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get licensed as a money transmitter #3321

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chadwhitacre opened this Issue Apr 9, 2015 · 31 comments

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chadwhitacre commented Apr 9, 2015

Reticketed from #3245 (comment) (cf. #938).

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chadwhitacre Apr 9, 2015

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My name is Marco Santori. I’m a business attorney for technology companies. In particular, I represent digital currency businesses. I am also the Chairman of the Bitcoin Foundation’s Regulatory Affairs Committee. In this multi-part series, I will give a basic primer on the state of US law as it applies to digital currency entrepreneurs. I aim to help bitcoin businesses assess their risks and develop an informed business model.

Part I: Bitcoin Law: What US businesses need to know
Part II: Bitcoin Law: Money transmission on the state level in the US
Part III: Bitcoin Law: Compliance and Avoidance Strategies

Lots of good info, even though we're not only exactly a "bitcoin business."

Also from the same site: Is Bitcoin Legal?

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chadwhitacre commented Apr 9, 2015

My name is Marco Santori. I’m a business attorney for technology companies. In particular, I represent digital currency businesses. I am also the Chairman of the Bitcoin Foundation’s Regulatory Affairs Committee. In this multi-part series, I will give a basic primer on the state of US law as it applies to digital currency entrepreneurs. I aim to help bitcoin businesses assess their risks and develop an informed business model.

Part I: Bitcoin Law: What US businesses need to know
Part II: Bitcoin Law: Money transmission on the state level in the US
Part III: Bitcoin Law: Compliance and Avoidance Strategies

Lots of good info, even though we're not only exactly a "bitcoin business."

Also from the same site: Is Bitcoin Legal?

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chadwhitacre commented Apr 9, 2015

@chadwhitacre chadwhitacre added this to the Balanced shutdown milestone Apr 9, 2015

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chadwhitacre Apr 9, 2015

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Marco works closely with his clients to structure their business plans to comply with these regulations, and whenever possible avoid them entirely.

http://www.pillsburylaw.com/marco-santori

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chadwhitacre commented Apr 9, 2015

Marco works closely with his clients to structure their business plans to comply with these regulations, and whenever possible avoid them entirely.

http://www.pillsburylaw.com/marco-santori

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chadwhitacre Apr 9, 2015

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The classic description of a money transmitter is a business, Business A, that accepts money from Person B and transmits that money to Person C, either at a later time or a different place.

http://www.coindesk.com/bitcoin-law-what-us-businesses-need-to-know/

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chadwhitacre commented Apr 9, 2015

The classic description of a money transmitter is a business, Business A, that accepts money from Person B and transmits that money to Person C, either at a later time or a different place.

http://www.coindesk.com/bitcoin-law-what-us-businesses-need-to-know/

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chadwhitacre Apr 9, 2015

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Because money transmission is such a heavily regulated business, classification as a money transmitter – especially unwitting classification – comes with real legal and practical consequences.

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chadwhitacre commented Apr 9, 2015

Because money transmission is such a heavily regulated business, classification as a money transmitter – especially unwitting classification – comes with real legal and practical consequences.

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chadwhitacre Apr 9, 2015

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Eep.

screen shot 2015-04-09 at 9 22 24 am

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chadwhitacre commented Apr 9, 2015

Eep.

screen shot 2015-04-09 at 9 22 24 am

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chadwhitacre Apr 9, 2015

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Whereas FinCEN regulators see themselves as money laundering preventers, state regulators see themselves as consumer protectors.

Thus, the application process is affectionately known among industry professionals as the "financial colonoscopy".

http://www.coindesk.com/bitcoin-law-money-transmission-state-level-us/

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chadwhitacre commented Apr 9, 2015

Whereas FinCEN regulators see themselves as money laundering preventers, state regulators see themselves as consumer protectors.

Thus, the application process is affectionately known among industry professionals as the "financial colonoscopy".

http://www.coindesk.com/bitcoin-law-money-transmission-state-level-us/

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chrisdev Apr 9, 2015

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Here's an idea, set up a credit union or a co-op.

