In 2008, a person by the name of Satoshi Nakamoto revolutionized the monetary world with the invention of bitcoin, the world’s first decentralized cryptocurrency. Concerned about the omnipotent control over money that governments all over the world wielded and the massive violations of financial privacy that came with such control, Nakamoto’s bitcoin provided people with a currency beyond governmental control that afforded people the possibility of restoring a tremendous amount of privacy over their financial affairs, something that federal officials naturally feared.
Ian Freeman and bitcoin
Ian Freeman was present at the beginning of the bitcoin revolution. As a libertarian, he understood perfectly the ramifications of federal monetary control and the destruction of liberty and privacy that came with such control. He understood that the U.S. Constitution established a gold-coin, silver-coin monetary standard, one that had protected the American people for some 125 years from the inflationary debauchery that comes with government-issued paper money. He understood the monetary revolution that had taken place in 1913 with the adoption of the Federal Reserve System. He understood the consequences of President Franklin D. Roosevelt’s nationalization of gold coins in the 1930s and the adoption of paper money as the legal tender of the United States as a prelude to the conversion of the federal government to a welfare-warfare state. He understood how the federal government had plundered and looted the American people through the Federal Reserve’s decades-long policy of ever-expanding quantities of paper money. He understood how the federal government had destroyed people’s right of financial privacy with its massive control over the banking industry, especially in combination with the multitudes of rules and regulations that come with the federal government’s decades-long drug war. In short, Freeman grasped the potential that bitcoin provided to upend the government’s control over monetary affairs, which was precisely what Nakamoto hoped to achieve with his invention of bitcoin.
Deeply dedicated to the principles of liberty and privacy, Freeman began selling bitcoins to people, but he did more than that. He also devoted himself to educating people on the virtues of bitcoin and how it could help them regain their fundamental, natural, God-given rights of liberty and privacy.
Freeman ended up making his hometown of Keene, New Hampshire, a major center of bitcoin activity. He was not only a big seller of bitcoin but also persuaded many retail establishments to accept bitcoin for payment in transactions. Most important, Freeman educated people on what was the central value of bitcoin, which was the financial privacy it provided people.
Given the fact that he was succeeding in showing people how to circumvent governmental control over their financial affairs, it goes without saying that the feds did not look kindly on him. That was why they had their IRS undercover agent, Pavel Prilotsky, befriend Freeman for almost a year in the hope that Prilotsky would find some evidence of criminal activity so they could shut Freeman down and perhaps even lock him up and take his money from him. The deep enmity that the feds have toward Freeman was demonstrated when Prilotsky ended up resorting to fraud as a way to achieve their goal.
Four sets of criminal charges
There were four main criminal charges against Freeman that the jury in Freeman’s criminal case had to consider.
Two charges related to his failure to register his bitcoin business with the federal government. Another related to income-tax violations. Let’s set those charges aside for now and address them in part 3 because they were clearly not the heart of the federal case against Ian Freeman. As I will explain in part 3, they are what I call “add-on” charges.
As I pointed out in part 1, the main thrust of the federal case against Ian Freeman involved two separate counts relating to money laundering. The first count accused him of actually engaging in money laundering: that was the count that involved Prilotsky, who deceived Freeman in an unsuccessful attempt to get him to commit a money-laundering crime. That was also the count that Judge Laplante acquitted Freeman of, notwithstanding the fact that the jury had found him guilty of that offense.
The second count accused Freeman of a conspiracy to launder money.
Those two crimes — laundering money and conspiracy to launder money — appear to be similar, but they are very different. To understand why this is so, I’m going to carefully analyze and compare each of these two crimes by using four hypothetical examples, ones that involve drug transactions.
Conspiracy hypotheticals
Example 1: Mary asks John to sell her an ounce of heroin for $1,000. John says yes. John and Mary agree to meet the next day to make the trade. But have John and Mary committed a federal offense? No, because they didn’t actually make the trade. If the feds indict John and Mary for what they have done, they will be unable to prove that they committed a crime, because John didn’t distribute any heroin to Mary and Mary didn’t possess any heroin.
Example 2: The facts are the same as in example 1, but the next day, John and Mary do meet. John hands Mary one ounce of heroin, and Mary pays John $1,000. We now have two federal crimes that have been committed — distribution of heroin and possession of heroin.
Example 3: Mary asks John and Jane to sell her an ounce of heroin for $1,000. John and Jane say yes. All three of them agree to meet the next day to make the trade. When John and Jane return home, they telephone their heroin supplier Bill and ask him to sell them an ounce of heroin for $500, which they plan to resell to Mary. The next day, however, Mary backs out of the deal.
