Monday, November 19, 2007

Legal except for the illegal part

-- by Dave

I caught a lot of flack from the Ron Paul contingent for pointing out that the people who were about to distribute "Ron Paul dollars" had just been busted by the FBI. Some commenters complained that there was nothing illegal about minting your own coins if you choose -- though of course others pointed out that this is true only if you don't make them look like legal tender.

It's also somewhat irrelevant if you're selling them as part of a pyramid scheme, and using the business for illegal money laundering.

It's apparent that this, in fact, was what the FBI busted the "Liberty Dollar" operators for. The search warrant and supporting FBI affidavit [PDF file] spells this out. For instance, there's the actual profit picture:
The marketing system NORFED operates to sell the currency is a multi-level marketing scheme. The scheme gives NORFED, RCOs, and Associates a profit for selling the ALDs into circulation. When the ALD reached the point of being unprofitable, NORFED conducted a "move up" of the currency. In 1998, the ALD currency was minted using a $10.00 base, meaning that a $10.000 ALD coin, eDollar, or warehouse receipt was backed by one troy ounce of silver. In November of 2005, the thirty (30) day moving average of the spot price of silver reached the "move up point" set by the NORFED. NORFED recalled all of the $10.00 base coins and warehouse receipts and "re-minted" the currency as a $20.00 base currency. This change made what the day prior had been a $10.00 denomination ALD coin, warehouse receipt, or eDollar backed by one troy ounce of silver, a re-minted re-issued $20 denomination coin. This instantly doubled the value of the currency. The "move up" left the silver and gold holdings at the same level as they were at the $10.00 base. Thus the value of the entire currency was doubled without changing the holdings at all. The other effect of the "move up" was a tremendous increase in profits for NORFED, RCOs and Associates.

Other parts of the affidavit detail how this operated, as well as how the business was used to launder money.

We'll see how all this plays out in court, but it's clear the FBI evidence is neither thin nor the prosecution mere persecution. From the outside, NORFED always looked like yet another right-wing scam (a la the Freemen and countless others, especially tax scams), and now it seems fairly evident it indeed was.

I guess that raises a secondary but legitimate question: Did Ron Paul enter into an agreement with these guys to use his image on their coins? And if he did, what does that say about his judgment?

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