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chrisdev commented Apr 9, 2015

Here's an idea, set up a credit union or a co-op.

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chadwhitacre Apr 9, 2015

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@chrisdev That sounds like getting licensed as a bank (#938), which I expect would be even more onerous.

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chadwhitacre commented Apr 9, 2015

@chrisdev That sounds like getting licensed as a bank (#938), which I expect would be even more onerous.

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chrisdev Apr 9, 2015

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@whit537 the US Bureaucracy really makes this credit union stuff sound like rocket science!!
I actually found the link to the service that deals with Small Credit Unions http://www.ncua.gov/Resources/OSCUI/Pages/default.aspx
May be worth a shot

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chrisdev commented Apr 9, 2015

@whit537 the US Bureaucracy really makes this credit union stuff sound like rocket science!!
I actually found the link to the service that deals with Small Credit Unions http://www.ncua.gov/Resources/OSCUI/Pages/default.aspx
May be worth a shot

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chadwhitacre Apr 9, 2015

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IRC:

money transmission licenses are expensive and time consuming. cannot do that without VC. it takes $1M bonds for several states, and you can theoretically only do business in the states in which you’ve been licensed. Coinbase is in the process.

https://www.coinbase.com/legal/licenses

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chadwhitacre commented Apr 9, 2015

IRC:

money transmission licenses are expensive and time consuming. cannot do that without VC. it takes $1M bonds for several states, and you can theoretically only do business in the states in which you’ve been licensed. Coinbase is in the process.

https://www.coinbase.com/legal/licenses

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bkrausz Apr 10, 2015

The do exist businesses that have MTLs and essentially license them out (essentially making you an agent of the business, allowing you to piggyback on their MTLs). I don't have specific names, nor do I know if it would enable your model (IANAL, yada yada), but may be worth exploring.

bkrausz commented Apr 10, 2015

The do exist businesses that have MTLs and essentially license them out (essentially making you an agent of the business, allowing you to piggyback on their MTLs). I don't have specific names, nor do I know if it would enable your model (IANAL, yada yada), but may be worth exploring.

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bkrausz Apr 10, 2015

Asked a coworker: PreCash is the company I was thinking of.

bkrausz commented Apr 10, 2015

Asked a coworker: PreCash is the company I was thinking of.

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chadwhitacre Apr 10, 2015

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Thanks @bkrausz, will look into them.

http://www.precash.com/

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chadwhitacre commented Apr 10, 2015

Thanks @bkrausz, will look into them.

http://www.precash.com/

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chadwhitacre Apr 21, 2015

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The conclusion is baloney, but the rest isn't bad:

http://blog.wepay.com/marketplaces-and-money-transmitter-licenses/

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chadwhitacre commented Apr 21, 2015

The conclusion is baloney, but the rest isn't bad:

http://blog.wepay.com/marketplaces-and-money-transmitter-licenses/

@chadwhitacre chadwhitacre referenced this issue Apr 21, 2015

Closed

pivot #180

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dpfavand Apr 26, 2015

I haven't been part of this discussion, so perhaps I missed something. But have you considered restructuring how Gratipay works so that instead of money transfers, people (backers, supporters) buy "Gratipay Coins" or something. Then the customer (backer, supporter) can give their "Gratipay Coins" to people they want to support. After that, the recipients can redeem their coins for a currency. Thus there are two (or three) transactions - one where a customer (supporter) buys coins from Gratipay, and one where Gratipay pays another customer (recipient) in currency for redeeming coins (and one where the supporter gives coins to a recipient, but it's not a currency transaction). Does that make any sense at all? Or is all the same as just being a money transmitter? Or an idea that you already looked at and discarded?

dpfavand commented Apr 26, 2015

I haven't been part of this discussion, so perhaps I missed something. But have you considered restructuring how Gratipay works so that instead of money transfers, people (backers, supporters) buy "Gratipay Coins" or something. Then the customer (backer, supporter) can give their "Gratipay Coins" to people they want to support. After that, the recipients can redeem their coins for a currency. Thus there are two (or three) transactions - one where a customer (supporter) buys coins from Gratipay, and one where Gratipay pays another customer (recipient) in currency for redeeming coins (and one where the supporter gives coins to a recipient, but it's not a currency transaction). Does that make any sense at all? Or is all the same as just being a money transmitter? Or an idea that you already looked at and discarded?

