in which, if they're morons (and willing to say as much), they get convicted.  It's not that innocent people will be convicted; those guys will just say "No."  It's simply that you're not having any actual effect on the underlying actual problem and at the same time just punishing the unrepresented and/or profoundly unsophisticated -- a tiny and practically meaningless fraction of the relevant universe.

I get it if some people say:  "That's fine with me; I'd rather punish 1% then 0%, even if it has no effect at all on the drug supply, deterrence, or anything practical at all."  It's just that I'm not that much of a retributivist, and even if I were, the randomness of the thing would still make me a bit uneasy.  At least when, as here, the relevant sentence is far from a trivial one.

At a minimum, a word to the (un)wise:  When someone tells you that it's drug money, stop what you are doing and make a quick call to a lawyer.  You'll be glad you did.