Have any federal offenses been committed? Yes. We now have a conspiracy, which is simply an agreement between two or more people to commit a crime. Since John and Jane have entered into an agreement to sell heroin to Mary, that constitutes a conspiracy. John and Jane can be charged and convicted of conspiracy to sell heroin even though they never actually distributed any heroin to Mary. It will simply be a one-count indictment charging John and Jane with conspiracy to sell heroin. Assuming the feds can prove the agreement (using a recording of the conversation with Mary) and the telephone call with Bill (using a wiretap), the feds will be able to prove their case and secure a conviction, even though no heroin was ever distributed.
Example 4: Mary asks John and Jane to sell her an ounce of heroin for $1,000, just as in example 3. John and Jane return home. Mary telephones them immediately and cancels the deal. Can John and Jane be convicted of any federal crime? No. What about the agreement between John and Jane to sell heroin to Mary? Isn’t that a conspiracy? Yes, but to be convicted of conspiracy, the feds are also required to show that the defendants committed an “overt act” to further the conspiracy, such as telephoning Bill and inquiring about buying heroin from him. In this example, since the deal was canceled before John and Jane telephoned Bill, there was no overt act. Therefore, even though the feds can prove conspiracy, the defendant will be acquitted because the feds cannot prove that an overt act was committed to further the conspiracy.
Freeman’s conspiracy charge
Keeping these examples in mind, let’s now turn to the Freeman case. Again, let’s set aside the add-on charges relating to failing to register his bitcoin business with the feds and the tax-violation charges. That leaves one money-laundering charge and one conspiracy-to-launder-money charge. The money-laundering charge is the one involving Prilotsky’s testimony, and that’s the charge that Judge Laplante acquitted Freeman of. Since the prosecution dismissed its appeal of that ruling, Freeman’s acquittal on that charge is now final. Under the constitutional principle of double jeopardy, Freeman can never be tried again on that particular charge.
That leaves us with just one charge: a conspiracy charge, specifically a conspiracy to illegally launder money. The following is a verbatim transcript of the jury verdict on the conspiracy charge: “With regard to the crime described in Count Four of the indictment, conspiracy to commit money laundering, we, the jury, find the defendant guilty.”
Keep in mind, once again, that the core element in such a charge is an agreement between two or more people to commit a crime, not the actual crime itself, in this case money laundering. The federal prosecutors had to prove beyond a reasonable doubt that Freeman and another person (or other people) entered into an agreement to commit an illegal act (and also that at least one of them committed an “overt act” that furthered the conspiracy).
The bank-fraud and wire-fraud charges
However, let’s back up for a few minutes. Initially, federal prosecutors had leveled more charges against Freeman, specifically bank fraud and wire fraud. Those charges were based on two allegations, both of which were true.
The first allegation was that Freeman had advised people who were wiring funds to him from their banks to buy bitcoins from him to lie to the banks with respect to what they were using their money for. He told them to falsely tell the banks that the monies they were wiring to Freeman constituted donations to a church that Freeman had organized rather than monies that were going toward the purchase of bitcoins.
The second allegation was that when Freeman opened a bank account for his church, he failed to disclose that he would be receiving money from the sale of bitcoins and instead told the bank that he would be receiving donations to his church.
That’s solid evidence of wire fraud and bank fraud, right? After all, those are false statements, right? Then why did the federal prosecutors, who were clearly out to get Freeman at all costs, as demonstrated by their reliance on the testimony of their agent, Prilotsky, abandon those charges before the start of the trial? The answer is very simple. They knew that they couldn’t prove that Freeman had committed either wire fraud or bank fraud because, in fact, he hadn’t committed either offense, and they knew it. To understand why this is so, we have to examine the difference between a lie and fraud.
Lying and fraud
Lying is ordinarily not a crime. There are exceptions, such as when a person lies under oath, which is perjury, a felony offense. It’s also against the law to lie to a federal official in an official investigation. That’s what the feds charged Martha Stewart with, for example. But usually, lying is not a criminal offense.
Fraud, on the other hand, is a federal criminal offense. It involves lying and deceit, but what’s different about fraud is that it is done with the aim of inflicting harm on the person or entity to whom the deceit is aimed.
Most of the time, fraud involves an effort to illegally deprive a person of his or her money. If I sell you a car for $50,000 that I tell you is brand new when, in fact, it has 20,000 miles on it, I have defrauded you and illegally gotten your money.
