{ "attribution": { "source": "legal.exploreworldai.com", "canonical": "https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:ca1-23-1839-2025-07-29", "cite_as": "NovaCopilot, legal.exploreworldai.com (https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:ca1-23-1839-2025-07-29)", "license": "https://legal.exploreworldai.com/revision", "version": "legal-2026-10-10", "fingerprint": "ewai:us:e7268f", "proof": "sha256:4f112c65bee055ae7fc096eaa34bb3044c9281c5cb784ada65ad52c20552ec60", "jurisdiction": "us", "lang": "en", "publisher": "NovaCopilot by ExploreWorld Legal", "terms": "https://legal.exploreworldai.com/om" }, "brand_source": "Source: NovaCopilot", "item": { "schema_version": "1.0.0", "id": "us:ca1-23-1839-2025-07-29", "jurisdiction": "us", "lang": "en", "brand_source": "Source: NovaCopilot", "brand": { "product": "NovaCopilot", "platform": "ExploreWorldAI", "infrastructure": "ExploreWorld Legal", "infrastructure_url": "legal.exploreworldai.com", "legal_entity": "Valkiv Ventures AB", "permanent_url": "https://legal.exploreworldai.com/novacopilot", "source": "Source: NovaCopilot", "powered_by": "Powered by NovaCopilot", "license": "https://legal.exploreworldai.com/licensvillkor" }, "sections": [ { "title": "United States Court of Appeals", "paragraphs": [] }, { "title": "For the First Circuit", "paragraphs": [] }, { "title": "No. 23-1839", "paragraphs": [ "para_4", "para_5", "para_6", "para_7", "para_8" ] }, { "title": "APPEAL FROM THE UNITED STATES DISTRICT COURT", "paragraphs": [] }, { "title": "FOR THE DISTRICT OF NEW HAMPSHIRE", "paragraphs": [ "para_11" ] }, { "title": "Before", "paragraphs": [ "para_13" ] }, { "title": "Richard Guerriero, with whom Oliver Bloom, Lothstein", "paragraphs": [] }, { "title": "Guerriero, PLLC, Mark L. Sisti, and Sisti Law Offices were on", "paragraphs": [ "para_16" ] }, { "title": "David M. Lieberman, Attorney, Appellate Section, Criminal", "paragraphs": [ "para_18" ] }, { "title": "United States Attorney, Georgina L. MacDonald, Assistant United", "paragraphs": [] }, { "title": "States Attorney, John J. Kennedy, Assistant United States", "paragraphs": [] }, { "title": "Attorney, Nicole M. Argentieri, Principal Deputy Assistant", "paragraphs": [] }, { "title": "Attorney General, Lisa H. Miller, Deputy Assistant Attorney", "paragraphs": [ "para_23" ] }, { "title": "July 29, 2025", "paragraphs": [ "para_25" ] }, { "title": "THOMPSON, Circuit Judge. Ian Freeman (\"Freeman\") is, by", "paragraphs": [ "para_27", "para_28" ] }, { "title": "Freeman began selling bitcoin in 2014 as part of his mission to", "paragraphs": [ "para_30", "para_31", "para_32", "para_33", "para_34", "para_35", "para_36", "para_37", "para_38", "para_39", "para_40", "para_41", "para_42", "para_43", "para_44", "para_45", "para_46", "para_47", "para_48", "para_49", "para_50", "para_51", "para_52" ] }, { "title": "BACKGROUND", "paragraphs": [] }, { "title": "Freeman's trial was an 11-day affair at which more than", "paragraphs": [ "para_55", "para_56", "para_57", "para_58", "para_59", "para_60", "para_61" ] }, { "title": "Freeman's Bitcoin Business", "paragraphs": [] }, { "title": "Courts throughout the country have offered thorough", "paragraphs": [ "para_64", "para_65", "para_66" ] }, { "title": "1 Because Freeman raises a sufficiency of the evidence", "paragraphs": [ "para_68", "para_69", "para_70" ] }, { "title": "F.3d 12, 18 (1st Cir. 2015). For the overview of Freeman's bitcoin", "paragraphs": [ "para_72", "para_73", "para_74", "para_75", "para_76" ] }, { "title": "2 In everyday speech, the phrase virtual currency would", "paragraphs": [ "para_78", "para_79", "para_80" ] }, { "title": "Instead bitcoin is stored in a software program referred to as a", "paragraphs": [ "para_82", "para_83", "para_84", "para_85", "para_86", "para_87", "para_88", "para_89", "para_90", "para_91", "para_92", "para_93", "para_94" ] }, { "title": "R45427, Cryptocurrency: The Economics of Money and Selected Policy", "paragraphs": [] }, { "title": "Issues 1 n.2 (2020) (distinguishing between cryptocurrencies and", "paragraphs": [ "para_97", "para_98", "para_99", "para_100", "para_101", "para_102", "para_103", "para_104" ] }, { "title": "3 This opinion is not meant to be a comprehensive or", "paragraphs": [ "para_106", "para_107", "para_108", "para_109", "para_110", "para_111" ] }, { "title": "To run his bitcoin business, Freeman acquired bitcoin", "paragraphs": [ "para_113", "para_114", "para_115", "para_116" ] }, { "title": "First, he used bitcoin \"kiosks\" or \"ATMs,\" physical machines in", "paragraphs": [ "para_118", "para_119", "para_120", "para_121", "para_122", "para_123", "para_124", "para_125" ] }, { "title": "Freeman had what he called a Know Your Customer procedure", "paragraphs": [ "para_127" ] }, { "title": "Telegram. He asked prospective customers to send him a photograph", "paragraphs": [ "para_129", "para_130", "para_131", "para_132", "para_133", "para_134", "para_135", "para_136", "para_137", "para_138", "para_139", "para_140", "para_141", "para_142" ] }, { "title": "The government sought to show that even when Freeman", "paragraphs": [ "para_144", "para_145" ] }, { "title": "For instance, Freeman permitted individuals to execute", "paragraphs": [ "para_147", "para_148", "para_149", "para_150", "para_151" ] }, { "title": "In consummating these third-party transactions, Freeman sent", "paragraphs": [ "para_153", "para_154", "para_155", "para_156" ] }, { "title": "4 For instance, a government investigator testified at trial", "paragraphs": [ "para_158", "para_159", "para_160", "para_161", "para_162", "para_163", "para_164", "para_165", "para_166" ] }, { "title": "To establish money laundering, the government called an", "paragraphs": [ "para_168" ] }, { "title": "Freeman through Telegram and at a kiosk in New Hampshire. After", "paragraphs": [ "para_170", "para_171", "para_172", "para_173", "para_174", "para_175", "para_176", "para_177", "para_178", "para_179", "para_180", "para_181", "para_182", "para_183", "para_184", "para_185", "para_186", "para_187", "para_188" ] }, { "title": "In the summer of 2018, the Financial Crimes Enforcement", "paragraphs": [] }, { "title": "Network (\"FinCEN\") of the United States Treasury Department sent", "paragraphs": [ "para_191", "para_192", "para_193", "para_194", "para_195", "para_196", "para_197" ] }, { "title": "Procedural History", "paragraphs": [] }, { "title": "The indictment alleged that Freeman (as well as several", "paragraphs": [ "para_200", "para_201" ] }, { "title": "March 15, 2021. In relevant part, the indictment charged Freeman", "paragraphs": [] }, { "title": "5 It's not clear whether Freeman himself used the name \"Shire", "paragraphs": [] }, { "title": "Cryptocoin\" in connection with any of his businesses. Also, to be", "paragraphs": [ "para_205", "para_206", "para_207", "para_208" ] }, { "title": "(defining money transmitter as type of money services business);", "paragraphs": [ "para_210", "para_211", "para_212", "para_213", "para_214", "para_215", "para_216", "para_217", "para_218", "para_219", "para_220", "para_221", "para_222", "para_223", "para_224", "para_225", "para_226", "para_227", "para_228", "para_229", "para_230", "para_231" ] }, { "title": "Freeman had moved for a judgment of acquittal after the", "paragraphs": [ "para_233", "para_234" ] }, { "title": "The district court partially granted that motion, ruling that there", "paragraphs": [ "para_236", "para_237", "para_238", "para_239", "para_240", "para_241", "para_242" ] }, { "title": "Thereafter, Freeman moved for a new trial based on spillover", "paragraphs": [ "para_244" ] }, { "title": "He also moved for reconsideration of the court's ruling on the", "paragraphs": [ "para_246", "para_247" ] }, { "title": "At sentencing, the district court calculated the", "paragraphs": [ "para_249" ] }, { "title": "210 to 262 months. It then granted Freeman's motion for a variance", "paragraphs": [ "para_251" ] }, { "title": "DISCUSSION", "paragraphs": [] }, { "title": "Motion to Dismiss Counts Related to Operation of an Unlicensed", "paragraphs": [] }, { "title": "Money Transmitting Business", "paragraphs": [] }, { "title": "Freeman's appeal largely centers on the major questions", "paragraphs": [ "para_256", "para_257", "para_258", "para_259", "para_260" ] }, { "title": "697 (2022); Util. Air Regul. Grp. v. EPA, 573 U.S. 302 (2014). To", "paragraphs": [ "para_262" ] }, { "title": "6 More precisely, the district court sentenced Freeman to 60", "paragraphs": [ "para_264", "para_265", "para_266", "para_267", "para_268", "para_269", "para_270", "para_271", "para_272", "para_273", "para_274", "para_275", "para_276", "para_277", "para_278", "para_279", "para_280", "para_281", "para_282", "para_283" ] }, { "title": "Thus, to understand what it means for a money", "paragraphs": [ "para_285", "para_286", "para_287", "para_288", "para_289", "para_290", "para_291", "para_292", "para_293", "para_294" ] }, { "title": "Because the government has deemed his financial", "paragraphs": [ "para_296", "para_297", "para_298", "para_299", "para_300" ] }, { "title": "Section 5330 does not cover businesses such as his that trade", "paragraphs": [ "para_302", "para_303" ] }, { "title": "5330, and by extension no criminal liability under Section 1960", "paragraphs": [ "para_305" ] }, { "title": "Of significance to Freeman's argument is one particular", "paragraphs": [ "para_307", "para_308" ] }, { "title": "5330(d)(1) looked a little different: it did not include the word", "paragraphs": [] }, { "title": "7 Eagle-eyed readers will have remembered that Section", "paragraphs": [] }, { "title": "5330(a)(1) referred to registration with the Secretary of the", "paragraphs": [] }, { "title": "Treasury and never mentioned FinCEN. The Secretary of the Treasury", "paragraphs": [ "para_313", "para_314" ] }, { "title": "Accountability Off., GAO/GGD-98-18, Money Laundering: FinCEN Needs", "paragraphs": [ "para_316" ] }, { "title": "(1998). For simplicity's sake, any time Section 5330 gives certain", "paragraphs": [ "para_318", "para_319", "para_320", "para_321", "para_322" ] }, { "title": "Instead, the only noun in the list of items being transmitted was", "paragraphs": [ "para_324" ] }, { "title": "Appropriate Tools Required to Intercept and Obstruct Terrorism Act", "paragraphs": [ "para_326", "para_327", "para_328" ] }, { "title": "For simplicity's sake, we'll refer to the definition of", "paragraphs": [ "para_330" ] }, { "title": "Freeman's bitcoin business as the \"effective definition\" and the", "paragraphs": [ "para_332", "para_333" ] }, { "title": "(Mac) Thornberry National Defense Authorization Act for Fiscal", "paragraphs": [] }, { "title": "Year 2021 (\"NDAA\"), Pub. L. No. 116-283 § 6102(d)(2)(A)(i), 134", "paragraphs": [ "para_336", "para_337" ] }, { "title": "8 For those tracking the dates, it may seem strange that we're", "paragraphs": [ "para_339", "para_340", "para_341", "para_342", "para_343" ] }, { "title": "NDAA § 6102(d)(2)(A)(i), 134 Stat. at 4552-53. Freeman points out", "paragraphs": [ "para_345", "para_346", "para_347", "para_348", "para_349", "para_350", "para_351", "para_352", "para_353" ] }, { "title": "An attentive reader may now be wondering what any of", "paragraphs": [ "para_355", "para_356", "para_357", "para_358", "para_359" ] }, { "title": "5330's effective definition of \"money transmitting business\"", "paragraphs": [ "para_361", "para_362", "para_363", "para_364", "para_365", "para_366", "para_367", "para_368", "para_369", "para_370", "para_371", "para_372" ] }, { "title": "9 Section 1960 had not been amended since Freeman's offending", "paragraphs": [ "para_374", "para_375" ] }, { "title": "Violence Against Women and Department of Justice Reauthorization", "paragraphs": [ "para_377", "para_378", "para_379", "para_380", "para_381", "para_382", "para_383", "para_384", "para_385", "para_386", "para_387", "para_388", "para_389" ] }, { "title": "Section 5330(d)(1) covers virtual currencies) fails under the", "paragraphs": [ "para_391", "para_392" ] }, { "title": "Ultimately then, Freeman's appeal poses the following", "paragraphs": [ "para_394", "para_395", "para_396", "para_397", "para_398", "para_399", "para_400", "para_401" ] }, { "title": "U.S. at 721 (citation and quotation marks omitted). Because this", "paragraphs": [ "para_403", "para_404", "para_405", "para_406" ] }, { "title": "Traditional Plain Meaning Analysis", "paragraphs": [] }, { "title": "We start by analyzing Sections 1960 and 5330 without", "paragraphs": [ "para_409", "para_410" ] }, { "title": "Providence v. Barr, 954 F.3d 23, 31 (1st Cir. 2020). Our usual", "paragraphs": [ "para_412" ] }, { "title": "Id. \"[W]e interpret a statute's words based on their plain and", "paragraphs": [ "para_414", "para_415", "para_416" ] }, { "title": "Ct. 425 (2024); City of Providence, 954 F.3d at 31 (\"When Congress", "paragraphs": [ "para_418", "para_419" ] }, { "title": "In this case, the parties ask us to define a specific", "paragraphs": [ "para_421", "para_422", "para_423", "para_424", "para_425" ] }, { "title": "10 The parties analyze the meaning of the word \"funds\" under", "paragraphs": [ "para_427", "para_428", "para_429", "para_430" ] }, { "title": "Supp. 3d 698, 707 (S.D.N.Y. 2016) (quoting Webster's Third New", "paragraphs": [ "para_432" ] }, { "title": "Faiella, 39 F. Supp. 3d 544, 545 (S.D.N.Y. 2014) (citing Merriam", "paragraphs": [] }, { "title": "Webster Online). Premised on this definition, with which the", "paragraphs": [ "para_435", "para_436" ] }, { "title": "5330 therefore capture businesses that sell bitcoin to customers", "paragraphs": [ "para_438", "para_439" ] }, { "title": "Feb. 1, 2019) (concluding that bitcoin transactions constitute", "paragraphs": [ "para_441", "para_442", "para_443" ] }, { "title": "3d at 707-11, 714 (concluding that bitcoin are funds within the", "paragraphs": [ "para_445", "para_446", "para_447", "para_448", "para_449" ] }, { "title": "209 F. Supp. 3d at 707; see also United States v. Iossifov, 45", "paragraphs": [] }, { "title": "F.4th 899, 913-14 (6th Cir. 2022) (concluding that bitcoin is a", "paragraphs": [] }, { "title": "11 For instance, the evidence at trial showed that the bar", "paragraphs": [ "para_453", "para_454", "para_455", "para_456", "para_457" ] }, { "title": "States v. Harmon, 474 F. Supp. 3d 76, 88-94, 100-09 (D.D.C. 2020)", "paragraphs": [] }, { "title": "(concluding that for similar reasons bitcoin is \"money\" within the", "paragraphs": [ "para_460", "para_461", "para_462", "para_463", "para_464" ] }, { "title": "Within our ordinary interpretive framework, our inquiry", "paragraphs": [ "para_466", "para_467", "para_468", "para_469" ] }, { "title": "Cir. 2021); City of Providence, 954 F.3d at 31-32 (\"Other tools of", "paragraphs": [ "para_471", "para_472", "para_473", "para_474", "para_475" ] }, { "title": "Freeman insists that we cannot stop here because his is \"an", "paragraphs": [ "para_477", "para_478", "para_479", "para_480", "para_481", "para_482", "para_483", "para_484", "para_485" ] }, { "title": "Major Questions Doctrine", "paragraphs": [] }, { "title": "Before we delve into the details of the major questions", "paragraphs": [ "para_488", "para_489", "para_490", "para_491", "para_492" ] }, { "title": "FinCEN guidance\" and as such, the major questions doctrine \"is not", "paragraphs": [ "para_494", "para_495" ] }, { "title": "As our preface noted, the \"major questions doctrine\" can", "paragraphs": [ "para_497", "para_498", "para_499" ] }, { "title": "597 U.S. at 721. Here, Freeman's argument centers on the effective", "paragraphs": [ "para_501" ] }, { "title": "That statutory definition governs the scope of what businesses are", "paragraphs": [ "para_503", "para_504", "para_505" ] }, { "title": "Section 1960(b)(1)(B) for failure to comply with that registration", "paragraphs": [ "para_507" ] }, { "title": "2015 WL 5602853, at *9 (S.D.N.Y. Sept. 23, 2015) (\"[C]riminal", "paragraphs": [ "para_509", "para_510", "para_511", "para_512", "para_513", "para_514" ] }, { "title": "Ratzlaf v. United States, 510 U.S. 135, 141-43 (1994) (explaining", "paragraphs": [ "para_516", "para_517", "para_518" ] }, { "title": "F.4th 267, 284 (1st Cir.) (concluding that \"proceeds\" has same", "paragraphs": [] }, { "title": "12 While summarizing the nature of Freeman's convictions in", "paragraphs": [ "para_521", "para_522", "para_523", "para_524", "para_525", "para_526", "para_527", "para_528" ] }, { "title": "The government does not argue, however, that we can ignore Section", "paragraphs": [] }, { "title": "5330 because the jury convicted Freeman under Section", "paragraphs": [] }, { "title": "1960(b)(1)(C), presumably because the verdict form did not ask the", "paragraphs": [ "para_532" ] }, { "title": "Even if the record could support such an argument, we would treat", "paragraphs": [ "para_534" ] }, { "title": "See Mass. Lobstermen's Ass'n v. Menashes, 127 F.4th 398, 403 n.2", "paragraphs": [ "para_536", "para_537", "para_538", "para_539" ] }, { "title": "This statutory scheme makes clear that the legislation's", "paragraphs": [ "para_541", "para_542", "para_543", "para_544", "para_545", "para_546", "para_547", "para_548", "para_549", "para_550", "para_551" ] }, { "title": "Section 5330(a)(2) appear to be that mechanism. And although the", "paragraphs": [ "para_553", "para_554" ] }, { "title": "All this to say, Freeman steps over the threshold of identifying", "paragraphs": [ "para_556", "para_557", "para_558" ] }, { "title": "13 We acknowledge that this is a somewhat unusual case for the", "paragraphs": [ "para_560", "para_561", "para_562" ] }, { "title": "Having explained the relationship between this case and", "paragraphs": [] }, { "title": "FinCEN's regulation of money transmitting businesses, we must now", "paragraphs": [ "para_565", "para_566", "para_567", "para_568", "para_569", "para_570", "para_571", "para_572", "para_573", "para_574", "para_575" ] }, { "title": "FinCEN's regulatory act. Nevertheless, the heart of this appeal", "paragraphs": [ "para_577" ] }, { "title": "Section 5330(d)(1), a definition that applies both to Sections", "paragraphs": [] }, { "title": "5330(a)(1) and (a)(2). Blinding ourselves (as the government", "paragraphs": [ "para_580" ] }, { "title": "5330(d)(1) impacts not only Freeman's criminal liability, but also", "paragraphs": [ "para_582", "para_583" ] }, { "title": "Fed. Bureau of Prisons, 552 U.S. 214, 222 (2008). Our sister", "paragraphs": [ "para_585", "para_586", "para_587", "para_588" ] }, { "title": "F.4th 532, 540 (7th Cir.) (considering major questions challenge", "paragraphs": [ "para_590", "para_591", "para_592" ] }, { "title": "(applying major questions doctrine in suit between environmental", "paragraphs": [ "para_594", "para_595", "para_596" ] }, { "title": "Grp., 573 U.S. at 324). In basic terms, the major questions", "paragraphs": [ "para_598", "para_599", "para_600", "para_601" ] }, { "title": "(Barrett, J., concurring) (analogizing major questions doctrine to", "paragraphs": [ "para_603", "para_604", "para_605" ] }, { "title": "What, then, makes for an extraordinary case? The Supreme", "paragraphs": [] }, { "title": "Court defines it in broad strokes as one \"in which the 'history", "paragraphs": [ "para_608", "para_609", "para_610", "para_611" ] }, { "title": "(quoting Brown & Williamson, 529 U.S. at 159-60). Within this", "paragraphs": [ "para_613", "para_614", "para_615", "para_616" ] }, { "title": "14 Our circuit has addressed the major questions doctrine only", "paragraphs": [ "para_618" ] }, { "title": "See Hornof v. United States, 107 F.4th 46, 59 n.14 (2024) (noting", "paragraphs": [ "para_620" ] }, { "title": "N.C. Coastal Fisheries, 76 F.4th at 297 (recognizing that doctrine", "paragraphs": [ "para_622", "para_623", "para_624", "para_625", "para_626", "para_627", "para_628" ] }, { "title": "707, 725-28 (10th Cir. 2024) (rejecting application of major", "paragraphs": [ "para_630", "para_631", "para_632", "para_633", "para_634" ] }, { "title": "(citation modified)), cert. denied, 145 S. Ct. 1047 (2025). Our", "paragraphs": [ "para_636", "para_637", "para_638", "para_639" ] }, { "title": "Supreme Court, starting with \"the history and the breadth\" of", "paragraphs": [] }, { "title": "FinCEN's assertion of authority and follow that with addressing", "paragraphs": [ "para_642", "para_643", "para_644", "para_645" ] }, { "title": "U.S. at 721; see Nebraska v. Su, 121 F.4th 1, 14 (9th Cir. 2024)", "paragraphs": [ "para_647" ] }, { "title": "History and Breadth of FinCEN's Assertion", "paragraphs": [] }, { "title": "History", "paragraphs": [] }, { "title": "To understand the \"history and breadth\" of FinCEN's", "paragraphs": [ "para_651", "para_652", "para_653", "para_654" ] }, { "title": "Department. Riegle Community Development and Regulatory", "paragraphs": [ "para_656" ] }, { "title": "2249-51 (1994) (codified at 31 U.S.C. § 5330). In the wake of the", "paragraphs": [] }, { "title": "September 11, 2001 terrorist attacks, Congress that year amended", "paragraphs": [] }, { "title": "15 In so doing, we acknowledge that the major questions", "paragraphs": [ "para_660", "para_661", "para_662", "para_663", "para_664", "para_665", "para_666", "para_667", "para_668", "para_669" ] }, { "title": "16 Our focus is on the legislative history of Section 5330", "paragraphs": [ "para_671", "para_672", "para_673" ] }, { "title": "Section 1960, which focuses on the circumstances of criminal", "paragraphs": [ "para_675", "para_676", "para_677", "para_678", "para_679", "para_680", "para_681", "para_682", "para_683" ] }, { "title": "Stat. at 328 (emphases added). According to the report of the", "paragraphs": [] }, { "title": "Committee on Financial Services, the amendment did not expand the", "paragraphs": [ "para_686", "para_687", "para_688", "para_689", "para_690", "para_691" ] }, { "title": "This was the effective version of Section 5330 when", "paragraphs": [ "para_693" ] }, { "title": "Freeman's telling though, FinCEN's first step towards the", "paragraphs": [ "para_695", "para_696", "para_697", "para_698" ] }, { "title": "Regulations; Definitions and Other Regulations Relating to Money", "paragraphs": [] }, { "title": "Services Businesses, 76 Fed. Reg. 43585, 43596 (July 21, 2011)", "paragraphs": [ "para_701" ] }, { "title": "(codified at 31 C.F.R. § 1010.100(ff)(5)) (emphasis added). Such", "paragraphs": [ "para_703", "para_704", "para_705" ] }, { "title": "Specifically, the guidance said, \"[t]he definition of a money", "paragraphs": [ "para_707", "para_708", "para_709", "para_710" ] }, { "title": "Secrecy Act].\"17 FinCEN, FIN-2013-G001, Application of FinCEN's", "paragraphs": [] }, { "title": "Regulations to Persons Administering, Exchanging, or Using Virtual", "paragraphs": [] }, { "title": "Currencies, at 3 (2013). Freeman says the fact that FinCEN never", "paragraphs": [ "para_714", "para_715", "para_716" ] }, { "title": "17 FinCEN laid out precise definitions for \"real currency,\"", "paragraphs": [ "para_718", "para_719", "para_720", "para_721", "para_722", "para_723", "para_724", "para_725", "para_726", "para_727", "para_728", "para_729", "para_730", "para_731", "para_732", "para_733", "para_734", "para_735", "para_736" ] }, { "title": "Doing so lets us focus on the parties' key dispute: whether", "paragraphs": [] }, { "title": "FinCEN, nonetheless, had statutory authority to regulate virtual", "paragraphs": [ "para_739" ] }, { "title": "Freeman would like us to conclude it \"inconceivable\" (as", "paragraphs": [ "para_741", "para_742", "para_743", "para_744", "para_745", "para_746", "para_747", "para_748" ] }, { "title": "18 Freeman takes the view that FinCEN did not begin regulating", "paragraphs": [ "para_750", "para_751", "para_752", "para_753", "para_754", "para_755", "para_756", "para_757", "para_758", "para_759", "para_760", "para_761", "para_762" ] }, { "title": "But we find this to be a strained reading of the Committee Report", "paragraphs": [ "para_764" ] }, { "title": "Congress was more generally concerned about \"underground black", "paragraphs": [ "para_766", "para_767", "para_768", "para_769", "para_770", "para_771", "para_772", "para_773", "para_774" ] }, { "title": "19 According to the findings of the House Committee on", "paragraphs": [] }, { "title": "Financial Services, \"hawala\" is the word for an \"ancient South", "paragraphs": [] }, { "title": "Asian money exchange system\" which \"consists of an international", "paragraphs": [ "para_778", "para_779", "para_780", "para_781", "para_782", "para_783", "para_784", "para_785", "para_786", "para_787", "para_788", "para_789" ] }, { "title": "Report gives us no reason to think that a non-bank system allowing", "paragraphs": [ "para_791", "para_792", "para_793" ] }, { "title": "And even if we adopted Freeman's approach and looked at", "paragraphs": [ "para_795", "para_796", "para_797", "para_798", "para_799" ] }, { "title": "F. Supp. 2d 82, 85, 94-97 (D.D.C. 2008) (concluding that Section", "paragraphs": [] }, { "title": "5330's definition of money transmitting business included internet", "paragraphs": [ "para_802", "para_803" ] }, { "title": "20 We are mindful, as Freeman points out, that the virtual", "paragraphs": [ "para_805" ] }, { "title": "See 550 F. Supp. 2d at 85; FIN-2013-G001, at 3 & n.13 (describing", "paragraphs": [ "para_807", "para_808", "para_809", "para_810", "para_811", "para_812", "para_813", "para_814", "para_815", "para_816", "para_817", "para_818", "para_819", "para_820" ] }, { "title": "597 U.S. at 710-11, 713, 724 (striking regulation requiring", "paragraphs": [ "para_822", "para_823", "para_824", "para_825", "para_826" ] }, { "title": "(or any other type of \"informal transfer banking system\") prior to", "paragraphs": [ "para_828", "para_829" ] }, { "title": "Drug Administration's (\"FDA\") decades-long position that it had no", "paragraphs": [ "para_831", "para_832", "para_833", "para_834", "para_835", "para_836", "para_837", "para_838", "para_839", "para_840", "para_841", "para_842" ] }, { "title": "And simply because FinCEN declined to exercise such", "paragraphs": [ "para_844", "para_845", "para_846", "para_847", "para_848" ] }, { "title": "(and thus the need for targeted regulation) may not have been", "paragraphs": [ "para_850" ] }, { "title": "Tactical, LLC v. Rhode Island, 95 F.4th 38, 50 (1st Cir. 2024)", "paragraphs": [] }, { "title": "(\"Law advances more slowly than the technology it regulates, but", "paragraphs": [ "para_853", "para_854", "para_855", "para_856", "para_857", "para_858", "para_859", "para_860" ] }, { "title": "21 In fact, FinCEN proposed the addition of the phrase \"value", "paragraphs": [ "para_862", "para_863" ] }, { "title": "Regulations-Definitions and Other Regulations Relating to Money", "paragraphs": [] }, { "title": "Services Businesses, 74 Fed. Reg. 22129, 22137, 22142 (proposed", "paragraphs": [ "para_866", "para_867" ] }, { "title": "(explaining that 1944 statutory provision had \"rarely been", "paragraphs": [ "para_869", "para_870", "para_871", "para_872", "para_873", "para_874" ] }, { "title": "Freeman's own brief indicates that the market capitalization of", "paragraphs": [ "para_876", "para_877", "para_878", "para_879", "para_880" ] }, { "title": "Unable to find a firm foothold in the history leading up", "paragraphs": [ "para_882", "para_883", "para_884", "para_885", "para_886", "para_887", "para_888" ] }, { "title": "Weinberger, 513 F.2d 835, 837 n.2 (1st Cir. 1975); see also", "paragraphs": [] }, { "title": "Bruesewitz v. Wyeth LLC, 562 U.S. 223, 242 (2011) (\"Post-enactment", "paragraphs": [ "para_891", "para_892", "para_893" ] }, { "title": "626–27 (2004) (\"[W]e have said repeatedly that subsequent", "paragraphs": [ "para_895", "para_896", "para_897", "para_898", "para_899", "para_900" ] }, { "title": "But as best we can glean, he believes that certain events post-", "paragraphs": [ "para_902", "para_903" ] }, { "title": "First, Freeman discusses subsequent legislative activity", "paragraphs": [ "para_905", "para_906", "para_907", "para_908", "para_909", "para_910", "para_911", "para_912", "para_913", "para_914", "para_915", "para_916", "para_917", "para_918" ] }, { "title": "See Util. Air Regul. Grp., 573 U.S. at 321 (explaining that \"EPA", "paragraphs": [ "para_920", "para_921" ] }, { "title": "Brown & Williamson, 529 U.S. at 144 (explaining that \"Congress", "paragraphs": [ "para_923", "para_924", "para_925", "para_926", "para_927", "para_928", "para_929" ] }, { "title": "U.S. at 626–27. That said, despite our skepticism, in the absence", "paragraphs": [ "para_931", "para_932", "para_933", "para_934", "para_935" ] }, { "title": "22 In some instances, the Court's major questions cases have", "paragraphs": [ "para_937", "para_938", "para_939", "para_940", "para_941", "para_942", "para_943", "para_944", "para_945", "para_946" ] }, { "title": "In our view, the subsequent history only confirms that", "paragraphs": [] }, { "title": "FinCEN's interpretation of the breadth of its authority to regulate", "paragraphs": [ "para_949" ] }, { "title": "Congress revisits a statute giving rise to a longstanding", "paragraphs": [ "para_951", "para_952", "para_953", "para_954", "para_955" ] }, { "title": "(concluding that deference to agency's interpretation was", "paragraphs": [ "para_957", "para_958", "para_959", "para_960", "para_961", "para_962", "para_963", "para_964", "para_965" ] }, { "title": "Inc. v. Herman, 146 F.3d 12, 20 (1st Cir. 1998); Strickland, 96", "paragraphs": [] }, { "title": "F.3d at 547. We think it applies with even more force when, as", "paragraphs": [ "para_968", "para_969", "para_970", "para_971" ] }, { "title": "SEC, 666 F.3d 1322, 1326 (D.C. Cir. 2011) (upholding SEC's", "paragraphs": [ "para_973", "para_974" ] }, { "title": "Affs. v. Inclusive Communities Project, Inc., 576 U.S. 519, 537-38", "paragraphs": [] }, { "title": "(2015) (explaining that Congress \"presupposed\" the existence of", "paragraphs": [ "para_977", "para_978", "para_979" ] }, { "title": "In the years following FinCEN's issuance of the 2013", "paragraphs": [ "para_981", "para_982", "para_983" ] }, { "title": "Virtual Currency and the Law Enforcement Response: Hearing Before", "paragraphs": [ "para_985", "para_986" ] }, { "title": "FinCEN Enf't Division) (testifying that \"value that substitutes", "paragraphs": [ "para_988", "para_989" ] }, { "title": "Virtual Currency: Joint Hearing Before the Subcomm. on Econ. Pol'y", "paragraphs": [ "para_991", "para_992" ] }, { "title": "(statement of Jennifer Shasky Calvery, Director, FinCEN)", "paragraphs": [] }, { "title": "(testifying that FinCEN was \"able to cover [virtual currency] under", "paragraphs": [ "para_995", "para_996", "para_997", "para_998", "para_999", "para_1000", "para_1001", "para_1002" ] }, { "title": "Finance: Regulator and Law Enforcement Perspective on Reform:", "paragraphs": [ "para_1004", "para_1005" ] }, { "title": "Director, FinCEN). As we previewed earlier, Congress subsequently", "paragraphs": [ "para_1007", "para_1008", "para_1009", "para_1010", "para_1011", "para_1012", "para_1013" ] }, { "title": "Freeman takes an alternative view of the same sequence", "paragraphs": [ "para_1015", "para_1016" ] }, { "title": "FinCEN's earlier reading. This view relies on a principle of", "paragraphs": [ "para_1018", "para_1019" ] }, { "title": "Providence, 954 F.3d at 43. (We usually call this principle the", "paragraphs": [ "para_1021", "para_1022", "para_1023", "para_1024", "para_1025", "para_1026", "para_1027" ] }, { "title": "NDAA § 6102(a) 134 Stat. at 4552, we should presume that the", "paragraphs": [ "para_1029" ] }, { "title": "But we have previously warned that the canon against", "paragraphs": [ "para_1031", "para_1032", "para_1033", "para_1034", "para_1035", "para_1036", "para_1037" ] }, { "title": "2021 amendment, NDAA § 6102(a), 134 Stat. at 4552, supports reading", "paragraphs": [ "para_1039", "para_1040", "para_1041", "para_1042" ] }, { "title": "4552 (explaining that FinCEN should \"mak[e] sure that steps to", "paragraphs": [ "para_1044", "para_1045", "para_1046" ] }, { "title": "McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 592 (2010)", "paragraphs": [] }, { "title": "(explaining that \"Congress may simply have intended to codify", "paragraphs": [ "para_1049", "para_1050", "para_1051" ] }, { "title": "And it's worth noting that Congress also has a history", "paragraphs": [ "para_1053", "para_1054", "para_1055", "para_1056", "para_1057", "para_1058", "para_1059", "para_1060", "para_1061", "para_1062" ] }, { "title": "742 (2025) (\"[S]ometimes the better overall reading of the statute", "paragraphs": [ "para_1064", "para_1065" ] }, { "title": "Freeman nevertheless insists that \"Congress struggled", "paragraphs": [ "para_1067", "para_1068", "para_1069", "para_1070", "para_1071" ] }, { "title": "To begin with, the legislative record simply doesn't show the sort", "paragraphs": [ "para_1073", "para_1074" ] }, { "title": "2018 and 2019, two bills that passed in the House of", "paragraphs": [ "para_1076" ] }, { "title": "(2018); H.R. 1414, 116th Cong. (2019). In relevant portion, these", "paragraphs": [ "para_1078", "para_1079", "para_1080", "para_1081", "para_1082" ] }, { "title": "H.R. 6411, § 3; H.R. 1414, § 3. But those bills did not address", "paragraphs": [ "para_1084", "para_1085" ] }, { "title": "Information Tracking of Criminal Activity in Shell Holdings Act", "paragraphs": [] }, { "title": "(\"ILLICIT Cash Act\"), S. 2563 § 308, 116th Cong. (2019), which", "paragraphs": [ "para_1088", "para_1089" ] }, { "title": "Freeman emphasizes that this bill \"failed to even make it out of", "paragraphs": [ "para_1091", "para_1092", "para_1093", "para_1094", "para_1095", "para_1096", "para_1097" ] }, { "title": "In a major questions case, an agency's assertion that it", "paragraphs": [ "para_1099", "para_1100", "para_1101", "para_1102", "para_1103", "para_1104", "para_1105" ] }, { "title": "Congress had not\" by imposing administrative eviction moratorium", "paragraphs": [ "para_1107" ] }, { "title": "But what we've chronicled as per Freeman's argument is hardly the", "paragraphs": [ "para_1109", "para_1110", "para_1111", "para_1112" ] }, { "title": "Instead, the bills that Freeman identifies were all introduced", "paragraphs": [ "para_1114", "para_1115", "para_1116", "para_1117", "para_1118", "para_1119", "para_1120" ] }, { "title": "Stat. at 4552-53; ILLICIT Cash Act S. 2563 § 308. None of the", "paragraphs": [] }, { "title": "Supreme Court's major questions cases have overturned agency", "paragraphs": [ "para_1123", "para_1124" ] }, { "title": "Finally, Freeman claims that \"FinCEN admitted that it", "paragraphs": [ "para_1126", "para_1127", "para_1128", "para_1129", "para_1130", "para_1131" ] }, { "title": "23 The Supreme Court came closest to doing so in Alabama", "paragraphs": [] }, { "title": "Association of Realtors, 594 U.S. 758. That case involved a", "paragraphs": [ "para_1134", "para_1135" ] }, { "title": "Id. at 760. When the CDC's administrative moratorium was set to", "paragraphs": [ "para_1137", "para_1138", "para_1139", "para_1140", "para_1141", "para_1142" ] }, { "title": "Congress's subsequent legislative activity (and inactivity)", "paragraphs": [ "para_1144" ] }, { "title": "Id. at 764-65. In any event, Congress's one-month extension of", "paragraphs": [ "para_1146", "para_1147", "para_1148", "para_1149", "para_1150", "para_1151", "para_1152", "para_1153", "para_1154", "para_1155", "para_1156", "para_1157" ] }, { "title": "(\"EPA itself has repeatedly acknowledged that applying the PSD and", "paragraphs": [] }, { "title": "Title V permitting requirements to greenhouse gases would be", "paragraphs": [ "para_1160", "para_1161", "para_1162" ] }, { "title": "But we see no such history of disclaimer here. The supposed agency", "paragraphs": [ "para_1164", "para_1165", "para_1166" ] }, { "title": "Context: Breaking Down the Illicit Activity in Digital Assets:", "paragraphs": [] }, { "title": "Hearing Before the Subcomm. on Digit. Assets, Fin. Tech. and", "paragraphs": [] }, { "title": "Inclusion of the H. Comm. on Fin. Servs., 118th Cong. (2023)", "paragraphs": [] }, { "title": "(witness statement of Jane Khodarkovsky, Former Trial Att'y and", "paragraphs": [] }, { "title": "Hum. Trafficking Fin. Specialist, Dep't of Justice) (no official", "paragraphs": [ "para_1172" ] }, { "title": "11 of written witness statement), https://perma.cc/7RBZ-CPWX", "paragraphs": [ "para_1174" ] }, { "title": "9, 25 (statement of Thomas Ott, Associate Director, FinCEN Enf't", "paragraphs": [] }, { "title": "Division); S. Hrg. 113-210, supra, at 5, 36 (statement of Jennifer", "paragraphs": [] }, { "title": "Shasky Calvery, Director, FinCEN); FinCEN, Prepared Remarks of", "paragraphs": [] }, { "title": "FinCEN Acting Dir. Him Das Delivered Virtually at the American", "paragraphs": [] }, { "title": "Bankers Association/ American Bar Association Financial Crimes", "paragraphs": [] }, { "title": "Enforcement Conference (Jan. 13, 2022), https://perma.cc/JXQ9-", "paragraphs": [ "para_1181" ] }, { "title": "BLNR. In Freeman's telling, these statements acknowledge that", "paragraphs": [] }, { "title": "FinCEN lacked statutory authorization to regulate virtual", "paragraphs": [ "para_1184" ] }, { "title": "As an initial matter, we note that Freeman's argument", "paragraphs": [ "para_1186", "para_1187" ] }, { "title": "That is so because each of the statements Freeman references", "paragraphs": [ "para_1189", "para_1190", "para_1191", "para_1192", "para_1193" ] }, { "title": "Most of these statements express FinCEN's concerns that virtual", "paragraphs": [ "para_1195", "para_1196", "para_1197", "para_1198" ] }, { "title": "See, e.g., S. Hrg. 113-210, supra, at 5, 36 (warning that virtual", "paragraphs": [ "para_1200", "para_1201", "para_1202", "para_1203", "para_1204", "para_1205", "para_1206", "para_1207" ] }, { "title": "Thomas Ott, Associate Director, FinCEN Enf't Division) (recounting", "paragraphs": [ "para_1209", "para_1210", "para_1211", "para_1212" ] }, { "title": "United States\"); Das, supra (\"[W]e need a regulatory regime to", "paragraphs": [ "para_1214", "para_1215", "para_1216", "para_1217", "para_1218", "para_1219", "para_1220", "para_1221" ] }, { "title": "Freeman also latches onto the following sentence from a", "paragraphs": [] }, { "title": "2019 guidance document issued by FinCEN stating, \"The term 'other", "paragraphs": [] }, { "title": "24 Freeman also claims that \"[a] former acting director of", "paragraphs": [] }, { "title": "FinCEN, Himamauli Das, stated that the 2021 updates to the Patriot", "paragraphs": [] }, { "title": "Act, including the amendment to § 5330, were necessary because the", "paragraphs": [] }, { "title": "2001 law 'never anticipated the challenges of the 2020s: digital", "paragraphs": [ "para_1228" ] }, { "title": "(quoting Das, supra). But of course, Congress did not need to", "paragraphs": [ "para_1230", "para_1231" ] }, { "title": "Bostock, 590 U.S. at 683. Nor does a high-level remark on the", "paragraphs": [ "para_1233", "para_1234", "para_1235", "para_1236", "para_1237", "para_1238", "para_1239", "para_1240", "para_1241" ] }, { "title": "Business Models Involving Convertible Virtual Currencies, FIN-", "paragraphs": [] }, { "title": "2019-G001, at 4 (2019).25 According to Freeman, this sentence", "paragraphs": [ "para_1244", "para_1245", "para_1246", "para_1247", "para_1248", "para_1249", "para_1250", "para_1251" ] }, { "title": "(referring to \"funds\" held in virtual currency wallets and \"funds\"", "paragraphs": [ "para_1253", "para_1254", "para_1255", "para_1256", "para_1257" ] }, { "title": "25 Freeman's brief incorrectly identifies the source of this", "paragraphs": [ "para_1259", "para_1260", "para_1261" ] }, { "title": "Breadth", "paragraphs": [] }, { "title": "With the relevant history in mind, we examine the breadth", "paragraphs": [ "para_1264", "para_1265", "para_1266" ] }, { "title": "See West Virginia, 597 U.S. at 721. To begin, we do not buy", "paragraphs": [] }, { "title": "Freeman's argument that FinCEN \"claim[ed] to discover in a long-", "paragraphs": [ "para_1269" ] }, { "title": "U.S. at 324. In requiring virtual currency transmitters to", "paragraphs": [ "para_1271", "para_1272" ] }, { "title": "(citations omitted) (explaining that EPA had never before", "paragraphs": [ "para_1274", "para_1275", "para_1276", "para_1277", "para_1278", "para_1279", "para_1280" ] }, { "title": "103-325 § 408, 108 Stat. 2160, 2249-51 (1994) (codified at 31", "paragraphs": [] }, { "title": "U.S.C. § 5330). All it did in 2013 was explicitly specify that", "paragraphs": [ "para_1283", "para_1284", "para_1285", "para_1286", "para_1287", "para_1288", "para_1289" ] }, { "title": "Missouri, 595 U.S. 87, 90-91, 94 (2022) (holding that Secretary of", "paragraphs": [] }, { "title": "Health and Human Services did not exceed statutory authority in", "paragraphs": [ "para_1292", "para_1293", "para_1294", "para_1295" ] }, { "title": "600 U.S. at 501 (reversing program by Secretary of Education to", "paragraphs": [ "para_1297", "para_1298", "para_1299", "para_1300" ] }, { "title": "765 (concluding that CDC could not impose eviction moratorium in", "paragraphs": [ "para_1302", "para_1303", "para_1304", "para_1305" ] }, { "title": "Nor in challenging FinCEN's breadth of reach does", "paragraphs": [] }, { "title": "Freeman attempt to argue that FinCEN's exercise of regulatory", "paragraphs": [ "para_1308", "para_1309" ] }, { "title": "595 U.S. 109, 117-18 (2022) (explaining that a \"broad public health", "paragraphs": [ "para_1311", "para_1312", "para_1313" ] }, { "title": "FinCEN's enumerated statutory duties and powers specifically", "paragraphs": [ "para_1315", "para_1316", "para_1317", "para_1318" ] }, { "title": "See 31 U.S.C. 310(b)(2)(C)(v), (b)(2)(M)-(N); cf. Missouri, 595", "paragraphs": [] }, { "title": "U.S. at 93 (affirming vaccine mandate for healthcare workers", "paragraphs": [ "para_1321", "para_1322", "para_1323" ] }, { "title": "Ultimately, and in the absence of facts suggesting", "paragraphs": [] }, { "title": "FinCEN tried to wield unheralded power, or regulate in an area", "paragraphs": [ "para_1326", "para_1327", "para_1328" ] }, { "title": "But there is nothing compelling about this timing-of-events", "paragraphs": [ "para_1330", "para_1331", "para_1332", "para_1333", "para_1334", "para_1335", "para_1336", "para_1337" ] }, { "title": "(certifying questions related to whether a child conceived via in", "paragraphs": [ "para_1339", "para_1340" ] }, { "title": "Security Act and Florida law), certified question answered, 385", "paragraphs": [] }, { "title": "So. 3d 587 (Fla. 2024); Application of Sarkar, 588 F.2d 1330, 1333", "paragraphs": [] }, { "title": "(C.C.P.A. 1978) (\"Congress cannot be expected to foresee, or to", "paragraphs": [ "para_1344", "para_1345", "para_1346", "para_1347", "para_1348" ] }, { "title": "The only case Freeman cites in support of his timing", "paragraphs": [ "para_1350" ] }, { "title": "595 U.S. at 114-19. According to Freeman, the Supreme Court", "paragraphs": [ "para_1352" ] }, { "title": "Administration's (\"OSHA\") \"attempt to impose a COVID vaccine", "paragraphs": [ "para_1354", "para_1355", "para_1356", "para_1357", "para_1358" ] }, { "title": "Health Act in 1970. See id. at 114. Instead, the Court's focus", "paragraphs": [ "para_1360", "para_1361", "para_1362", "para_1363" ] }, { "title": "(\"OSHA, in its half century of existence, has never before adopted", "paragraphs": [ "para_1365", "para_1366", "para_1367", "para_1368" ] }, { "title": "FinCEN decided to regulate materials used to manufacture illegal", "paragraphs": [ "para_1370", "para_1371", "para_1372", "para_1373", "para_1374", "para_1375", "para_1376" ] }, { "title": "That simply is not what National Federation is about, and there is", "paragraphs": [ "para_1378", "para_1379" ] }, { "title": "Put differently, under Freeman's characterization of", "paragraphs": [] }, { "title": "National Federation, the major questions doctrine would apply any", "paragraphs": [ "para_1382", "para_1383", "para_1384", "para_1385", "para_1386", "para_1387", "para_1388", "para_1389", "para_1390" ] }, { "title": "Political and Economic Significance", "paragraphs": [] }, { "title": "Political Significance", "paragraphs": [] }, { "title": "Freeman asserts that virtual currencies have \"provoked", "paragraphs": [ "para_1394", "para_1395", "para_1396", "para_1397" ] }, { "title": "(which we've just explained only shows Congress's approval of", "paragraphs": [] }, { "title": "FinCEN's regulation of virtual currencies) rather than on any", "paragraphs": [ "para_1400", "para_1401" ] }, { "title": "To his nebulous \"provoked much political debate\" political", "paragraphs": [ "para_1403", "para_1404", "para_1405", "para_1406", "para_1407", "para_1408", "para_1409" ] }, { "title": "Tosi, 897 F.3d 12, 15 (1st Cir. 2018) (\"[A]rguments available at", "paragraphs": [ "para_1411", "para_1412", "para_1413", "para_1414", "para_1415", "para_1416" ] }, { "title": "Telegraphs, Steamships, and Virtual Currency: An Analysis of Money", "paragraphs": [] }, { "title": "Transmitter Regulation 1 n.1 (2020). That federal and state anti-", "paragraphs": [ "para_1419", "para_1420", "para_1421", "para_1422", "para_1423", "para_1424", "para_1425" ] }, { "title": "26 Freeman claims that this argument properly responds to the", "paragraphs": [ "para_1427", "para_1428", "para_1429" ] }, { "title": "F.3d 20, 27 (1st Cir. 1999) (\"Reply briefs are to counter the", "paragraphs": [ "para_1431", "para_1432", "para_1433", "para_1434", "para_1435", "para_1436", "para_1437", "para_1438", "para_1439", "para_1440" ] }, { "title": "Economic Significance", "paragraphs": [] }, { "title": "Freeman puts some more elbow grease into his argument", "paragraphs": [ "para_1443", "para_1444" ] }, { "title": "According to Freemans's sources, the overall market capitalization", "paragraphs": [ "para_1446", "para_1447", "para_1448", "para_1449", "para_1450", "para_1451", "para_1452", "para_1453", "para_1454" ] }, { "title": "For instance, in applying the major questions doctrine to a", "paragraphs": [] }, { "title": "Department of Education attempt to cancel student debt, the Supreme", "paragraphs": [] }, { "title": "Court did not cite to the total amount of outstanding student loan", "paragraphs": [ "para_1458", "para_1459" ] }, { "title": "Nebraska, 600 U.S. at 496, 502 (emphasizing cancellation of $430", "paragraphs": [ "para_1461", "para_1462", "para_1463" ] }, { "title": "Similarly, in cases holding that the Environmental Protection", "paragraphs": [] }, { "title": "Agency had exceeded its statutory authority, the Court's focus was", "paragraphs": [ "para_1466" ] }, { "title": "West