Inside the federal raid on Keene, NHs crypto mecca – The Verge

The sky was still dark when officers arrived at Leverett Street. in keine, new hampshire, a leafy block of team houses on the quiet outskirts of the small college town. They took up residence in a house on the corner, surrounding it with two armored Bearcat G3s and a fleet of unmarked ATVs. both bearcats had gunners stationed in a hatch in the roof, dressed in camouflage uniforms. the only light came from the blue and red sirens, which illuminated houses in all directions.

inside, ian freeman slept with his girlfriend and their little dog coco. he woke up to the sound of glass exploding. a ramming pole, strapped to the front of one of the bear cats, had pierced through a first-floor window, ripping out the frame as he backed away. Freeman put on a bathrobe and stumbled down the stairs, still shaking off sleep. there was broken glass everywhere. his first thought was that some stranger had thrown a brick. But then he heard a buzz, a small hover drone that the police had deployed to explore the house. he looked outside and saw blinding lights. as he came into focus by the lights, the men pointed their rifles at him.

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A mile east, Freeman’s Talk Radio co-host Aria Dimezzo stumbled downstairs in her underwear and was met by a tactical assault team, who told her they would shoot her if she moved. At the city’s bitcoin embassy, ​​a group of agents ripped a bitcoin dispenser off the concrete floor, leaving four symmetrical holes where it had been screwed. They took another machine from the campus convenience in downtown Keine, another from a bar called Murphy’s Taproom, and a fourth from Red Arrow Diner in Nashua. together, they had more than $50,000 in cash.

There was even more money in Freeman’s home, seized by federal agents and later reported in court in a forfeiture filing: $180,000 in cash, a 100-ounce Swiss silver bar (worth about $3,000) and a platinum coin stamped with a portrait of Ron Paul. There were boxes full of golden bills called goldbacks that were too dark to even put a value on, some taken from Freeman’s home, others seized in transit by the postal service. The biggest prize was two physical bitcoins from casacius, worth 100 and 1 btc respectively, first available in 2011 and now worth over $4 million.

Video: Christopher Waid

Video: Christopher Waid

For police, the money was nearly as important as Freeman himself. For years, they had been tracking his Bitcoin business for evidence of money laundering or other crimes. As far as they were concerned, it was all part of an unlicensed money transmittal scheme processing millions of dollars a year. The purpose of the raid was to break that system, tearing out Freeman’s Bitcoin machines one by one and seizing any illegal proceeds along with them.

The news of the raid spread quickly. A local Linux developer and crypto activist named Christopher Waid rushed to Freeman’s house to film the last gasps of the raid, capturing footage of the Bearcats, the drone, and the bizarre militarism of it all. When he was done there, he headed to the bitcoin embassy, ​​where a crowd had gathered to watch police pull out duffel bags and plastic bins filled with loose paper. Despite the name, the embassy was little more than a side room to a convenience store. The most radical part was the bookshelf, which offered Devops manuals along with copies of Socialism by Ludwig von Mises and Robert A. heinlein’s moon is a tough mistress.

For years, Freeman had been warning of federal encroachment, broadcasting nightly on the radio about the clenched fist of the state. his bitcoin venture was part of a broader free state movement in new hampshire, turning a quiet corner of new england into a libertarian haven. now the counterforce was here, like a fulfilled prophecy, and the free statesmen fully understood his role. they were ready with cameras, asking for warrants and litigating precisely where they were allowed to remain as the raid dragged on. when the police led the crowd across the street, it just meant they had to shout a lot louder.

“you guys are the fucking enemy!” one of the protesters told the agents, as they took out another can of papers. “You’re not protecting anyone’s fucking freedom. you all are a bunch of mobsters.”

At the end of the day on March 16, six people were in custody: including Freeman, his girlfriend and a married couple who lived nearby. Two co-hosts of the radio show were also named: Dimezzo and a man born Richard Paul, who had legally changed his name to None in protest of the bureaucratic state. According to the indictment, all six had been involved in Freeman’s bitcoin dispensing business. An indictment filed under seal the day before the raid counted thirteen instances in which someone from the group contacted a bank on behalf of the company since April 2017, listing each call or email as a wire fraud charge.

defense attorneys describe the project in more idealistic terms. “The defendants were a loosely affiliated group of people with libertarian political leanings that included a strong belief that bitcoin was a breakthrough for those who defend human freedom,” a filing read.