But fraud can also involve an effort to inflict nonmonetary harm on a person. A good example was the fraud that IRS agent Prilotsky committed against Freeman. Prilotsky lied to Freeman to deceive him into committing a federal offense that would enable federal officials to target Freeman with arrest, prosecution, conviction, incarceration, and a fine. Of course, it goes without saying that when the feds commit this type of fraud, it is not considered a crime, any more than a murder carried out by the Pentagon or the CIA for the purpose of protecting “national security” is considered a crime.
As the Freeman trial approached, it undoubtedly began dawning on the federal prosecutors that they could never prove that Freeman had committed either bank fraud or wire fraud. They could prove that he had lied to the banks or induced his customers to lie to the banks, but they knew that simply proving a lie would not be sufficient to secure a conviction. They had to prove that the lie involved an effort to inflict harm on the bank, such as by fraudulently stealing its money, and it was clear that Freeman had never done that, which is why the feds abandoned their bank-fraud and wire-fraud counts against Freeman just before trial. They knew they couldn’t prove he had committed a federal criminal offense.
Fear of the feds
So why did Freeman lie to the banks and induce his clients to lie to the banks? Because he knew that federal officials had put the fear of God into banking officials with respect to bitcoins. As it is, the banking industry is already the most tightly controlled and regulated industry in the country. Whenever a federal banking inspector walks into a bank, every single bank employee, from the president on down, is immediately stricken with deep fear, given the overwhelming federal power to fine the bank large sums of money, or even close it down, for violating federal regulations. In fact, banks have been fined millions of dollars for supposed “shortcomings” in their antilaundering controls.
The bitcoin phenomenon only made things worse. Every banking official knew that the feds hated bitcoin and would look askance on banks that dealt with bitcoin sellers. Thus, when banks would discover that Freeman was a bitcoin seller, some of them would close his account immediately even though selling bitcoins was perfectly legal, because the banks didn’t want to upset the feds. By the same token, if a customer told a bank that he was wiring his funds to buy bitcoins, some banks would refuse to do so, again out of fear of federal retaliation. They might even ask the customer to take his business elsewhere.
That’s the reason that Freeman was deceiving the banks — not for purposes of fraud but rather simply to circumvent bank policies that are rooted in bankers’ fear of federal regulators, and deceiving the banks in this way is not illegal.
Romance fraud
Lack of evidence, which was why the prosecutors abandoned their wire-fraud and bank-fraud charges against Freeman, is also the reason why they never charged Freeman with defrauding even one member of the Lonely Hearts Club — that is, the lonely 60- and 70-year-olds who had fallen in love with the wrong people — people who they had never met but to whom they had sent extremely large sums of money in bitcoin in an effort to please their online lovers. The prosecutors knew that they could never prove that Freeman had defrauded any one of them. Again, if they had had any evidence whatsoever of fraud with respect to the “romance scams,” you can be certain that they would have indicted Freeman for both fraud and conspiracy to commit fraud, given their quest to get him on anything and everything they could.
Remember: fraud necessarily involves lying and deceit as a way to inflict harm on a person, specifically by stealing his money. Freeman never lied to any of his bitcoin customers, including members of the Lonely Hearts Club. On the contrary, like any good businessman, he treated his customers with the utmost of respect, which is why he had received extremely high feedback ratings with respect to honesty and integrity on the website that he was using for selling bitcoins. Therefore, in preparing their case, federal prosecutors knew that they could never prove Freeman guilty of defrauding his customers because the simple truth was that Freeman had never done so.
No evidence of fraud
That left the federal prosecutors with just one count — conspiracy to launder money — against Freeman. To prove him guilty of that one conspiracy count, the prosecutors not only presented their parade of romance-scam victims before the judge but also argued that Freeman had turned a “blind eye” to the romance scams themselves.
That was pure nonsense. For one thing, in his testimony at trial, Freeman established that he did everything he could to ferret out whether someone was being scammed through his or her purchase of bitcoins. In fact, he was able to stop many scams and actively cooperated with law-enforcement personnel to bring romance scammers to justice. The problem was that he could not prevent all scams, which is what the feds claimed he should have done.
Moreover, it was never in Freeman’s interest to have his customers victimized by romance scammers. After all, like many other online businesses, he knew that his business depended on high feedback ratings. The problem was that some members of the Lonely Hearts Club would lie to Freeman about what they were using their money for, even when he questioned them about it. They didn’t want to admit to Freeman that they were sending large sums of money to their new lovers for fear that Freeman might not sell them the bitcoins they intended to send to them.