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chadwhitacre Apr 27, 2015

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@dpfavand That idea has surfaced before. I don't know enough to say how that relates to money transmission, I don't think it necessarily gets you out of it, though. Anyway, this ticket is about getting licensed as a money transmitter, but that's not going to happen anytime soon due to cost. Closing in favor of gratipay/inside.gratipay.com#192.

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chadwhitacre commented Apr 27, 2015

@dpfavand That idea has surfaced before. I don't know enough to say how that relates to money transmission, I don't think it necessarily gets you out of it, though. Anyway, this ticket is about getting licensed as a money transmitter, but that's not going to happen anytime soon due to cost. Closing in favor of gratipay/inside.gratipay.com#192.

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techtonik Apr 28, 2015

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@whit537 what is the cost?

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techtonik commented Apr 28, 2015

@whit537 what is the cost?

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chadwhitacre Apr 28, 2015

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Millions.

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chadwhitacre commented Apr 28, 2015

Millions.

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techtonik Apr 28, 2015

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Is there an official quote?

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techtonik commented Apr 28, 2015

Is there an official quote?

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chadwhitacre Apr 29, 2015

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In addition to the disclosure requirements, the financial obligations are substantial. A New York money transmitter must carry at least a $500,000 surety bond, and bonding agents will require a recurring yearly payment of 2-10% of the total bond amount, depending on the personal credit rating of the bond's guarantor.

An applicant must also satisfy minimum capitalization requirements that push well into the six figures. Add to that the cost of annual reporting, record-keeping, audits and legal fees. It should come as no surprise that (i) the costs of licensure, combined with (ii) the uncertainty of whether licensure is even required in the first instance, drive some businesses to not apply at all.

http://www.coindesk.com/bitcoin-law-money-transmission-state-level-us/

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chadwhitacre commented Apr 29, 2015

In addition to the disclosure requirements, the financial obligations are substantial. A New York money transmitter must carry at least a $500,000 surety bond, and bonding agents will require a recurring yearly payment of 2-10% of the total bond amount, depending on the personal credit rating of the bond's guarantor.

An applicant must also satisfy minimum capitalization requirements that push well into the six figures. Add to that the cost of annual reporting, record-keeping, audits and legal fees. It should come as no surprise that (i) the costs of licensure, combined with (ii) the uncertainty of whether licensure is even required in the first instance, drive some businesses to not apply at all.

http://www.coindesk.com/bitcoin-law-money-transmission-state-level-us/

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ctrlcctrlv May 1, 2015

You banned me for commenting that I reported you to FinCEN, did you also ban me from commenting on your repo?

https://ghostbin.com/paste/d7gsc

Why don't you want your contributors to know I reported you to FinCEN? Afraid another will pull out like Changaco?

ctrlcctrlv commented May 1, 2015

You banned me for commenting that I reported you to FinCEN, did you also ban me from commenting on your repo?

https://ghostbin.com/paste/d7gsc

Why don't you want your contributors to know I reported you to FinCEN? Afraid another will pull out like Changaco?

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techtonik May 1, 2015

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@ctrlcctrlv so, it was you who reported Balanced to FinCEH and initiated its shutdown? And all of that just because laws are not ready for online services such as this, and because you can't maintain your Bitcoin wallet and get your $$$ out of it? What a mess..

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techtonik commented May 1, 2015

@ctrlcctrlv so, it was you who reported Balanced to FinCEH and initiated its shutdown? And all of that just because laws are not ready for online services such as this, and because you can't maintain your Bitcoin wallet and get your $$$ out of it? What a mess..

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ctrlcctrlv May 1, 2015

@techtonik I didn't report Balanced to FinCEN, I reported Gratipay, LLC and its CEO @whit537 to FinCEN today. There is a difference.