Virginia, 597 U.S. at 714 (emphasizing that \"EPA's own", "paragraphs": [ "para_1468", "para_1469" ] }, { "title": "(describing growth in administrative and permitting costs that", "paragraphs": [ "para_1471" ] }, { "title": "As the district court recognized below (and the", "paragraphs": [ "para_1473", "para_1474", "para_1475", "para_1476" ] }, { "title": "(explaining that a \"user who obtains convertible virtual currency", "paragraphs": [ "para_1478", "para_1479", "para_1480", "para_1481" ] }, { "title": "27 This opinion focuses on the registration requirement under", "paragraphs": [] }, { "title": "Section 5330 and does not address other aspects of compliance for", "paragraphs": [ "para_1484" ] }, { "title": "FIN-2013-G001, at 2. This is because neither party has developed", "paragraphs": [ "para_1486", "para_1487", "para_1488", "para_1489", "para_1490", "para_1491", "para_1492", "para_1493", "para_1494", "para_1495", "para_1496", "para_1497", "para_1498" ] }, { "title": "FinCEN's regulation placed no meaningful economic burden on the", "paragraphs": [ "para_1500" ] }, { "title": "Second, it seems rather puzzling for Freeman to argue to", "paragraphs": [ "para_1502", "para_1503", "para_1504", "para_1505", "para_1506" ] }, { "title": "(joined by Freeman), which asserted that the relevant data point", "paragraphs": [ "para_1508", "para_1509", "para_1510" ] }, { "title": "(explaining that \"we are generally reluctant to venture beyond the", "paragraphs": [ "para_1512", "para_1513", "para_1514", "para_1515", "para_1516" ] }, { "title": "Freeman intend to assert that a legal defense positing that", "paragraphs": [ "para_1518", "para_1519" ] }, { "title": "Clearly it would be absurd to hold that FinCEN's regulatory", "paragraphs": [ "para_1521", "para_1522", "para_1523", "para_1524", "para_1525" ] }, { "title": "597 U.S. at 714 (noting an estimate of compliance costs that would", "paragraphs": [ "para_1527", "para_1528" ] }, { "title": "Ass'n of Realtors, 594 U.S. at 764 (treating \"nearly $50 billion", "paragraphs": [ "para_1530", "para_1531", "para_1532" ] }, { "title": "Residential Evictions in Communities With Substantial or High", "paragraphs": [ "para_1534" ] }, { "title": "86 Fed. Reg. 43244, 43247 (Aug. 6, 2021))). According to the", "paragraphs": [ "para_1536", "para_1537", "para_1538", "para_1539", "para_1540", "para_1541", "para_1542", "para_1543", "para_1544", "para_1545" ] }, { "title": "Summing up, Freeman's appeal is chock-full of major-", "paragraphs": [ "para_1547", "para_1548", "para_1549", "para_1550", "para_1551", "para_1552", "para_1553", "para_1554" ] }, { "title": "(citation omitted). Because there is no major question, we need", "paragraphs": [ "para_1556", "para_1557", "para_1558", "para_1559" ] }, { "title": "28 That said, we have difficulty imagining how Congress could", "paragraphs": [ "para_1561", "para_1562", "para_1563", "para_1564", "para_1565" ] }, { "title": "Sufficiency of Tax Evasion Evidence", "paragraphs": [] }, { "title": "We turn now to Freeman's claim that the government", "paragraphs": [ "para_1568", "para_1569", "para_1570", "para_1571", "para_1572", "para_1573", "para_1574", "para_1575", "para_1576" ] }, { "title": "States v. Azubike, 564 F.3d 59, 64 (1st Cir. 2009) (citations", "paragraphs": [ "para_1578", "para_1579", "para_1580", "para_1581" ] }, { "title": "Soler-Montalvo, 44 F.4th at 7 (quoting United States v. Seary-", "paragraphs": [] }, { "title": "Colón, 997 F.3d 1, 11, 14 (1st Cir. 2021)). To sustain a tax", "paragraphs": [ "para_1584", "para_1585", "para_1586", "para_1587", "para_1588", "para_1589", "para_1590", "para_1591", "para_1592", "para_1593", "para_1594", "para_1595", "para_1596" ] }, { "title": "2005). Freeman claims that the government failed to carry its", "paragraphs": [ "para_1598" ] }, { "title": "The government can prove a tax deficiency exists by", "paragraphs": [ "para_1600", "para_1601", "para_1602" ] }, { "title": "747 F.2d 1172, 1174 (7th Cir. 1984)). To make its case here, the", "paragraphs": [ "para_1604" ] }, { "title": "(\"IRS\"), Colleen Ranahan, to testify. Ranahan testified that", "paragraphs": [ "para_1606", "para_1607", "para_1608", "para_1609", "para_1610", "para_1611", "para_1612", "para_1613", "para_1614", "para_1615", "para_1616", "para_1617", "para_1618", "para_1619", "para_1620" ] }, { "title": "Freeman had a tax deficiency from 2016-2019. See Hogan, 861 F.2d", "paragraphs": [ "para_1622" ] }, { "title": "(unpublished table decision) (affirming conviction based on", "paragraphs": [ "para_1624", "para_1625", "para_1626" ] }, { "title": "Freeman does not dispute Ranahan's method for", "paragraphs": [ "para_1628", "para_1629", "para_1630", "para_1631", "para_1632" ] }, { "title": "Ranahan's testimony. On cross-examination, Ranahan admitted that", "paragraphs": [ "para_1634", "para_1635", "para_1636", "para_1637" ] }, { "title": "29 Freeman also emphasizes that the IRS never sent him an", "paragraphs": [ "para_1639", "para_1640", "para_1641", "para_1642", "para_1643", "para_1644", "para_1645", "para_1646", "para_1647", "para_1648", "para_1649" ] }, { "title": "But the government was not required to disprove every", "paragraphs": [ "para_1651" ] }, { "title": "Soler-Montalvo, 44 F.4th at 7. Although the government bore the", "paragraphs": [ "para_1653", "para_1654", "para_1655", "para_1656", "para_1657" ] }, { "title": "United States, 377 F.2d 469, 473 (1st Cir. 1967); see also United", "paragraphs": [] }, { "title": "States v. Stayback, 212 F.2d 313, 317 (3d Cir. 1954); United States", "paragraphs": [ "para_1660" ] }, { "title": "States, 231 F.2d 928, 933 (9th Cir. 1956). Here, the government", "paragraphs": [ "para_1662", "para_1663" ] }, { "title": "Freeman the burden of producing evidence rebutting Ranahan's tax", "paragraphs": [ "para_1665", "para_1666", "para_1667" ] }, { "title": "States v. Davenport, 824 F.2d 1511, 1516–17 (7th Cir. 1987) (\"It", "paragraphs": [ "para_1669", "para_1670", "para_1671", "para_1672", "para_1673" ] }, { "title": "States, 211 F.2d 100, 103 (8th Cir. 1954) (explaining that", "paragraphs": [ "para_1675", "para_1676", "para_1677" ] }, { "title": "Another problem for Freeman is that taxpayers are not", "paragraphs": [ "para_1679", "para_1680", "para_1681", "para_1682", "para_1683", "para_1684", "para_1685", "para_1686" ] }, { "title": "2020) (concluding that taxpayer's \"arguments regarding itemized", "paragraphs": [ "para_1688", "para_1689", "para_1690", "para_1691", "para_1692", "para_1693", "para_1694" ] }, { "title": "As to willfulness, the government must prove that", "paragraphs": [] }, { "title": "Freeman voluntarily and intentionally violated a known legal duty", "paragraphs": [ "para_1697", "para_1698", "para_1699", "para_1700" ] }, { "title": "Id. (quoting Spies v. United States, 317 U.S. 492, 499 (1943))", "paragraphs": [] }, { "title": "(identifying defendant's \"employment of aliases and nominee", "paragraphs": [ "para_1703", "para_1704", "para_1705", "para_1706", "para_1707", "para_1708" ] }, { "title": "1999) (holding that \"[c]onsistent patterns of understatement", "paragraphs": [ "para_1710", "para_1711", "para_1712", "para_1713", "para_1714" ] }, { "title": "26-27 (first citing United States v. Greenlee, 517 F.2d 899, 903", "paragraphs": [] }, { "title": "(3d Cir. 1975); and then citing United States v. Bohrer, 807 F.2d", "paragraphs": [] }, { "title": "159, 162 (10th Cir. 1986)). Freeman is correct, of course, that", "paragraphs": [ "para_1718", "para_1719", "para_1720", "para_1721" ] }, { "title": "States v. McGill, 953 F.2d 10, 12 (1st Cir. 1992). Even so, the", "paragraphs": [ "para_1723", "para_1724", "para_1725", "para_1726" ] }, { "title": "65 (1st Cir. 2008) (citation omitted). This is because \"deliberate", "paragraphs": [ "para_1728", "para_1729" ] }, { "title": "We think the government presented sufficient evidence of", "paragraphs": [ "para_1731" ] }, { "title": "For a period of four years, Freeman earned a substantial amount of", "paragraphs": [ "para_1733" ] }, { "title": "He accepted large cash transactions by mail. And when customers", "paragraphs": [ "para_1735", "para_1736" ] }, { "title": "30 Our analysis that follows does not draw a fine line between", "paragraphs": [ "para_1738", "para_1739", "para_1740", "para_1741", "para_1742" ] }, { "title": "524 F.3d 71, 79 (1st Cir. 2008))). Freeman does not challenge the", "paragraphs": [ "para_1744", "para_1745", "para_1746", "para_1747", "para_1748", "para_1749", "para_1750", "para_1751", "para_1752" ] }, { "title": "And there was evidence that at least some of these churches were", "paragraphs": [ "para_1754", "para_1755" ] }, { "title": "The government also offered evidence suggesting that", "paragraphs": [ "para_1757" ] }, { "title": "Such an objection, however sincerely held, does not negate", "paragraphs": [ "para_1759" ] }, { "title": "Cir. 1992) (citing Cheek, 498 U.S. at 205). Freeman displayed a", "paragraphs": [ "para_1761", "para_1762", "para_1763" ] }, { "title": "31 For instance, one of Freeman's friends signed the formation", "paragraphs": [ "para_1765", "para_1766", "para_1767", "para_1768", "para_1769", "para_1770", "para_1771", "para_1772", "para_1773", "para_1774", "para_1775", "para_1776" ] }, { "title": "Freeman held \"$2.4 million in various liquid assets\" without", "paragraphs": [ "para_1778", "para_1779", "para_1780", "para_1781", "para_1782", "para_1783" ] }, { "title": "Combined with the evidence of concealment, the jury had sufficient", "paragraphs": [ "para_1785", "para_1786" ] }, { "title": "Of course, that is not to say that the government's", "paragraphs": [ "para_1788", "para_1789", "para_1790", "para_1791", "para_1792", "para_1793", "para_1794" ] }, { "title": "F.3d at 26. Freeman also cites to his own testimony that he held", "paragraphs": [ "para_1796", "para_1797" ] }, { "title": "Certainly, if the jury credited Freeman's testimony and determined", "paragraphs": [ "para_1799", "para_1800", "para_1801", "para_1802", "para_1803", "para_1804" ] }, { "title": "342 F.3d 6, 14 (1st Cir. 2003) (\"We are mindful that the jury's", "paragraphs": [ "para_1806", "para_1807", "para_1808", "para_1809", "para_1810", "para_1811", "para_1812" ] }, { "title": "See United States v. Tierney, 266 F.3d 37, 40 (1st Cir. 2001)", "paragraphs": [] }, { "title": "(explaining that appellate court does not \"second-guess\" the", "paragraphs": [ "para_1815", "para_1816" ] }, { "title": "(acknowledging that defendant could believe both that wages were", "paragraphs": [ "para_1818", "para_1819", "para_1820", "para_1821", "para_1822" ] }, { "title": "Street, 370 F. App'x 343, 345 (3d Cir. 2010) (\"The jury was free", "paragraphs": [ "para_1824", "para_1825", "para_1826", "para_1827", "para_1828", "para_1829" ] }, { "title": "Spillover Prejudice", "paragraphs": [] }, { "title": "In a final attack on his convictions, Freeman asserts", "paragraphs": [ "para_1832", "para_1833" ] }, { "title": "His theory is that \"the evidence admitted to prove [the money", "paragraphs": [ "para_1835", "para_1836", "para_1837" ] }, { "title": "See United States v. Correia, 55 F.4th 12, 36 (1st Cir. 2022)", "paragraphs": [] }, { "title": "(citation and quotation marks omitted). In previous cases, we've", "paragraphs": [ "para_1840", "para_1841" ] }, { "title": "60-61 (1st Cir. 2023). As the defendant, Freeman bears the burden", "paragraphs": [ "para_1843", "para_1844", "para_1845" ] }, { "title": "2021)). We review the district court's denial of a new trial on", "paragraphs": [ "para_1847" ] }, { "title": "Freeman argues, as he did below in his motion for a new", "paragraphs": [ "para_1849" ] }, { "title": "32 Freeman's brief asserts that his spillover prejudice", "paragraphs": [ "para_1851", "para_1852", "para_1853", "para_1854", "para_1855", "para_1856", "para_1857", "para_1858", "para_1859" ] }, { "title": "Freeman points to portions of the government's opening statement", "paragraphs": [ "para_1861", "para_1862", "para_1863", "para_1864", "para_1865", "para_1866", "para_1867", "para_1868", "para_1869", "para_1870", "para_1871", "para_1872", "para_1873", "para_1874", "para_1875" ] }, { "title": "33 The district court granted Freeman's motion for judgment", "paragraphs": [ "para_1877", "para_1878" ] }, { "title": "Freeman knew that the undercover agent went to the bitcoin kiosk", "paragraphs": [ "para_1880", "para_1881", "para_1882", "para_1883", "para_1884", "para_1885", "para_1886" ] }, { "title": "48-49 (1st Cir. 2014) (concluding that sufficient evidence", "paragraphs": [ "para_1888", "para_1889", "para_1890", "para_1891" ] }, { "title": "F.3d 68, 74 (1st Cir. 2013) (explaining that to be liable for", "paragraphs": [ "para_1893", "para_1894", "para_1895", "para_1896", "para_1897" ] }, { "title": "34 The cases in which we have granted a new trial for", "paragraphs": [ "para_1899", "para_1900" ] }, { "title": "F.4th 1, 16 (1st Cir. 2021) (\"Some amount of spillover is inherent", "paragraphs": [ "para_1902", "para_1903", "para_1904", "para_1905" ] }, { "title": "Chan, 981 F.3d 39, 54-55 (1st Cir. 2020). Here, Freeman was tried", "paragraphs": [ "para_1907", "para_1908", "para_1909", "para_1910" ] }, { "title": "(referring to risk that direct evidence of a co-defendant's corrupt", "paragraphs": [ "para_1912", "para_1913", "para_1914", "para_1915", "para_1916" ] }, { "title": "Substantive Reasonableness of the Sentence", "paragraphs": [] }, { "title": "We turn now to Freeman's challenge to the substantive", "paragraphs": [ "para_1919", "para_1920", "para_1921", "para_1922" ] }, { "title": "968 F.3d 1, 12 (1st Cir. 2020). We analyze Freeman's preserved", "paragraphs": [ "para_1924", "para_1925", "para_1926" ] }, { "title": "2021) (citations omitted). And we must affirm the sentence so", "paragraphs": [ "para_1928", "para_1929", "para_1930" ] }, { "title": "133 (1st Cir. 2021)). Under these standards, sentences falling", "paragraphs": [ "para_1932", "para_1933" ] }, { "title": "States v. Rivera-Gerena, 112 F.4th 67, 73 (1st Cir. 2024); United", "paragraphs": [ "para_1935" ] }, { "title": "None of Freeman's arguments convince us that this is one", "paragraphs": [ "para_1937", "para_1938", "para_1939", "para_1940", "para_1941", "para_1942", "para_1943", "para_1944", "para_1945", "para_1946", "para_1947", "para_1948", "para_1949", "para_1950", "para_1951" ] }, { "title": "Freeman received as a \"manager or leader\" and the impact of the", "paragraphs": [ "para_1953", "para_1954", "para_1955", "para_1956", "para_1957", "para_1958", "para_1959", "para_1960", "para_1961" ] }, { "title": "Moreno, 954 F.3d 383, 396-97 (1st Cir. 2020) (concluding that the", "paragraphs": [ "para_1963", "para_1964", "para_1965", "para_1966", "para_1967", "para_1968", "para_1969", "para_1970", "para_1971", "para_1972", "para_1973" ] }, { "title": "(explaining that the district judge's failure to attach more weight", "paragraphs": [ "para_1975", "para_1976" ] }, { "title": "974 F.3d 34, 54-55 (1st Cir. 2020) (concluding that a 37-month", "paragraphs": [ "para_1978", "para_1979" ] }, { "title": "States v. Floyd, 740 F.3d 22, 39 (1st Cir. 2014) (describing", "paragraphs": [ "para_1981", "para_1982", "para_1983" ] }, { "title": "Freeman also points to six other \"virtual currency", "paragraphs": [ "para_1985", "para_1986", "para_1987", "para_1988", "para_1989", "para_1990", "para_1991", "para_1992", "para_1993", "para_1994", "para_1995" ] }, { "title": "2021) (\"[T]he hard-to-satisfy plain-error standard requires a", "paragraphs": [ "para_1997", "para_1998", "para_1999", "para_2000", "para_2001", "para_2002" ] }, { "title": "Jiménez, 