There are lots of people like that in Keene, although you might not guess it from driving through. A quiet college town of less than 25,000 people, the libertarian migration to New Hampshire (also known as the Free State Project) has turned it into a magnet for cryptocurrency buffs, some of whom have unexpectedly become millionaires after the Bitcoin boom of the past few years. In 2019, Forbes called the town a “crypto mecca,” citing more than 20 businesses accepting some form of cryptocurrency payment. Many of those businesses were solicited directly by Freeman and his cohort, who saw cryptocurrency as a kind of moral crusade against the belligerence of the US government.

freeman is best known as the host of free talk live, a libertarian radio talk show syndicated to 185 radio stations nationwide. many of the activists outside the embassy had appeared on the show at some point, including waid. When the bear cat came through the window, he was entering Freeman’s studio, a maze of wires and audio racks where the show is recorded, mixed, and distributed.

free talk live gave freeman the power to rally a community of crypto-minded libertarians in keine, but it also amplified his ugliest mistakes. More recently, he brought prominence to his still-active lawsuit against New Hampshire’s mask mandate. (“I was never really convinced that covid was anything particularly dangerous,” Freeman tells me when I ask him about the case.) when he was still trying to brand himself as a libertarian anti-police activist. (“When he got racist, I fired him from Free Talk Live,” says Freeman. “He just kept getting deeper into that world.”)

The chaotic world of libertarian radio made Freeman’s show a natural rallying point for the early bitcoin community. the first bitcoin free talk call came in december 2010, the same month that satoshi nakamoto disappeared from active development of the bitcoin specification.

Touted on the free live chat site as the first mention of bitcoin in the media, the episode now comes across as a strange time capsule. The first 20 minutes are devoted to a discussion of voluntary alternatives to the fire department and municipal road maintenance, after which the conversation turns to methamphetamine and Venezuela. Around 40 minutes later, a person named Jeremy from Australia steps in to talk about a new digital currency called bitcoin.

“I was charging about six cents per bitcoin in August and now it’s 26 cents, so it’s already gone up quite a bit,” Jeremy says.

“My initial concern was that it’s essentially fiat currency, because it’s not backed by anything,” freeman replies. “It is a good idea. I don’t know if it’s still a fantastic alternative.”

freeman reached out to bitcoin in the months that followed, eventually dovetailing it into broader complaints about the way the us govt. uu. controls the value of the dollar. the price kept rising: in three years he had cleared $1,000, then $10,000 four years later. according to forfeiture documents, freeman’s cryptocurrency holdings are now worth more than $5 million.

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As more money flooded into cryptocurrencies, something else came with it. The version of bitcoin that has become popular in recent years is less political and more directly interested in making money. venture capital has embraced blockchain as an opportunity on the same scale as targeted advertising or independent contractor labor schemes. it’s rare to hear concerns about the federal reserve at a bitcoin conference these days, and few are interested in clashes with regulators, there’s just no money in it.

but if you’re ready to work with the regulators, the money is almost endless. Coinbase, one of the earliest adherents to federal know-your-customer rules, now processes more than $100 billion in transactions each month, while the company itself is valued at $50 billion. New wallet regulations are creeping up from the financial crime watchdog network, and while some activists complain, most entrepreneurs have welcomed them with open arms. At the 2021 Bitcoin conference in Miami, the Winklevoss twins promised a crowd of real estate moguls and retail investors that anyone who owns a bitcoin will one day be a millionaire.

For true believers like Freeman, that shift has been bittersweet. “There’s nothing wrong with somebody seeing it from that perspective and just wanting to invest in a thing and be successful,” Freeman tells me. “But in the libertarian Bitcoin community up here, they see it differently. They see it as a dramatic transfer of power.”

but if mt. gox and the silk road represented a transfer of power, power is now shifting to the other side. In 2017, international raids brought down BTC-E (then the largest unregulated exchange), and the following year a money laundering operation was revealed. An Ohio man was arrested last year for operating a bitcoin vessel called Helix, which mixed blockchain records with obscure transactions. A month after the New Hampshire raid, a Russian-Swedish citizen was arrested for operating a similar service called Bitcoin Fog.

In public statements, prosecutors refer to these as “dark web” cases, treating the unregulated bitcoin system as a loosely organized criminal conspiracy. there is a lot of tainted money on the blockchain: money from drug sales, online scams, or money stolen from individual users as part of a rape. tumblers and anonymous exchanges allow criminals to get away with that money, so law enforcement tries to shut them down one by one, like plugging holes in a dam. With so much dirty money trying to clean itself up, the prosecutions take on a kind of fatalistic logic. any unregulated exchange will eventually be used for money laundering; any unsupervised flow of coins will eventually be complicit in a crime.

for keine’s project, keeping those coins unmonitored was the whole point. their goal was to maintain the privacy and freedom of bitcoin’s original design while staying within the bounds of the law. but to the federal government, it just seemed like one more hole to plug.

at the end of may, both freeman and dimezzo were out on bail, with trial scheduled for october 2022. waid announced freeman’s release with a tongue-in-cheek blog post on freekeine: “after significant delays, the kidnappers freed ian from merrimack county spiritual retreat.”