As soon as the Balanced Shutdown was announced @whit537 terminated mine and Andrew Aurenheimer (@Rabite on Twitter) accounts. Ever since I've been investigating Gratipay, LLC and I finished my investigation with this FinCEN report (which I will also be mailing to the Pennsylvania Department of Banking & Securities). Before the shutdown was announced I didn't even know what Balanced was, I only learned that in the course of investigation.

And all of that just because laws are not ready for online services such as this, and because you can't maintain your Bitcoin wallet and get your $$$ out of it? What a mess..

Speak for yourself. I can maintain a Bitcoin wallet just fine. My account was terminated for no good reason, thus my investigation and subsequent report.

ctrlcctrlv commented May 1, 2015

@techtonik I didn't report Balanced to FinCEN, I reported Gratipay, LLC and its CEO @whit537 to FinCEN today. There is a difference.

As soon as the Balanced Shutdown was announced @whit537 terminated mine and Andrew Aurenheimer (@Rabite on Twitter) accounts. Ever since I've been investigating Gratipay, LLC and I finished my investigation with this FinCEN report (which I will also be mailing to the Pennsylvania Department of Banking & Securities). Before the shutdown was announced I didn't even know what Balanced was, I only learned that in the course of investigation.

And all of that just because laws are not ready for online services such as this, and because you can't maintain your Bitcoin wallet and get your $$$ out of it? What a mess..

Speak for yourself. I can maintain a Bitcoin wallet just fine. My account was terminated for no good reason, thus my investigation and subsequent report.

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ctrlcctrlv May 1, 2015

I also made Spreedly, OpenACH and Braintree Payments aware of this report and @whit537's business conduct. https://twitter.com/HW_BEAT_THAT/status/593980954936377344

I am not doing this to mindlessly troll. I am doing this because I feel legitimately wronged by Gratipay, LLC and cursory investigation shows that Gratipay, LLC is in violation of federal law, and has indeed been such since Gittip was founded.

"All free software projects deserve gratitude, but some deserve more gratitude than others" should be the new Gratipay slogan. Shall I open an issue? :^)

ctrlcctrlv commented May 1, 2015

I also made Spreedly, OpenACH and Braintree Payments aware of this report and @whit537's business conduct. https://twitter.com/HW_BEAT_THAT/status/593980954936377344

I am not doing this to mindlessly troll. I am doing this because I feel legitimately wronged by Gratipay, LLC and cursory investigation shows that Gratipay, LLC is in violation of federal law, and has indeed been such since Gittip was founded.

"All free software projects deserve gratitude, but some deserve more gratitude than others" should be the new Gratipay slogan. Shall I open an issue? :^)

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techtonik Jun 11, 2015

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@ctrlcctrlv yes, these laws were created before the internet era, and not for putting you in a jail for giving your friend $20 just because you want to tip him. But you can enforce this law as an US citizen. The only problem is that you seem to be from Philippines.

I can't say for sure that was reason for banning you, because I didn't watch closely. However, that happened after Chad under SJW pressure went to FBI (gratipay/inside.gratipay.com#121) and asked them if the image board you're supporting is legal. They said that they do not give out information, only accept it. So, believe it or not, but FBI is involved. So can you clarify your status towards federal law? Why are you hiding in Philippines? It would be really interesting to discover that FinCEH cooperates with criminals to destroy innovative services that could provide some insights how to save the broken economy from collapsing when free resources are depleted, and prepare for the change in the regulation laws.

Also, can you post your investigation thesis "Gratipay as an illegal money transmission business" here? Gratipay is not PayPal. It is not a Bank, who are doing money transfers. Gratipay doesn't cut commissions, doesn't use people money for their own purposes, it can not speculate on currency conversion - that stuff is all handled by service providers. Why Gratipay should be licensed to let people tell their banks how to tip people? Sorry, but I am more dumb than you in money laundering and transmitting activities. Where is the edge when giving tips to people becomes "illegal business"? Also, can you describe that in human terms - I am not that ready to deal with bureaucracy and legalese, which was born by necromancers to steal people lifes before my age.