946 F.3d 8, 15 (1st Cir. 2019) (applying abuse of", "paragraphs": [ "para_2004", "para_2005", "para_2006" ] }, { "title": "Freeman is right that 18 U.S.C. § 3553(a)(6) reflects a", "paragraphs": [ "para_2008", "para_2009", "para_2010", "para_2011", "para_2012", "para_2013", "para_2014" ] }, { "title": "United States v. Demers, 842 F.3d 8, 15 (1st Cir. 2016)); United", "paragraphs": [] }, { "title": "States v. Gonzalez, 981 F.3d 11, 23 (1st Cir. 2020) (\"[W]hen a", "paragraphs": [ "para_2017", "para_2018", "para_2019", "para_2020", "para_2021", "para_2022" ] }, { "title": "Cir. 2024) (rejecting claim of 45-month sentencing disparity", "paragraphs": [ "para_2024", "para_2025", "para_2026", "para_2027", "para_2028" ] }, { "title": "Here, Freeman asks us to compare him to other defendants", "paragraphs": [ "para_2030", "para_2031", "para_2032", "para_2033", "para_2034", "para_2035", "para_2036", "para_2037", "para_2038", "para_2039", "para_2040", "para_2041", "para_2042" ] }, { "title": "Cruz, 91 F.4th at 552-53. Half of these defendants were not", "paragraphs": [ "para_2044" ] }, { "title": "United States v. Bishoff, 58 F.4th 18, 26 (1st Cir. 2023)", "paragraphs": [] }, { "title": "(rejecting sentencing disparity claim between co-defendants in", "paragraphs": [ "para_2047", "para_2048" ] }, { "title": "Setting that aside, five of the six defendants pled guilty rather", "paragraphs": [] }, { "title": "35 Transcript of Sentencing Hearing at 17:2-3, United States", "paragraphs": [ "para_2051", "para_2052", "para_2053" ] }, { "title": "(parties agreed to seek a sentence between 19 and 30 months based", "paragraphs": [ "para_2055", "para_2056" ] }, { "title": "23-cr-00179 (W.D. Wash. Nov. 21, 2023), ECF No. 78 (arguing for", "paragraphs": [ "para_2058", "para_2059" ] }, { "title": "2021), ECF No. 44 (57 to 71 months); Defendant's Sentencing", "paragraphs": [ "para_2061" ] }, { "title": "Cal. June 4, 2018), ECF No. 32 (uncontested range of 46 to 57", "paragraphs": [ "para_2063" ] }, { "title": "Lebedev, No. 15-cr-00769 (S.D.N.Y. Aug. 29, 2017), ECF No. 585", "paragraphs": [] }, { "title": "(108 to 135 months as calculated by probation, 10 to 16 months as", "paragraphs": [ "para_2066", "para_2067" ] }, { "title": "90 (one count of failure to maintain an effective anti-money", "paragraphs": [ "para_2069", "para_2070" ] }, { "title": "Lebedev, 15-cr-00769, ECF No. 748 (various bribery and fraud", "paragraphs": [ "para_2072", "para_2073", "para_2074", "para_2075" ] }, { "title": "Freeman's case noted that Freeman was receiving an upward", "paragraphs": [ "para_2077", "para_2078", "para_2079", "para_2080" ] }, { "title": "36, 44 (1st Cir. 2023) (holding that sentencing disparity was", "paragraphs": [ "para_2082", "para_2083", "para_2084", "para_2085", "para_2086" ] }, { "title": "(concluding that no unwarranted discrepancy between co-defendants", "paragraphs": [ "para_2088", "para_2089", "para_2090" ] }, { "title": "37 Plea Agreement, Zhao, 23-cr-00179, ECF No. 31; Transcript", "paragraphs": [ "para_2092" ] }, { "title": "(noting acceptance of responsibility deduction from offense", "paragraphs": [ "para_2094", "para_2095", "para_2096", "para_2097" ] }, { "title": "ECF No. 82; Government's Sentencing Memorandum at 3, Farace, 21-", "paragraphs": [ "para_2099" ] }, { "title": "Tetley, 17-cr-00738, ECF No. 31; Defendant's Sentencing Memorandum", "paragraphs": [ "para_2101", "para_2102", "para_2103", "para_2104", "para_2105", "para_2106", "para_2107" ] }, { "title": "In sum, Freeman has failed to show that his sentence was", "paragraphs": [ "para_2109", "para_2110", "para_2111", "para_2112" ] }, { "title": "CONCLUSION", "paragraphs": [ "para_2114" ] } ], "paragraphs": [ { "text": "United States Court of Appeals", "paragraph_id": "para_1" }, { "text": "For the First Circuit", "paragraph_id": "para_2" }, { "text": "No. 23-1839", "paragraph_id": "para_3" }, { "text": "UNITED STATES,", "paragraph_id": "para_4" }, { "text": "Appellee,", "paragraph_id": "para_5" }, { "text": "v.", "paragraph_id": "para_6" }, { "text": "IAN FREEMAN,", "paragraph_id": "para_7" }, { "text": "Defendant, Appellant.", "paragraph_id": "para_8" }, { "text": "APPEAL FROM THE UNITED STATES DISTRICT COURT", "paragraph_id": "para_9" }, { "text": "FOR THE DISTRICT OF NEW HAMPSHIRE", "paragraph_id": "para_10" }, { "text": "[Hon. Joseph N. Laplante, U.S. District Judge]", "paragraph_id": "para_11" }, { "text": "Before", "paragraph_id": "para_12" }, { "text": "Gelpí, Lipez, and Thompson, Circuit Judges.", "paragraph_id": "para_13" }, { "text": "Richard Guerriero, with whom Oliver Bloom, Lothstein", "paragraph_id": "para_14" }, { "text": "Guerriero, PLLC, Mark L. Sisti, and Sisti Law Offices were on", "paragraph_id": "para_15" }, { "text": "brief, for appellant.", "paragraph_id": "para_16" }, { "text": "David M. Lieberman, Attorney, Appellate Section, Criminal", "paragraph_id": "para_17" }, { "text": "Division, U.S. Department of Justice, with whom Jane E. Young,", "paragraph_id": "para_18" }, { "text": "United States Attorney, Georgina L. MacDonald, Assistant United", "paragraph_id": "para_19" }, { "text": "States Attorney, John J. Kennedy, Assistant United States", "paragraph_id": "para_20" }, { "text": "Attorney, Nicole M. Argentieri, Principal Deputy Assistant", "paragraph_id": "para_21" }, { "text": "Attorney General, Lisa H. Miller, Deputy Assistant Attorney", "paragraph_id": "para_22" }, { "text": "General, were on brief, for appellee.", "paragraph_id": "para_23" }, { "text": "July 29, 2025", "paragraph_id": "para_24" }, { "text": "- 2 -", "paragraph_id": "para_25" }, { "text": "THOMPSON, Circuit Judge. Ian Freeman (\"Freeman\") is, by", "paragraph_id": "para_26" }, { "text": "his own description, a radio talk show host and church founder", "paragraph_id": "para_27" }, { "text": "promoting peace, liberty, individual freedom, and morality.", "paragraph_id": "para_28" }, { "text": "Freeman began selling bitcoin in 2014 as part of his mission to", "paragraph_id": "para_29" }, { "text": "promote peace. The government, which launched an investigation", "paragraph_id": "para_30" }, { "text": "into his bitcoin sales, took a different view of Freeman's conduct", "paragraph_id": "para_31" }, { "text": "and convinced a jury to convict Freeman on counts of conspiracy to", "paragraph_id": "para_32" }, { "text": "operate an unlicensed money transmitting business, operation of an", "paragraph_id": "para_33" }, { "text": "unlicensed money transmitting business, conspiracy to commit money", "paragraph_id": "para_34" }, { "text": "laundering, money laundering, and tax evasion. Post-verdict, the", "paragraph_id": "para_35" }, { "text": "district court acquitted Freeman on the substantive money", "paragraph_id": "para_36" }, { "text": "laundering count based on the insufficiency of the evidence. On", "paragraph_id": "para_37" }, { "text": "appeal, Freeman argues that the district court should never have", "paragraph_id": "para_38" }, { "text": "allowed the money-transmitting-business charges to reach trial,", "paragraph_id": "para_39" }, { "text": "because something called the \"major questions doctrine\" —— which", "paragraph_id": "para_40" }, { "text": "governs how we read statutes that convey regulatory authority to", "paragraph_id": "para_41" }, { "text": "administrative agencies —— requires us to interpret the relevant", "paragraph_id": "para_42" }, { "text": "statutes as not permitting agency regulation of virtual currencies", "paragraph_id": "para_43" }, { "text": "like bitcoin. He also claims that the district court should have", "paragraph_id": "para_44" }, { "text": "acquitted him based on the insufficiency of the evidence on his", "paragraph_id": "para_45" }, { "text": "tax evasion charge and granted him a new trial on the remaining", "paragraph_id": "para_46" }, { "text": "money laundering conspiracy count due to prejudicial evidentiary", "paragraph_id": "para_47" }, { "text": "spillover. Finally, he claims that even if his convictions stand,", "paragraph_id": "para_48" }, { "text": "the district court's imposition of a 96-month sentence is", "paragraph_id": "para_49" }, { "text": "- 3 -", "paragraph_id": "para_50" }, { "text": "substantively unreasonable. Having carefully considered all", "paragraph_id": "para_51" }, { "text": "Freeman's arguments, we affirm.", "paragraph_id": "para_52" }, { "text": "BACKGROUND", "paragraph_id": "para_53" }, { "text": "Freeman's trial was an 11-day affair at which more than", "paragraph_id": "para_54" }, { "text": "thirty witnesses testified. This appeal does not require us to", "paragraph_id": "para_55" }, { "text": "recount every in-and-out of the evidence presented at trial, but", "paragraph_id": "para_56" }, { "text": "to better orient the reader, we start with a brief overview of the", "paragraph_id": "para_57" }, { "text": "events leading to Freeman's arrest. From there, we'll dive into", "paragraph_id": "para_58" }, { "text": "the merits of each of Freeman's arguments on appeal, filling in", "paragraph_id": "para_59" }, { "text": "the necessary factual details and announcing our standard of review", "paragraph_id": "para_60" }, { "text": "as we go.1", "paragraph_id": "para_61" }, { "text": "Freeman's Bitcoin Business", "paragraph_id": "para_62" }, { "text": "Courts throughout the country have offered thorough", "paragraph_id": "para_63" }, { "text": "descriptions of what bitcoin is and how it works. All that a", "paragraph_id": "para_64" }, { "text": "reader need understand for today's opinion is that bitcoin is a", "paragraph_id": "para_65" }, { "text": "virtual currency, with no physical coinage or government backing.2", "paragraph_id": "para_66" }, { "text": "1 Because Freeman raises a sufficiency of the evidence", "paragraph_id": "para_67" }, { "text": "challenge to his tax evasion count, we'll present the facts", "paragraph_id": "para_68" }, { "text": "relevant to that count in the light most favorable to the jury's", "paragraph_id": "para_69" }, { "text": "verdict once we get there. See United States v. Paz-Alvarez, 799", "paragraph_id": "para_70" }, { "text": "F.3d 12, 18 (1st Cir. 2015). For the overview of Freeman's bitcoin", "paragraph_id": "para_71" }, { "text": "sales that follows, however, we summarize the trial record in a", "paragraph_id": "para_72" }, { "text": "\"balanced\" fashion, because the manner in which we relate these", "paragraph_id": "para_73" }, { "text": "background facts does not impact our analysis of Freeman's", "paragraph_id": "para_74" }, { "text": "remaining claims of error. See United States v. Burgos-Montes,", "paragraph_id": "para_75" }, { "text": "786 F.3d 92, 99 (1st Cir. 2015).", "paragraph_id": "para_76" }, { "text": "2 In everyday speech, the phrase virtual currency would", "paragraph_id": "para_77" }, { "text": "seemingly capture any currency that exists on a computer in a", "paragraph_id": "para_78" }, { "text": "non-physical form (for instance, currency used in video games to", "paragraph_id": "para_79" }, { "text": "- 4 -", "paragraph_id": "para_80" }, { "text": "Instead bitcoin is stored in a software program referred to as a", "paragraph_id": "para_81" }, { "text": "\"wallet.\" When bitcoin is moved from one wallet to another, the", "paragraph_id": "para_82" }, { "text": "transfer is accounted for on a public, cryptographic ledger called", "paragraph_id": "para_83" }, { "text": "the blockchain. Perkins, supra, at 1, 7. But although the ledger", "paragraph_id": "para_84" }, { "text": "is public and each wallet uniquely identifiable from other wallets,", "paragraph_id": "para_85" }, { "text": "bitcoin offers relative anonymity compared to traditional bank", "paragraph_id": "para_86" }, { "text": "transactions, because there is no information associated with a", "paragraph_id": "para_87" }, { "text": "wallet that can identify who owns the wallet. (By contrast, a", "paragraph_id": "para_88" }, { "text": "bank customer must provide personal information to a bank to open", "paragraph_id": "para_89" }, { "text": "an account and conduct transactions.) And unlike electronic", "paragraph_id": "para_90" }, { "text": "payments sent through banks, which can sometimes be cancelled or", "paragraph_id": "para_91" }, { "text": "reversed, there is no way for a sender to claw back bitcoin once", "paragraph_id": "para_92" }, { "text": "it has been sent.3", "paragraph_id": "para_93" }, { "text": "buy items in that game). See David W. Perkins, Cong. Rsch. Serv.,", "paragraph_id": "para_94" }, { "text": "R45427, Cryptocurrency: The Economics of Money and Selected Policy", "paragraph_id": "para_95" }, { "text": "Issues 1 n.2 (2020) (distinguishing between cryptocurrencies and", "paragraph_id": "para_96" }, { "text": "other \"digital representations of value\"). For the purposes of", "paragraph_id": "para_97" }, { "text": "today's opinion, unless we note otherwise, we use the phrase", "paragraph_id": "para_98" }, { "text": "virtual currency to refer to cryptocurrencies like bitcoin, which", "paragraph_id": "para_99" }, { "text": "can act as an alternative to traditional government-issued", "paragraph_id": "para_100" }, { "text": "currency (we'll refer to this as \"fiat currency\") and which use", "paragraph_id": "para_101" }, { "text": "cryptographic protocols (i.e., methods of sending information", "paragraph_id": "para_102" }, { "text": "through codes) to ensure that transactions are accurately", "paragraph_id": "para_103" }, { "text": "recorded. Id. at 1 n.2, 3-4, 7-8.", "paragraph_id": "para_104" }, { "text": "3 This opinion is not meant to be a comprehensive or", "paragraph_id": "para_105" }, { "text": "authoritative account of bitcoin or cryptocurrencies, or of any", "paragraph_id": "para_106" }, { "text": "advancements made in this arena since this case was appealed. Our", "paragraph_id": "para_107" }, { "text": "recitation of the history, function, and value of bitcoin is drawn", "paragraph_id": "para_108" }, { "text": "from the parties' presentation to the district court and jury below", "paragraph_id": "para_109" }, { "text": "and in their briefs to us.", "paragraph_id": "para_110" }, { "text": "- 5 -", "paragraph_id": "para_111" }, { "text": "To run his bitcoin business, Freeman acquired bitcoin", "paragraph_id": "para_112" }, { "text": "from large virtual currency exchanges for relatively small", "paragraph_id": "para_113" }, { "text": "commissions (0.16% in one example) and then resold it to his", "paragraph_id": "para_114" }, { "text": "customers while charging higher commissions (upwards of 10% in", "paragraph_id": "para_115" }, { "text": "many cases). Freeman conducted sales through three platforms.", "paragraph_id": "para_116" }, { "text": "First, he used bitcoin \"kiosks\" or \"ATMs,\" physical machines in", "paragraph_id": "para_117" }, { "text": "which a customer could deposit \"fiat currency,\" scan a QR code", "paragraph_id": "para_118" }, { "text": "associated with a bitcoin wallet, and receive a corresponding", "paragraph_id": "para_119" }, { "text": "amount of bitcoin in their wallet. Second, he posted", "paragraph_id": "para_120" }, { "text": "advertisements and communicated with customers on a website called", "paragraph_id": "para_121" }, { "text": "localbitcoins.com, which allowed users to buy and sell bitcoin", "paragraph_id": "para_122" }, { "text": "from each other, much as other websites allow users to buy and", "paragraph_id": "para_123" }, { "text": "sell goods. Finally, Freeman engaged in direct negotiations with", "paragraph_id": "para_124" }, { "text": "buyers on the messaging software Telegram.", "paragraph_id": "para_125" }, { "text": "Freeman