In fact, Freeman’s customers did the same thing with the banks where they had their monies and from which they were wiring their monies to Freeman. Complying with the federal government’s intrusive “Know Your Customers” regulations, the banks would try to ferret out whether people were being seduced by romance scammers to wire their monies to their new lovers. Wanting nothing more than to please them, and fearful that their bank might interfere with their online love affairs, they would keep their love affair secret from the banks and lie about it if asked. Yet while the feds targeted Freeman for supposedly turning a “blind eye” toward the romance scams, they never targeted the banks that were wiring the monies to Freeman for supposedly doing the same thing.
For that matter, they also never targeted the children of those lonely 60- and 70-year-olds for turning a blind eye to their parents’ online love affairs. That’s obviously because some of the romance-scam victims also didn’t want their children interfering with their new-found and secret love affair and, therefore, presumably also lied to them about their online misguided love affair.
No civil suits
There is something else to bear in mind. There was no evidence introduced at trial that any of the romance-scam victims had ever filed a civil lawsuit against Freeman for fraud. In a criminal case, the government has a heavy burden of proof. It must prove a person’s guilt beyond a reasonable doubt. In a civil case, however, the burden is much lighter. All the plaintiff must do is prove fraud by “a preponderance of the evidence.” Why hadn’t any of the romance-scam victims filed a civil suit against Freeman for defrauding them of their money? Because there was no evidence whatsoever that Freeman had defrauded them—and because they could never have been able to find a lawyer who would be willing to take their case.
In fact, every indication is that the feds came up with these romance-scam victims only after seizing and searching Freeman’s computer as part of a military-style raid on his house and then contacting the victims and convincing them that Freeman bore responsibility for their financial woes rather than the victims themselves.
Romance scams and conspiracy to launder
But there is still the central legal question: What in the world does all this romance-scam evidence have to do with a conspiracy charge? The answer is: Nothing at all!
Remember: In a conspiracy case, what matters is whether an agreement has been entered into between two or more people to commit an illegal act. In this case, there was no such agreement. To prove a conspiracy to launder money, the prosecutors had to prove that Freeman entered into an agreement with the romance scammers to jointly and knowingly commit an illegal act. But it is undisputed that Freeman never entered into such an agreement with any of the romance scammers. All that Freeman did was sell bitcoins to people, a far cry from knowingly entering into an agreement with someone to commit an illegal act.
Why no money-laundering charges with the romance scams?
The natural question arises: Why didn’t the federal prosecutors charge Freeman with laundering money from the romance-scam victims? Why limit their charges to a conspiracy to launder money? Keep in mind that they had already charged him with illegally laundering money by supposedly selling bitcoins to Prilotsky, so why not also charge him with illegally laundering money with respect to the Lonely Hearts Club victims?
The answer is because they knew they couldn’t prove that he had laundered any money. Laundering money entails taking dirty money and converting it into clean money. When Freeman received the money from his customers, it was obviously still clean money, and it remained clean money up until the time that the bitcoins were deposited, at the request of Freeman’s customers, into the bitcoin wallets of the scammers, after which point it became dirty money in the hands of the romance scammers. It’s only after money has become dirty that it needs to be laundered. The feds knew that Freeman had no dealings with the romance scammers after the romance victims had purchased bitcoins and instructed Freeman to deposit them into the bitcoin wallets of their lovers, and that’s why they never charged him with such a crime.
Crime and punishment
So if federal prosecutors never proved that Freeman entered into any agreements, or conspiracies, with the romance scammers to defraud the victims or to illegally launder money, how did they convince the jury and the judge to convict and severely punish Freeman?
They obviously did it by bamboozling both the jury and the judge by flooding them with evidence about the romance scams and making it look like this was a big fraud case, one based on money-laundering, rather than simply a conspiracy case. In that way, they were able to distract the jury’s and the judge’s attention away from the central issue of such a charge — which was: Where is the illegal agreement or conspiracy? — by causing both the jury and the judge to focus instead on the circumstances surrounding the romance scams.
At the sentencing hearing, one of the issues involved was what the federal government was going to do with the $5 million that the feds had seized from Freeman. In its presentence report, the federal probation office stated that it would be improper to use Freeman’s $5 million to reimburse the romance-scam victims. It pointed out that since this was a money-laundering case, not a fraud case, the victim was “society,” and therefore, Freeman’s $5 million should be forfeited to the government rather than be used to reimburse the romance-scam victims. The probation office clearly had it right, although only partly, as I show below.
But the prosecutors paraded some of their romance-scam victims before Laplante at sentencing, just as they had done at trial. In fact, Laplante even pointed out at the sentencing hearing that “the prosecution has gone to a lot of trouble giving me a big binder full of FBI interview reports and evidence that suggest there’s a lot of vulnerable victims here.”