Bail conditions are strict, in keeping with the aftermath of the raid: they cannot leave their homes, exchange bitcoins, or communicate with other co-defendants. that last provision created significant problems for free talk live, as it meant the two main co-hosts could no longer talk to each other without risking more jail time. within a few weeks, the court granted an injunction allowing them to speak in order to coordinate the show, and the show was back to its usual problems. In late July, they were rallying support for a ballot measure that would allow New Hampshire to secede from the United States.

No one took a more contradictory stance towards the legal system and stayed in jail for months longer. according to court records, her calls with the public defender turned into screaming matches. after two weeks in jail, he made a phone call so alarming that he stopped his efforts to obtain pretrial release. the recording itself is sealed, but one file gives alarming titles for the exhibits, including “audio clip: you need to die”, “audio clip: start shooting pigs” and “audio clip: kill yourself if sentenced”.

Prosecutors say he threatened his public defender’s life, and the public defender withdrew from the case the next day, suspending the bond hearing. as of August, he was still in jail. supporters demonstrated in front of the corrections building, waving signs saying “don’t release anyone.”

freeman’s cohort had always lived on the fringes of the broader free state project, but after the arrest, a new wave of libertarian activism arose around them. keine’s free website became a daily news burst about bail hearings and protests. waid started a website to support “the crypto6”, as he called them. soon, name shirts were a common sight in the city. Dave Ridley, a longtime Free State activist, began organizing jailhouse rallies, giving the cause more local credibility.

as the jailhouse protests subsided, ridley turned to a more ostentatious kind of activism: branding himself a “bitcoin gandhi” and launching a 24-day march from keine to concord dressed in robes with a suit historically accurate gandhi. A series of YouTube videos show him walking the narrow shoulders of two-lane highways, picking up litter, and occasionally being questioned by confused but cool highway patrolmen. In an open letter to the head of the New England General Services Agency, Ridley called on the federal government to distance itself from the case, saying, “Surges of this sort indicate a Venezuelan-style slide into monetary fascism.” The following month, Ridley’s alter ego Gandhi participated in another protest outside the Concord Federal Building with Mr. bitcoin, a mr. the meth-style foam suit embodiment of a physical bitcoin.

freeman was familiar with this kind of civil disobedience, acting out to show the brutality of the prison status quo. Years earlier, Freeman had smoked marijuana on Keine’s main street, daring local cops to arrest him for a crime that usually goes unpunished. (a friend filmed the encounter from across the street). A longer gag is Freeman’s refusal to pay municipal fines, litigating every parking ticket or citation until it becomes easier for the bureaucracy to give up.

Looking at your bitcoin business, it can be hard to tell where that activism ends and the plain business begins. Freeman’s machines were real and he was making money building a cryptocurrency infrastructure like any entrepreneur. But he arranged the business in a knowingly risky way, avoiding financial licensing and other measures that insulate many bitcoin companies from prosecution. Even more than his Wall Street competitors, Freeman was deeply familiar with cryptocurrency processing. he knew his bitcoin dispenser was leaving him exposed, but he never stopped it.

freeman believes he was under investigation as early as 2018, when he says a federal agent approached renee spinella with questions about freeman’s bitcoin transactions. Spinella refused to report on Freeman; she and her husband were among six arrested during the raids. But it was an ominous sign, the first hint of a federal case against Freeman’s bitcoin business.

even so, it wasn’t enough for freeman to abandon the project. As he tells it, his bitcoin work was too important to abandon, a kind of moral crusade against the American state and his ability to wage war.

“I was on a mission to spread bitcoin,” Freeman says. “To give people a chance to get out of this government money system that funds evil, funds violence, and funds war. Dollar for dollar, people need to get out of that system.”

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freeman didn’t think the fbi could make a case either. “We thought this was legal,” he says. “There was a legal opinion written by our church attorney that looked at federal and state regulations and said, this is just the sale of a product; this is not a money transmission.”