had what he called a Know Your Customer procedure", "paragraph_id": "para_126" }, { "text": "for buyers who were purchasing through localbitcoins.com or", "paragraph_id": "para_127" }, { "text": "Telegram. He asked prospective customers to send him a photograph", "paragraph_id": "para_128" }, { "text": "of their driver's license and a photograph of themselves holding", "paragraph_id": "para_129" }, { "text": "a handwritten note indicating that they intended to purchase", "paragraph_id": "para_130" }, { "text": "bitcoin. Sometimes, he would also ask for customers' phone numbers", "paragraph_id": "para_131" }, { "text": "to confirm that they intended to buy bitcoin. These procedures", "paragraph_id": "para_132" }, { "text": "did not apply to purchases made at Freeman's bitcoin kiosks, which", "paragraph_id": "para_133" }, { "text": "did not require any form of personal verification, even though", "paragraph_id": "para_134" }, { "text": "kiosk operators can and do impose various verification", "paragraph_id": "para_135" }, { "text": "- 6 -", "paragraph_id": "para_136" }, { "text": "requirements.4 Across all three of his platforms, Freeman", "paragraph_id": "para_137" }, { "text": "instituted another policy —— one which eschewed any inquiries into", "paragraph_id": "para_138" }, { "text": "why his customers were purchasing bitcoin. But it is questionable,", "paragraph_id": "para_139" }, { "text": "as we'll explain, that such a no-ask policy truly insulated Freeman", "paragraph_id": "para_140" }, { "text": "from the knowledge that his services were being used by customers", "paragraph_id": "para_141" }, { "text": "who were, in fact, scammers and money launderers.", "paragraph_id": "para_142" }, { "text": "The government sought to show that even when Freeman", "paragraph_id": "para_143" }, { "text": "implemented his Know Your Customer procedures, he ignored multiple", "paragraph_id": "para_144" }, { "text": "red flags that would have suggested money laundering or scams.", "paragraph_id": "para_145" }, { "text": "For instance, Freeman permitted individuals to execute", "paragraph_id": "para_146" }, { "text": "transactions for hundreds of thousands of dollars within the course", "paragraph_id": "para_147" }, { "text": "of a week, and worked with individuals seeking to exchange hundreds", "paragraph_id": "para_148" }, { "text": "of thousands of dollars in cash. He also conducted transactions", "paragraph_id": "para_149" }, { "text": "in which he accepted payment from one person but delivered bitcoin", "paragraph_id": "para_150" }, { "text": "to another —— something the government calls a \"third-party trade.\"", "paragraph_id": "para_151" }, { "text": "In consummating these third-party transactions, Freeman sent", "paragraph_id": "para_152" }, { "text": "individuals, whom the evidence strongly suggested were scam", "paragraph_id": "para_153" }, { "text": "artists, bitcoin paid for by individuals over the age of 50,", "paragraph_id": "para_154" }, { "text": "despite finding out in many cases that the elderly individuals", "paragraph_id": "para_155" }, { "text": "paying for the bitcoin were geographically distant both from the", "paragraph_id": "para_156" }, { "text": "4 For instance, a government investigator testified at trial", "paragraph_id": "para_157" }, { "text": "that other bitcoin kiosks required him to scan a piece of", "paragraph_id": "para_158" }, { "text": "government-issued identification (like a driver's license), enter", "paragraph_id": "para_159" }, { "text": "a non-prepaid phone number, provide his name, and communicate with", "paragraph_id": "para_160" }, { "text": "the owner or operator of the kiosk to verify his purchases.", "paragraph_id": "para_161" }, { "text": "- 7 -", "paragraph_id": "para_162" }, { "text": "recipient of the bitcoin and from others paying to send bitcoin to", "paragraph_id": "para_163" }, { "text": "the same recipient. And Freeman continued to trade with", "paragraph_id": "para_164" }, { "text": "individuals after encountering signs that they were not who they", "paragraph_id": "para_165" }, { "text": "claimed to be.", "paragraph_id": "para_166" }, { "text": "To establish money laundering, the government called an", "paragraph_id": "para_167" }, { "text": "undercover agent who had made multiple bitcoin purchases from", "paragraph_id": "para_168" }, { "text": "Freeman through Telegram and at a kiosk in New Hampshire. After", "paragraph_id": "para_169" }, { "text": "building a rapport with Freeman through Telegram messages, the", "paragraph_id": "para_170" }, { "text": "agent joined Freeman at a social gathering in New Hampshire and", "paragraph_id": "para_171" }, { "text": "explained to Freeman that he was buying bitcoin with money he", "paragraph_id": "para_172" }, { "text": "earned selling drugs. After this disclosure, Freeman wrote to the", "paragraph_id": "para_173" }, { "text": "agent that he could not \"KNOWINGLY sell bitcoin\" to the agent and", "paragraph_id": "para_174" }, { "text": "refused to conduct business with him over Telegram. He", "paragraph_id": "para_175" }, { "text": "nevertheless invited the agent to continue socializing with him.", "paragraph_id": "para_176" }, { "text": "At a gathering in Keene, New Hampshire less than a month later,", "paragraph_id": "para_177" }, { "text": "the agent asked Freeman if the kiosk he had previously used was", "paragraph_id": "para_178" }, { "text": "still available. Freeman responded that the kiosk was still there", "paragraph_id": "para_179" }, { "text": "and said, \"I can't tell you that you can use it.\" The agent went", "paragraph_id": "para_180" }, { "text": "to the kiosk, located in a bar, and purchased nearly $20,000 in", "paragraph_id": "para_181" }, { "text": "bitcoin. That same night, the agent also taped Freeman saying in", "paragraph_id": "para_182" }, { "text": "a conversation with friends (including the agent) over drinks that", "paragraph_id": "para_183" }, { "text": "\"if you fall in love with a guy from Africa, I can't talk you out", "paragraph_id": "para_184" }, { "text": "of it\" and describing his kiosks as a way for smitten victims to", "paragraph_id": "para_185" }, { "text": "- 8 -", "paragraph_id": "para_186" }, { "text": "\"take the money that they have and send it to the person they've", "paragraph_id": "para_187" }, { "text": "fallen in love with.\"", "paragraph_id": "para_188" }, { "text": "In the summer of 2018, the Financial Crimes Enforcement", "paragraph_id": "para_189" }, { "text": "Network (\"FinCEN\") of the United States Treasury Department sent", "paragraph_id": "para_190" }, { "text": "correspondence to an email address associated with Freeman stating", "paragraph_id": "para_191" }, { "text": "that \"Shire Cryptocoin,\" purportedly one of Freeman's businesses,", "paragraph_id": "para_192" }, { "text": "must register with FinCEN as a money transmitting business and", "paragraph_id": "para_193" }, { "text": "comply with other anti-money-laundering regulations.5 Ignoring", "paragraph_id": "para_194" }, { "text": "this directive, Freeman never registered this entity or any of his", "paragraph_id": "para_195" }, { "text": "businesses with FinCEN. He also did not file tax returns from", "paragraph_id": "para_196" }, { "text": "2016 through 2019.", "paragraph_id": "para_197" }, { "text": "Procedural History", "paragraph_id": "para_198" }, { "text": "The indictment alleged that Freeman (as well as several", "paragraph_id": "para_199" }, { "text": "co-defendants) exchanged more than $10 million worth of", "paragraph_id": "para_200" }, { "text": "government-backed currency for bitcoin between May 25, 2016 and", "paragraph_id": "para_201" }, { "text": "March 15, 2021. In relevant part, the indictment charged Freeman", "paragraph_id": "para_202" }, { "text": "5 It's not clear whether Freeman himself used the name \"Shire", "paragraph_id": "para_203" }, { "text": "Cryptocoin\" in connection with any of his businesses. Also, to be", "paragraph_id": "para_204" }, { "text": "exact, FinCEN wrote that Shire Cryptocoin was a money services", "paragraph_id": "para_205" }, { "text": "business. Under FinCEN's regulations, money transmitting", "paragraph_id": "para_206" }, { "text": "businesses are a subcategory of money services businesses (which", "paragraph_id": "para_207" }, { "text": "are all required to register). 31 C.F.R. § 1010.100(ff)(5)", "paragraph_id": "para_208" }, { "text": "(defining money transmitter as type of money services business);", "paragraph_id": "para_209" }, { "text": "id. § 1022.380(a)(1) (requiring registration of money services", "paragraph_id": "para_210" }, { "text": "businesses). For the sake of simplicity, this opinion will", "paragraph_id": "para_211" }, { "text": "primarily use the term \"money transmitting business\" or \"money", "paragraph_id": "para_212" }, { "text": "transmitter\" as resolution of this case does not require us to", "paragraph_id": "para_213" }, { "text": "make fine distinctions between money transmitting businesses and", "paragraph_id": "para_214" }, { "text": "other categories of money services businesses.", "paragraph_id": "para_215" }, { "text": "- 9 -", "paragraph_id": "para_216" }, { "text": "with operation of an unlicensed money transmitting business,", "paragraph_id": "para_217" }, { "text": "conspiracy to operate an unlicensed money transmitting business,", "paragraph_id": "para_218" }, { "text": "money laundering, and conspiracy to commit money laundering, based", "paragraph_id": "para_219" }, { "text": "on this conduct. It also charged Freeman with several counts of", "paragraph_id": "para_220" }, { "text": "tax evasion for not paying taxes on income he received from his", "paragraph_id": "para_221" }, { "text": "bitcoin sales. Freeman joined a motion to dismiss filed by one of", "paragraph_id": "para_222" }, { "text": "his co-defendants regarding the counts related to operation of an", "paragraph_id": "para_223" }, { "text": "unlicensed money transmitting business, 18 U.S.C. § 1960, which", "paragraph_id": "para_224" }, { "text": "invoked the major questions doctrine and argued that businesses", "paragraph_id": "para_225" }, { "text": "dealing in virtual currency do not come within the statutory", "paragraph_id": "para_226" }, { "text": "definition of money transmitting businesses (more on the statutory", "paragraph_id": "para_227" }, { "text": "scheme and relevant definition to come in our analysis). The", "paragraph_id": "para_228" }, { "text": "district court denied the motion to dismiss in an oral ruling from", "paragraph_id": "para_229" }, { "text": "the bench, and Freeman proceeded to trial. At the end of an 11-", "paragraph_id": "para_230" }, { "text": "day trial, a jury convicted Freeman on all counts.", "paragraph_id": "para_231" }, { "text": "Freeman had moved for a judgment of acquittal after the", "paragraph_id": "para_232" }, { "text": "close of the government's evidence, and renewed that motion after", "paragraph_id": "para_233" }, { "text": "trial, arguing that insufficient evidence supported each count.", "paragraph_id": "para_234" }, { "text": "The district court partially granted that motion, ruling that there", "paragraph_id": "para_235" }, { "text": "was insufficient evidence that Freeman knowingly laundered money,", "paragraph_id": "para_236" }, { "text": "but upheld the remaining convictions (including the conspiracy to", "paragraph_id": "para_237" }, { "text": "commit money laundering count). In the same written order, the", "paragraph_id": "para_238" }, { "text": "district court recognized that Freeman had incorporated by", "paragraph_id": "para_239" }, { "text": "reference his earlier motion to dismiss arguments regarding the", "paragraph_id": "para_240" }, { "text": "- 10 -", "paragraph_id": "para_241" }, { "text": "major questions doctrine and rejected those arguments anew.", "paragraph_id": "para_242" }, { "text": "Thereafter, Freeman moved for a new trial based on spillover", "paragraph_id": "para_243" }, { "text": "prejudice from the evidence related to the money laundering count.", "paragraph_id": "para_244" }, { "text": "He also moved for reconsideration of the court's ruling on the", "paragraph_id": "para_245" }, { "text": "motion to dismiss. The district court denied both motions, ruling", "paragraph_id": "para_246" }, { "text": "that they were untimely and unmeritorious.", "paragraph_id": "para_247" }, { "text": "At sentencing, the district court calculated the", "paragraph_id": "para_248" }, { "text": "recommended range under the United States Sentencing Guidelines as", "paragraph_id": "para_249" }, { "text": "210 to 262 months. It then granted Freeman's motion for a variance", "paragraph_id": "para_250" }, { "text": "and sentenced Freeman to 96 months in prison.6", "paragraph_id": "para_251" }, { "text": "DISCUSSION", "paragraph_id": "para_252" }, { "text": "Motion to Dismiss Counts Related to Operation of an Unlicensed", "paragraph_id": "para_253" }, { "text": "Money Transmitting Business", "paragraph_id": "para_254" }, { "text": "Freeman's appeal largely centers on the major questions", "paragraph_id": "para_255" }, { "text": "doctrine, a jurisprudential principle fleshed out in a line of", "paragraph_id": "para_256" }, { "text": "cases emanating from the Supreme Court. The doctrine's purpose is", "paragraph_id": "para_257" }, { "text": "to prevent administrative agencies from expanding their regulatory", "paragraph_id": "para_258" }, { "text": "powers beyond that which Congress has granted. See, e.g., Biden", "paragraph_id": "para_259" }, { "text": "v. Nebraska, 600 U.S. 477 (2023); West Virginia v. EPA, 597 U.S.", "paragraph_id": "para_260" }, { "text": "697 (2022); Util. Air Regul. Grp. v. EPA, 573 U.S. 302 (2014). To", "paragraph_id": "para_261" }, { "text": "understand why cases about the scope of an agency's regulatory", "paragraph_id": "para_262" }, { "text": "6 More precisely, the district court sentenced Freeman to 60", "paragraph_id": "para_263" }, { "text": "months of imprisonment on tax evasion and the counts related to", "paragraph_id": "para_264" }, { "text": "operation of a money transmitting business to be served", "paragraph_id": "para_265" }, { "text": "concurrently with a 96-month sentence for conspiracy to commit", "paragraph_id": "para_266" }, { "text": "money laundering.", "paragraph_id": "para_267" }, { "text": "- 11 -", "paragraph_id": "para_268" }, { "text": "power are relevant to Freeman's prosecution for operation of an", "paragraph_id": "para_269" }, { "text": "unlicensed money transmitting business and his defense thereto, we", "paragraph_id": "para_270" }, { "text": "need to take a closer look at the statute under which Freeman was", "paragraph_id": "para_271" }, { "text": "prosecuted.", "paragraph_id": "para_272" }, { "text": "The indictment charged Freeman with violating 18 U.S.C.", "paragraph_id": "para_273" }, { "text": "§ 1960 (\"Section 1960\"). In relevant part, that statute punishes", "paragraph_id": "para_274" }, { "text": "anyone who \"knowingly conducts, controls, manages, supervises,", "paragraph_id": "para_275" }, { "text": "directs, or owns all or part of an unlicensed money transmitting", "paragraph_id": "para_276" }, { "text": "business.\" Id. § 1960(a). \"[M]oney transmitting,\" according to", "paragraph_id": "para_277" }, { "text": "the statute, \"includes transferring funds on behalf of the public", "paragraph_id": "para_278" }, { "text": "by any and all means.