The fraud perpetrated on the romance-scam victims clearly had a big impact on Laplante. He stated at the sentencing hearing: “I do think there’s an abundance of record evidence that the defendant transferred wire fraud victims’ fraudulently obtained money to wire fraudsters.” He also stated: “So they were — they were laundering transactions that were very much part and parcel of the actual defrauding conduct, the — the obtaining of money from victims and transmitting it to perpetrators.”
In fact, Laplante clearly understood that using Freeman’s savings to reimburse the romance-scam victims, which Laplante was clearly determined to do, necessarily depended on Freeman’s having participated in defrauding them, as the probation office had pointed out to him.
Yet, the fact remains that Freeman was neither charged with or convicted of defrauding even one single romance-scam victim! Moreover, let us not forget two critically important points:
(1) The prosecution abandoned its wire-fraud and bank-fund charges before trial. Given the government’s quest to get Freeman at all costs, including having an IRS undercover agent himself commit fraud against Freeman in an attempt to entrap him into committing a crime, there can be only possible reason for abandoning such charges: The prosecution knew that there was no evidence to support them.
(2) If the prosecutors had even one iota of evidence establishing that Freeman defrauded even just one of the romance-scam victims, there can be no doubt that they would have indicted him for doing so, especially given the government’s fierce determination to get him at all costs. The fact that the prosecution did not have him indicted for defrauding even just one single romance-scam victim shows that they did not have even one iota of evidence to support such a charge.
Nonetheless, one thing is crystal clear: U.S. District Judge Joseph N. Laplante punished Ian Freeman by giving him an eight-year jail sentence, plus two more years of supervised parole, plus a $40,000 fine, plus forfeiture of his $5 million in savings for a crime that he was not convicted of, not charged with, and did not commit — namely, fraud. That’s what passes for “justice” in America’s federal-court system.
Bamboozling the probation office and the media
The jury and the judge were not the only ones who obviously got bamboozled by the prosecution. Obviously, so did the probation office. Recall above that the probation office’s position was that since this was a money-laundering case, Freeman’s savings should be forfeited to the government and not be used to reimburse the romance-scam victims. But the probation office was wrong. This was not a money-laundering case. This was a conspiracy case. Freeman was never convicted of or even charged with money-laundering with respect to the romance-scam victims. Instead, he was charged with and convicted of conspiracy, that is, supposedly entering into an illegal agreement. At the risk of belaboring the obvious, there are no victims arising from an illegal agreement.
This bamboozlement on the part of the New Hampshire U.S. Attorney’s office also extended to the media. The press release that it issued on the day of Freeman’s sentencing — October 2, 2023 — stated the following: “Ian Freeman was sentenced today in federal court for laundering over ten million dollars in proceeds from romance scams and other internet fraud…. Dozens of victims … lost their life’s savings by way of Freeman’s bitcoin money laundering scheme. Ian Freeman’s sentencing shows that IRS Criminal Investigation is working vigorously to stop internet fraudsters like Ian Freeman.”
Those were all patently false or misleading statements. As the U.S. Attorney’s office knew full well, at the time that that press release was sent out, Judge Laplante had already acquitted Freeman of the government’s only money-laundering charge — the one that was based on the testimony of IRS agent Prilotsky — and that Freeman had been convicted of conspiracy, not money laundering and not fraud.
The final shock
What actually happened to Freeman’s $5 million in savings was shocking. It was clear that Judge Laplante was going to order a forfeiture of Freeman’s money as part of Freeman’s punishment. The only issue was whether the money was going to go to the federal government or to the victims of the romance scams. Knowing Freeman’s antigovernment mindset, the federal prosecutors got him to agree that $3.5 million of the $5 million would go to the romance-scam victims, which would leave only $1.5 million going to the federal government. As far as Freeman was concerned, since he was going to lose the money anyway, he preferred that it go to the victims rather than to the federal government.
What is shocking about the deal, however, was that they got Freeman to agree that even if he were to succeed in getting his criminal conviction overturned on appeal (which is still pending), he can never get any of his $5 million back. In other words, even if he were to be adjudged innocent on appeal, he’d still lose his money. That’s what passes for “justice” in America’s federal-court system.
In part 3, we will examine the other two add-on charges that Ian Freeman was convicted of — the charges dealing with violations of federal regulatory and tax provisions. We will also examine the roots of the deep enmity that federal officials have for people like Ian Freeman, as well as what this case was really all about.