That opinion, prepared by the shire free church, is based on a unique technical point that makes freeman’s bitcoin dispensers more like vending machines than an ATM. The machines look like a fried cupertino version of your standard ATM, but each has its own wallet, similar to a stash of bitcoins that is physically kept inside the machine. So instead of transferring his money from elsewhere, Freeman argues that he is simply delivering locally controlled inventory. It’s a smart distinction, though one can see how the FBI might not be convinced.

Freeman was operating the business openly and the New Hampshire Banking Department never told him to shut it down, but he kept receiving ominous signs from law enforcement. Earlier this year, he was cultivated by a stranger who claimed to be a drug dealer — and who Freeman believes was actually an undercover FBI agent.

“This guy had been a bitcoin buyer, seemed like a decent guy. he had shown up at one of our crypto meetups,” says freeman. “He wasn’t even talking to me personally, but I was within earshot and I heard him say that he was a heroin and ecstasy dealer and it was like, ‘red alert! we have a possible feeder here! either you’re a federal agent or you’re a fucking asshole. Freeman says he recognized the legal danger and refused to sell to the man, thinking he had avoided a money laundering charge.

but if freeman was ready to take on the federal government, he wasn’t ready for the dramatic violence of the raid. “They could have come and played,” Freeman says. “nobody had to break their windows.”

I was also unprepared for the full scope of the charges. Reviewing the case now, he is particularly alarmed by the charge of operating a “continuing financial crime enterprise” specifically brought against him. he appears to have been provoked by the county free church which reportedly generated more than $5 million in gross receipts over two years, which places it in a different class of criminal organization. When we spoke, Freeman was still hoping more charges would emerge from the ongoing grand jury proceedings.

“It was worse than I expected,” he tells me. “and they’re not done yet.”

once dimezzo launched, one of its biggest surprises was the bail restriction on bitcoin. it’s a reasonable request from prosecutors – he can’t allow an accused diamond smuggler to sell diamonds – but it meant a big change in his lifestyle because unlike most crypto enthusiasts, dimezzo actually uses bitcoin as money. She tells me that she made about 80 percent of her purchases directly from the blockchain before her arrest, usually businesses in the Keine area that have set up bitcoin payments through a local point-of-sale system called anypay. dimezzo says she could eat at a different restaurant every night and always pay with cryptocurrency. bitcoin doesn’t work like that for most people and it can seem like keine’s crypto mecca is something of an island, blissfully isolated from the broader cryptocurrency movement.

After the attack, the island is shrinking. In a phone call from Merrimack Jail, Freeman’s co-host Nobody spoke bitterly to me about the Bitcoin developers’ refusal to increase the block size, a disagreement that ultimately led to the Bitcoin Cash split in 2017. his side lost that fight: the block size didn’t change, pushing bitcoin’s price up while transactions on the blockchain got slower and slower. keine’s contingent still uses bitcoin cash when possible or fully anonymous alternatives like monero, but it’s much harder to sell than bitcoin.

the financial side of bitcoin (the side you would find partying in miami) is not interested in bitcoin cash. They don’t care about on-chain transactions or anonymity or anything else that adds friction to the vast sums of money being poured into cryptocurrencies. For most newcomers, bitcoin is about profit, not politics.

“There is that divide,” Freeman says, “between people who want to be regulated and controlled and people who see [cryptocurrency] as a new freedom that we have.”

That divide is particularly stark after the raids, now that supporters are trying to raise money and awareness. It would be a good time to have rich and powerful friends, but Freeman has no expectation that the institutional world of bitcoin will intervene. “They probably won’t talk on any of our cases,” Freeman tells me. “we are irrelevant to them.”

bitcoin was born as a way to escape all this, to build a monetary system beyond the reach of the dollar, the fed or the government. That was the dream that first drew Freeman to Bitcoin, before it was a more plausible investment than currency with gold or silver coins. In the decade since, Silicon Valley and Wall Street have gotten friendlier to Bitcoin, and prosecutors have learned to tame it, but Freeman sees the same dream of escape still living beneath it all.

“the exchanges are going to be regulated”, he says. “We know. They’re going to regulate the banks, wherever they can apply pressure… but no matter how much effort they put into trying to control cryptocurrency, it’s going to fail because of its decentralized nature.”

It is a point of almost religious faith for him. no matter how harsh the crackdown is, it will be incomplete. the wildest forces will survive just out of reach.

“They can’t control bitcoin,” he tells me. “That’s why they hate him.”

correction: an earlier version of this article misrepresented freeman’s total physical bitcoin holdings (101 btc, instead of 11), as well as the date of spinella’s contact with the fbi (2018, not 2016) and the nature of the anypay point of sale service. the verge regrets mistakes.

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