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techtonik commented Jun 11, 2015

@ctrlcctrlv yes, these laws were created before the internet era, and not for putting you in a jail for giving your friend $20 just because you want to tip him. But you can enforce this law as an US citizen. The only problem is that you seem to be from Philippines.

I can't say for sure that was reason for banning you, because I didn't watch closely. However, that happened after Chad under SJW pressure went to FBI (gratipay/inside.gratipay.com#121) and asked them if the image board you're supporting is legal. They said that they do not give out information, only accept it. So, believe it or not, but FBI is involved. So can you clarify your status towards federal law? Why are you hiding in Philippines? It would be really interesting to discover that FinCEH cooperates with criminals to destroy innovative services that could provide some insights how to save the broken economy from collapsing when free resources are depleted, and prepare for the change in the regulation laws.

Also, can you post your investigation thesis "Gratipay as an illegal money transmission business" here? Gratipay is not PayPal. It is not a Bank, who are doing money transfers. Gratipay doesn't cut commissions, doesn't use people money for their own purposes, it can not speculate on currency conversion - that stuff is all handled by service providers. Why Gratipay should be licensed to let people tell their banks how to tip people? Sorry, but I am more dumb than you in money laundering and transmitting activities. Where is the edge when giving tips to people becomes "illegal business"? Also, can you describe that in human terms - I am not that ready to deal with bureaucracy and legalese, which was born by necromancers to steal people lifes before my age.

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ctrlcctrlv Jun 11, 2015

@techtonik Why bump this issue?

By the way I'm a US citizen.

Philippines has extradition to USA since the 80's. I'm not hiding here. If I wanted to hide I'd go to an Arab country with no extradition, not a former US colony ;)

I don't have to explain anything to you. Chad already kicked out most of his users, is demanding everyone give them their names and as such compiled with FinCEN. You lose, I await the European version of Gratipay. Just because you don't like money transmission laws doesn't mean you don't have to fllow them.

ctrlcctrlv commented Jun 11, 2015

@techtonik Why bump this issue?

By the way I'm a US citizen.

Philippines has extradition to USA since the 80's. I'm not hiding here. If I wanted to hide I'd go to an Arab country with no extradition, not a former US colony ;)

I don't have to explain anything to you. Chad already kicked out most of his users, is demanding everyone give them their names and as such compiled with FinCEN. You lose, I await the European version of Gratipay. Just because you don't like money transmission laws doesn't mean you don't have to fllow them.

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ctrlcctrlv Jun 11, 2015

Also the FBI has even requested data from us before: https://8ch.net/_t/20150518.txt

Unlike Chad I don't have to be worried that the business I'm operating is illegal so I'm not afraid of the feds :)

ctrlcctrlv commented Jun 11, 2015

Also the FBI has even requested data from us before: https://8ch.net/_t/20150518.txt

Unlike Chad I don't have to be worried that the business I'm operating is illegal so I'm not afraid of the feds :)

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techtonik Sep 12, 2015

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@ctrlcctrlv, hey, there is something that may help you out if your project is not acceptable for Gratipay - https://salt.bountysource.com/ - they don't have anything to do about economy of love and gratitude, so they don't have to meet the same challenges as we are.

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techtonik commented Sep 12, 2015

@ctrlcctrlv, hey, there is something that may help you out if your project is not acceptable for Gratipay - https://salt.bountysource.com/ - they don't have anything to do about economy of love and gratitude, so they don't have to meet the same challenges as we are.

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ctrlcctrlv Sep 17, 2015

Thanks for thinking of me, but I solved this by passing my lead developer status to a friend, @jaw-sh ...

He's in charge of fundraising and development now, I'm just a lowly contributor (of both code and resources). ;)

ctrlcctrlv commented Sep 17, 2015

Thanks for thinking of me, but I solved this by passing my lead developer status to a friend, @jaw-sh ...

He's in charge of fundraising and development now, I'm just a lowly contributor (of both code and resources). ;)

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