\" Id. § 1960(b)(2). And an \"unlicensed money", "paragraph_id": "para_279" }, { "text": "transmitting business\" means one that \"fails to comply with the", "paragraph_id": "para_280" }, { "text": "money transmitting business registration requirements under", "paragraph_id": "para_281" }, { "text": "section 5330 of title 31, United States Code, or regulations", "paragraph_id": "para_282" }, { "text": "prescribed under such section.\" Id. § 1960(b)(1)(B).", "paragraph_id": "para_283" }, { "text": "Thus, to understand what it means for a money", "paragraph_id": "para_284" }, { "text": "transmitting business to be unlicensed, we must flip to 31 U.S.C", "paragraph_id": "para_285" }, { "text": "§ 5330 (\"Section 5330\"), which requires \"[a]ny person who owns or", "paragraph_id": "para_286" }, { "text": "controls a money transmitting business\" to register that business", "paragraph_id": "para_287" }, { "text": "\"with the Secretary of the Treasury.\" How can someone tell if", "paragraph_id": "para_288" }, { "text": "they need to register? Section 5330 defines \"money transmitting", "paragraph_id": "para_289" }, { "text": "business\" to include one \"who engages as a business in the", "paragraph_id": "para_290" }, { "text": "transmission of currency, funds, or value that substitutes for", "paragraph_id": "para_291" }, { "text": "- 12 -", "paragraph_id": "para_292" }, { "text": "currency, including any person who engages as a business in an", "paragraph_id": "para_293" }, { "text": "informal money transfer system.\" Id. § 5330(d)(1).", "paragraph_id": "para_294" }, { "text": "Because the government has deemed his financial", "paragraph_id": "para_295" }, { "text": "endeavors to be money transmitting businesses, the Section 1960", "paragraph_id": "para_296" }, { "text": "crime Freeman is charged with is triggered by his failure to comply", "paragraph_id": "para_297" }, { "text": "with Section 5330(a)(1)'s requirement that such money transmitting", "paragraph_id": "para_298" }, { "text": "businesses must register with FinCEN (which is a subdivision of", "paragraph_id": "para_299" }, { "text": "the Treasury Department).7 However, if, as Freeman contends,", "paragraph_id": "para_300" }, { "text": "Section 5330 does not cover businesses such as his that trade", "paragraph_id": "para_301" }, { "text": "bitcoin (i.e., if he does not operate a money transmitting business", "paragraph_id": "para_302" }, { "text": "with registration requirements), he was not violating Section", "paragraph_id": "para_303" }, { "text": "5330, and by extension no criminal liability under Section 1960", "paragraph_id": "para_304" }, { "text": "would attach to him.", "paragraph_id": "para_305" }, { "text": "Of significance to Freeman's argument is one particular", "paragraph_id": "para_306" }, { "text": "feature of Section 5330. As Freeman points out, when the", "paragraph_id": "para_307" }, { "text": "indictment against him was filed, the definition in Section", "paragraph_id": "para_308" }, { "text": "5330(d)(1) looked a little different: it did not include the word", "paragraph_id": "para_309" }, { "text": "7 Eagle-eyed readers will have remembered that Section", "paragraph_id": "para_310" }, { "text": "5330(a)(1) referred to registration with the Secretary of the", "paragraph_id": "para_311" }, { "text": "Treasury and never mentioned FinCEN. The Secretary of the Treasury", "paragraph_id": "para_312" }, { "text": "delegated regulatory responsibilities under Section 5330 (which is", "paragraph_id": "para_313" }, { "text": "part of the Bank Secrecy Act) to FinCEN. See generally U.S. Gov't", "paragraph_id": "para_314" }, { "text": "Accountability Off., GAO/GGD-98-18, Money Laundering: FinCEN Needs", "paragraph_id": "para_315" }, { "text": "to Better Communicate Regulatory Priorities and Time Lines 1", "paragraph_id": "para_316" }, { "text": "(1998). For simplicity's sake, any time Section 5330 gives certain", "paragraph_id": "para_317" }, { "text": "responsibilities to the Secretary of the Treasury, we will", "paragraph_id": "para_318" }, { "text": "substitute in FinCEN as the office of the Treasury Department that", "paragraph_id": "para_319" }, { "text": "carries out that work.", "paragraph_id": "para_320" }, { "text": "- 13 -", "paragraph_id": "para_321" }, { "text": "\"currency\" or the phrase \"value that substitutes for currency.\"", "paragraph_id": "para_322" }, { "text": "Instead, the only noun in the list of items being transmitted was", "paragraph_id": "para_323" }, { "text": "\"funds.\" Uniting and Strengthening America by Providing", "paragraph_id": "para_324" }, { "text": "Appropriate Tools Required to Intercept and Obstruct Terrorism Act", "paragraph_id": "para_325" }, { "text": "(\"USA PATRIOT Act\") of 2001, Pub. L. No. 107-56 § 359(b), 115 Stat.", "paragraph_id": "para_326" }, { "text": "272, 328 (2001) (codified as amended at 31 U.S.C. § 5330(d)(1)).", "paragraph_id": "para_327" }, { "text": "In this language difference lies the rub of Freeman's grievance.", "paragraph_id": "para_328" }, { "text": "For simplicity's sake, we'll refer to the definition of", "paragraph_id": "para_329" }, { "text": "money transmitting business in effect during the existence of", "paragraph_id": "para_330" }, { "text": "Freeman's bitcoin business as the \"effective definition\" and the", "paragraph_id": "para_331" }, { "text": "new definition, which was enacted in 2021 (more on this legislative", "paragraph_id": "para_332" }, { "text": "history in a moment), as the \"current definition.\" See William M.", "paragraph_id": "para_333" }, { "text": "(Mac) Thornberry National Defense Authorization Act for Fiscal", "paragraph_id": "para_334" }, { "text": "Year 2021 (\"NDAA\"), Pub. L. No. 116-283 § 6102(d)(2)(A)(i), 134", "paragraph_id": "para_335" }, { "text": "Stat. 3388, 4552-53 (2021) (codified as amended at 31 U.S.C.", "paragraph_id": "para_336" }, { "text": "§ 5330(d)).8 Unless we specify otherwise, our analysis (and the", "paragraph_id": "para_337" }, { "text": "8 For those tracking the dates, it may seem strange that we're", "paragraph_id": "para_338" }, { "text": "saying the current version of Section 5330 was not effective for", "paragraph_id": "para_339" }, { "text": "the purposes of this prosecution, even though the indictment", "paragraph_id": "para_340" }, { "text": "alleges that violations of Section 1960 continued until the date", "paragraph_id": "para_341" }, { "text": "of Freeman's arrest, March 15, 2021, which was more than three", "paragraph_id": "para_342" }, { "text": "months after the current definition became law on January 1, 2021.", "paragraph_id": "para_343" }, { "text": "NDAA § 6102(d)(2)(A)(i), 134 Stat. at 4552-53. Freeman points out", "paragraph_id": "para_344" }, { "text": "that under Section 5330(a)(1), any person who owns or controls a", "paragraph_id": "para_345" }, { "text": "money transmitting business has 180 days to register, and so his", "paragraph_id": "para_346" }, { "text": "time to register under the updated definition had not expired by", "paragraph_id": "para_347" }, { "text": "the time the government put a stop to his business. 31 U.S.C.", "paragraph_id": "para_348" }, { "text": "§ 5330(a)(1). The government does not dispute this explanation of", "paragraph_id": "para_349" }, { "text": "why the current version of Section 5330 is ineffective and has not", "paragraph_id": "para_350" }, { "text": "- 14 -", "paragraph_id": "para_351" }, { "text": "cases we cite) refers to the effective definition of money", "paragraph_id": "para_352" }, { "text": "transmitting business in Section 5330(d)(1).9", "paragraph_id": "para_353" }, { "text": "An attentive reader may now be wondering what any of", "paragraph_id": "para_354" }, { "text": "this has to do with the power of an administrative agency. And,", "paragraph_id": "para_355" }, { "text": "as we'll see, the government says we shouldn't take up the major", "paragraph_id": "para_356" }, { "text": "questions doctrine at all because agency authority is not", "paragraph_id": "para_357" }, { "text": "implicated in these proceedings. This is how Freeman contends the", "paragraph_id": "para_358" }, { "text": "doctrine factors into this dispute. According to Freeman, Section", "paragraph_id": "para_359" }, { "text": "5330's effective definition of \"money transmitting business\"", "paragraph_id": "para_360" }, { "text": "cannot be properly understood to cover businesses dealing in", "paragraph_id": "para_361" }, { "text": "virtual currencies like bitcoin, because (and here's where the", "paragraph_id": "para_362" }, { "text": "link to an administrative agency arises) Section 5330(a)(2)", "paragraph_id": "para_363" }, { "text": "instructs FinCEN to \"prescribe, by regulation, the form and manner", "paragraph_id": "para_364" }, { "text": "for registering a money transmitting business.\" 31 U.S.C.", "paragraph_id": "para_365" }, { "text": "§ 5330(a)(2). Thus, the 2001 effective definition of money", "paragraph_id": "para_366" }, { "text": "transmitting business, which refers to the transmission of", "paragraph_id": "para_367" }, { "text": "\"funds,\" seemingly applies to both the statutory registration", "paragraph_id": "para_368" }, { "text": "requirement in Section 5330(a)(1) and to the scope of FinCEN's", "paragraph_id": "para_369" }, { "text": "argued that we should analyze the post-amendment conduct any", "paragraph_id": "para_370" }, { "text": "differently from the pre-amendment conduct. And we thus focus our", "paragraph_id": "para_371" }, { "text": "attention on the prior, effective definition.", "paragraph_id": "para_372" }, { "text": "9 Section 1960 had not been amended since Freeman's offending", "paragraph_id": "para_373" }, { "text": "conduct began, and neither party asserts that any prior amendments", "paragraph_id": "para_374" }, { "text": "to Section 1960 are relevant to our resolution of this case. See", "paragraph_id": "para_375" }, { "text": "Violence Against Women and Department of Justice Reauthorization", "paragraph_id": "para_376" }, { "text": "Act of 2005, Pub. L. No. 109-162 § 1171(a)(2), 119 Stat. 2960,", "paragraph_id": "para_377" }, { "text": "3123 (2006) (striking surplus words from Section 1960(b)(1)(C)).", "paragraph_id": "para_378" }, { "text": "- 15 -", "paragraph_id": "para_379" }, { "text": "regulatory authority under Section 5330(a)(2). The major", "paragraph_id": "para_380" }, { "text": "questions doctrine arises, says Freeman, because we should not", "paragraph_id": "para_381" }, { "text": "conclude that Congress intended to grant FinCEN regulatory", "paragraph_id": "para_382" }, { "text": "authority over virtual currencies that did not exist in 2001,", "paragraph_id": "para_383" }, { "text": "solely by virtue of Congress's use of the word \"funds\" in the", "paragraph_id": "para_384" }, { "text": "effective definition in Section 5330(d)(1). And how we interpret", "paragraph_id": "para_385" }, { "text": "the effective definition necessarily circumscribes the scope of", "paragraph_id": "para_386" }, { "text": "the statutory registration requirement in Section 5330(a)(1). In", "paragraph_id": "para_387" }, { "text": "other words, the statutory assumption underlying Freeman's", "paragraph_id": "para_388" }, { "text": "prosecution (i.e., that Congress's use of the word \"funds\" in", "paragraph_id": "para_389" }, { "text": "Section 5330(d)(1) covers virtual currencies) fails under the", "paragraph_id": "para_390" }, { "text": "major questions doctrine, because, according to Freeman, such an", "paragraph_id": "para_391" }, { "text": "interpretation runs contrary to congressional intent.", "paragraph_id": "para_392" }, { "text": "Ultimately then, Freeman's appeal poses the following", "paragraph_id": "para_393" }, { "text": "question for us: does the effective definition of \"money", "paragraph_id": "para_394" }, { "text": "transmitting business\" in Section 5330 capture businesses that", "paragraph_id": "para_395" }, { "text": "transmit virtual currency? In our opinion, the usual principles", "paragraph_id": "para_396" }, { "text": "of statutory construction say, resoundingly, yes, and we'll take", "paragraph_id": "para_397" }, { "text": "a step back to briefly explain why. We'll then dive into the heart", "paragraph_id": "para_398" }, { "text": "of Freeman's appeal and assess whether the major questions doctrine", "paragraph_id": "para_399" }, { "text": "nonetheless \"provide[s] a reason to hesitate\" before definitively", "paragraph_id": "para_400" }, { "text": "saying yes and adopting that construction. West Virginia, 597", "paragraph_id": "para_401" }, { "text": "U.S. at 721 (citation and quotation marks omitted). Because this", "paragraph_id": "para_402" }, { "text": "is a matter of statutory construction, our standard of review is", "paragraph_id": "para_403" }, { "text": "- 16 -", "paragraph_id": "para_404" }, { "text": "de novo. See United States v. McGlashan, 78 F.4th 1, 6 (1st Cir.", "paragraph_id": "para_405" }, { "text": "2023).", "paragraph_id": "para_406" }, { "text": "Traditional Plain Meaning Analysis", "paragraph_id": "para_407" }, { "text": "We start by analyzing Sections 1960 and 5330 without", "paragraph_id": "para_408" }, { "text": "reference to the major questions doctrine. In interpreting a", "paragraph_id": "para_409" }, { "text": "statute, we strive \"to effectuate congressional intent.\" City of", "paragraph_id": "para_410" }, { "text": "Providence v. Barr, 954 F.3d 23, 31 (1st Cir. 2020). Our usual", "paragraph_id": "para_411" }, { "text": "starting place for such an inquiry is the statutory text itself.", "paragraph_id": "para_412" }, { "text": "Id. \"[W]e interpret a statute's words based on their plain and", "paragraph_id": "para_413" }, { "text": "ordinary meaning at the time of the statute's enactment.\" United", "paragraph_id": "para_414" }, { "text": "States v. Abreu, 106 F.4th 1, 12 (1st Cir.) (citing Bostock v.", "paragraph_id": "para_415" }, { "text": "Clayton County, 590 U.S. 644, 654 (2020)), cert. denied, 145 S.", "paragraph_id": "para_416" }, { "text": "Ct. 425 (2024); City of Providence, 954 F.3d at 31 (\"When Congress", "paragraph_id": "para_417" }, { "text": "uses a term in a statute and does not define it, we generally", "paragraph_id": "para_418" }, { "text": "assume that the term carries its plain and ordinary meaning.\").", "paragraph_id": "para_419" }, { "text": "In this case, the parties ask us to define a specific", "paragraph_id": "para_420" }, { "text": "word, \"funds,\" in Sections 1960 and 5330.10 Other courts have been", "paragraph_id": "para_421" }, { "text": "asked to respond to this same query and those who have done so", "paragraph_id": "para_422" }, { "text": "have concluded this: that the plain meaning of \"funds\" is \"money\"", "paragraph_id": "para_423" }, { "text": "or \" something generally accepted as a medium of exchange, a measure", "paragraph_id": "para_424" }, { "text": "of value, or a means of payment.\" United States v. Murgio, 209 F.", "paragraph_id": "para_425" }, { "text": "10 The parties analyze the meaning of the word \"funds\" under", "paragraph_id": "para_426" }, { "text": "both statutes, and neither suggests that the term \"funds\" should", "paragraph_id": "para_427" }, { "text": "be interpreted differently between Sections 1960 and 5330. Thus,", "paragraph_id": "para_428" }, { "text": "we discuss the meaning of the term \"funds\" under both statutes.", "paragraph_id": "para_429" }, { "text": "- 17 -", "paragraph_id": "para_430" }, { "text": "Supp. 3d 698, 707 (S.D.N.Y. 2016) (quoting Webster's Third New", "paragraph_id": "para_431" }, { "text": "International Dictionary 921 (2002)); see also United States v.", "paragraph_id": "para_432" }, { "text": "Faiella, 39 F. Supp. 3d 544, 545 (S.D.N.Y. 2014) (citing Merriam", "paragraph_id": "para_433" }, { "text": "Webster Online). Premised on this definition, with which the", "paragraph_id": "para_434" }, { "text": "government agrees, other courts have found that bitcoin falls", "paragraph_id": "para_435" }, { "text": "within the plain meaning of \"funds\" and that Sections 1960 and", "paragraph_id": "para_436" }, { "text": "5330 therefore capture businesses that sell bitcoin to customers", "paragraph_id": "para_437" }, { "text": "in exchange for government-issued currency. See, e.g., United", "paragraph_id": "para_438" }, { "text": "States v. Stetkiw, No. 18-20579, 2019 WL 417404, at *2 (E.D. Mich.", "paragraph_id": "para_439" }, { "text": "Feb. 1, 2019) (concluding that bitcoin transactions constitute", "paragraph_id": "para_440" }, { "text": "\"money transmitting\" within the meaning of Section 1960); United", "paragraph_id": "para_441" }, { "text": "States v. Mansy, No. 2:15-cr-198-GZS, 2017 WL 9672554, at *1 (D.", "paragraph_id": "para_442" }, { "text": "Me. May 11, 2017) (same) (collecting cases); Murgio, 209 F. Supp.", "paragraph_id": "para_443" }, { "text": "3d at 707-11, 714 (concluding that bitcoin are funds within the", "paragraph_id": "para_444" }, { "text": "plain meaning of Section 1960 and that indictment sufficiently", "paragraph_id": "para_445" }, { "text": "alleged failure to comply with Section 5330's registration", "paragraph_id": "para_446" }, { "text": "requirements). We agree with this judicial reasoning because", "paragraph_id": "para_447" }, { "text": "bitcoin can be and is used as a currency to make sales and purchases", "paragraph_id": "para_448" }, { "text": "and, therefore, nicely fits the definition of \"funds.\"11 Murgio,", "paragraph_id": "para_449" }, { "text": "209 F. Supp. 3d at 707; see also United States v. Iossifov, 45", "paragraph_id": "para_450" }, { "text": "F.4th 899, 913-14 (6th Cir. 2022) (concluding that bitcoin is a", "paragraph_id": "para_451" }, { "text": "11 For instance, the evidence at trial showed that the bar", "paragraph_id": "para_452" }, { "text": "where one of Freeman's kiosks was located accepted bitcoin in", "paragraph_id": "para_453" }, { "text": "exchange for food.", "paragraph_id": "para_454" }, { "text": "- 18 -", "paragraph_id": "para_455" }, { "text": "medium of exchange and qualifies as \"funds\" within the meaning of", "paragraph_id": "para_456" }, { "text": "the federal money laundering statute, 18 U.S.C. § 1956); United", "paragraph_id": "para_457" }, { "text": "States v. Harmon, 474 F. Supp. 3d 76, 88-94, 100-09 (D.D.C. 2020)", "paragraph_id": "para_458" }, { "text": "(concluding that for similar reasons bitcoin is \"money\" within the", "paragraph_id": "para_459" }, { "text": "meaning of the District of Columbia's Money Transmitters Act and", "paragraph_id": "para_460" }, { "text": "separately concluding that defendant operated an \"unlicensed money", "paragraph_id": "para_461" }, { "text": "transmitting business\" within the meaning of Section 1960 where", "paragraph_id": "para_462" }, { "text": "its \"core business was receiving bitcoin and transmitting that", "paragraph_id": "para_463" }, { "text": "bitcoin to another location or person\").", "paragraph_id": "para_464" }, { "text": "Within our ordinary interpretive framework, our inquiry", "paragraph_id": "para_465" }, { "text": "into whether the word \"funds\" covers bitcoin would usually end", "paragraph_id": "para_466" }, { "text": "here, as there is no reason to look past the statutory text itself", "paragraph_id": "para_467" }, { "text": "if that text is unambiguous and consistent with a coherent", "paragraph_id": "para_468" }, { "text": "statutory scheme. Penobscot Nation v. Frey, 3 F.4th 484, 490 (1st", "paragraph_id": "para_469" }, { "text": "Cir. 2021); City of Providence, 954 F.3d at 31-32 (\"Other tools of", "paragraph_id": "para_470" }, { "text": "statutory interpretation, such as legislative history, customarily", "paragraph_id": "para_471" }, { "text": "carry significant weight only when the text is ambiguous or its", "paragraph_id": "para_472" }, { "text": "plain meaning leads to an absurd result.\"). Indeed Freeman admits", "paragraph_id": "para_473" }, { "text": "that he has \"never argued\" that \"the ordinary meaning of 'funds'\"", "paragraph_id": "para_474" }, { "text": "does not \"encompass[] bitcoin.\" But as we've already alluded to,", "paragraph_id": "para_475" }, { "text": "Freeman insists that we cannot stop here because his is \"an", "paragraph_id": "para_476" }, { "text": "exceptional case\" wherein ordinary rules of statutory construction", "paragraph_id": "para_477" }, { "text": "cannot be relied upon to answer the question of whether bitcoin", "paragraph_id": "para_478" }, { "text": "qualifies as \"funds.\" Rather, only an examination of the major", "paragraph_id": "para_479" }, { "text": "- 19 -", "paragraph_id": "para_480" }, { "text": "questions doctrine (which takes a deeper dive into congressional", "paragraph_id": "para_481" }, { "text": "intent) can do that, so we turn to it now. A heads-up here to the", "paragraph_id": "para_482" }, { "text": "gentle reader: Freeman offers us a slew of arguments as to why he", "paragraph_id": "para_483" }, { "text": "should prevail on this issue, so we beg your patience as we work", "paragraph_id": "para_484" }, { "text": "our way through his various contentions.", "paragraph_id": "para_485" }, { "text": "Major Questions Doctrine", "paragraph_id": "para_486" }, { "text": "Before we delve into the details of the major questions", "paragraph_id": "para_487" }, { "text": "doctrine, we pause to address the government's threshold assertion", "paragraph_id": "para_488" }, { "text": "that we \"need not indulge\" Freeman's invocation of the doctrine at", "paragraph_id": "para_489" }, { "text": "all because his criminal prosecution involved no \"regulatory", "paragraph_id": "para_490" }, { "text": "assertions\" whatsoever by the Department of Treasury. Rather, it", "paragraph_id": "para_491" }, { "text": "argues \"the indictment neither depended on nor referenced the", "paragraph_id": "para_492" }, { "text": "FinCEN guidance\" and as such, the major questions doctrine \"is not", "paragraph_id": "para_493" }, { "text": "triggered\" here. However, we think the government's position", "paragraph_id": "para_494" }, { "text": "oversimplifies Freeman's argument and here's why.", "paragraph_id": "para_495" }, { "text": "As our preface noted, the \"major questions doctrine\" can", "paragraph_id": "para_496" }, { "text": "arise in cases where we are asked to interpret a legislative", "paragraph_id": "para_497" }, { "text": "enactment that \"confers authority upon an administrative agency\"", "paragraph_id": "para_498" }, { "text": "in the executive branch to implement its terms. West Virginia,", "paragraph_id": "para_499" }, { "text": "597 U.S. at 721. Here, Freeman's argument centers on the effective", "paragraph_id": "para_500" }, { "text": "definition of money transmitting business in Section 5330(d)(1).", "paragraph_id": "para_501" }, { "text": "That statutory definition governs the scope of what businesses are", "paragraph_id": "para_502" }, { "text": "required to register under Section 5330(a)(1), and in consequence,", "paragraph_id": "para_503" }, { "text": "what businesses might be subject to criminal penalties under", "paragraph_id": "para_504" }, { "text": "- 20 -", "paragraph_id": "para_505" }, { "text": "Section 1960(b)(1)(B) for failure to comply with that registration", "paragraph_id": "para_506" }, { "text": "requirement.12 See United States v. Budovsky, No. 13-cr-00368,", "paragraph_id": "para_507" }, { "text": "2015 WL 5602853, at *9 (S.D.N.Y. Sept. 23, 2015) (\"[C]riminal", "paragraph_id": "para_508" }, { "text": "liability under § 1960(b)(1)(B) rests in part on a failure to", "paragraph_id": "para_509" }, { "text": "comply with registration requirements, including those set forth", "paragraph_id": "para_510" }, { "text": "in § 5330 or in § 5330's regulations.\"). Simultaneously, the", "paragraph_id": "para_511" }, { "text": "effective definition (what constitutes a money transmitting", "paragraph_id": "para_512" }, { "text": "business) governs the scope of the regulations FinCEN can", "paragraph_id": "para_513" }, { "text": "promulgate in the next subsection, Section 5330(a)(2). See, e.g.,", "paragraph_id": "para_514" }, { "text": "Ratzlaf v. United States, 510 U.S. 135, 141-43 (1994) (explaining", "paragraph_id": "para_515" }, { "text": "that willful violation has same meaning under some provisions of", "paragraph_id": "para_516" }, { "text": "the Bank Secrecy Act, 31 U.S.C. §§ 5322, 5324, as it does in other", "paragraph_id": "para_517" }, { "text": "provisions, 31 U.S.C. §§ 5314, 5316); United States v. Abbas, 100", "paragraph_id": "para_518" }, { "text": "F.4th 267, 284 (1st Cir.) (concluding that \"proceeds\" has same", "paragraph_id": "para_519" }, { "text": "12 While summarizing the nature of Freeman's convictions in", "paragraph_id": "para_520" }, { "text": "its brief, the government claims that Freeman was also convicted", "paragraph_id": "para_521" }, { "text": "under Section 1960(b)(1)(C). Section 1960(b)(1)(C) defines an", "paragraph_id": "para_522" }, { "text": "unlicensed money transmitting business seemingly independently", "paragraph_id": "para_523" }, { "text": "from Section 5330. See 18 U.S.C. § 1960(b)(1)(C) (defining term", "paragraph_id": "para_524" }, { "text": "to mean a money transmitting business \"otherwise involv[ing] the", "paragraph_id": "para_525" }, { "text": "transportation or transmission of funds that are known to the", "paragraph_id": "para_526" }, { "text": "defendant to have been derived from a criminal offense or are", "paragraph_id": "para_527" }, { "text": "intended to be used to promote or support unlawful activity\").", "paragraph_id": "para_528" }, { "text": "The government does not argue, however, that we can ignore Section", "paragraph_id": "para_529" }, { "text": "5330 because the jury convicted Freeman under Section", "paragraph_id": "para_530" }, { "text": "1960(b)(1)(C), presumably because the verdict form did not ask the", "paragraph_id": "para_531" }, { "text": "jury to indicate which of the two subsections Freeman had violated.", "paragraph_id": "para_532" }, { "text": "Even if the record could support such an argument, we would treat", "paragraph_id": "para_533" }, { "text": "it as waived given the government's failure to brief the issue.", "paragraph_id": "para_534" }, { "text": "See Mass. Lobstermen's Ass'n v. Menashes, 127 F.4th 398, 403 n.2", "paragraph_id": "para_535" }, { "text": "(1st Cir. 2025).", "paragraph_id": "para_536" }, { "text": "- 21 -", "paragraph_id": "para_537" }, { "text": "meaning in different subsections of criminal money laundering", "paragraph_id": "para_538" }, { "text": "statute, 18 U.S.C. § 1956), cert. denied, 145 S. Ct. 319 (2024).", "paragraph_id": "para_539" }, { "text": "This statutory scheme makes clear that the legislation's", "paragraph_id": "para_540" }, { "text": "substantive provisions work hand in hand with those provisions", "paragraph_id": "para_541" }, { "text": "granting regulatory authority to FinCEN to implement the terms of", "paragraph_id": "para_542" }, { "text": "the statute itself. Given the necessary interplay between the", "paragraph_id": "para_543" }, { "text": "statutory and regulatory provisions, we agree with Freeman that", "paragraph_id": "para_544" }, { "text": "skirting the major questions doctrine would incorrectly treat the", "paragraph_id": "para_545" }, { "text": "statutory registration requirement as completely divorced from any", "paragraph_id": "para_546" }, { "text": "of FinCEN's regulatory authority. Indeed, as Freeman pointed out", "paragraph_id": "para_547" }, { "text": "during oral argument, requiring a business to register by statute", "paragraph_id": "para_548" }, { "text": "means very little without a corresponding mechanism by which said", "paragraph_id": "para_549" }, { "text": "business can, in fact, register. For the registration requirement", "paragraph_id": "para_550" }, { "text": "in Section 5330(a)(1), the regulations FinCEN promulgates under", "paragraph_id": "para_551" }, { "text": "Section 5330(a)(2) appear to be that mechanism. And although the", "paragraph_id": "para_552" }, { "text": "government would like us to conclude the major questions doctrine", "paragraph_id": "para_553" }, { "text": "has no place here, it offers no direct response to this point.", "paragraph_id": "para_554" }, { "text": "All this to say, Freeman steps over the threshold of identifying", "paragraph_id": "para_555" }, { "text": "a statute which, at least in part, confers regulatory authority", "paragraph_id": "para_556" }, { "text": "upon an administrative agency, a power Freeman insists Congress", "paragraph_id": "para_557" }, { "text": "never intended to delegate.13", "paragraph_id": "para_558" }, { "text": "13 We acknowledge that this is a somewhat unusual case for the", "paragraph_id": "para_559" }, { "text": "invocation of the major questions doctrine: FinCEN is not a party", "paragraph_id": "para_560" }, { "text": "and Freeman is seeking to overturn his conviction, not to enjoin", "paragraph_id": "para_561" }, { "text": "- 22 -", "paragraph_id": "para_562" }, { "text": "Having explained the relationship between this case and", "paragraph_id": "para_563" }, { "text": "FinCEN's regulation of money transmitting businesses, we must now", "paragraph_id": "para_564" }, { "text": "determine \"whether Congress in fact meant to confer the power the", "paragraph_id": "para_565" }, { "text": "agency has asserted\" as the major questions doctrine requires us", "paragraph_id": "para_566" }, { "text": "to do. West Virginia, 597 U.S. at 721 (quoting FDA v. Brown", "paragraph_id": "para_567" }, { "text": "& Williamson Tobacco Corp., 529 U.S. 120, 159 (2000)). \"In the", "paragraph_id": "para_568" }, { "text": "ordinary case,\" this consideration \"has no great effect on the", "paragraph_id": "para_569" }, { "text": "appropriate analysis.\" Id. But the Supreme Court has recognized", "paragraph_id": "para_570" }, { "text": "the existence of \"extraordinary cases.\" Id. In such instances,", "paragraph_id": "para_571" }, { "text": "we cannot conclude that Congress granted an agency authority \"to", "paragraph_id": "para_572" }, { "text": "exercise powers of vast economic and political significance\"", "paragraph_id": "para_573" }, { "text": "unless the statutory text \"speaks clearly\" of such a grant. Ala.", "paragraph_id": "para_574" }, { "text": "Ass'n of Realtors v. Dep't of Health & Hum. Servs., 594 U.S. 758,", "paragraph_id": "para_575" }, { "text": "FinCEN's regulatory act. Nevertheless, the heart of this appeal", "paragraph_id": "para_576" }, { "text": "is the effective definition of money transmitting business in", "paragraph_id": "para_577" }, { "text": "Section 5330(d)(1), a definition that applies both to Sections", "paragraph_id": "para_578" }, { "text": "5330(a)(1) and (a)(2). Blinding ourselves (as the government", "paragraph_id": "para_579" }, { "text": "requests) to the reality that our interpretation of Section", "paragraph_id": "para_580" }, { "text": "5330(d)(1) impacts not only Freeman's criminal liability, but also", "paragraph_id": "para_581" }, { "text": "the scope of FinCEN's regulatory authority, undermines the", "paragraph_id": "para_582" }, { "text": "coherency and consistency of the statutory scheme. See Ali v.", "paragraph_id": "para_583" }, { "text": "Fed. Bureau of Prisons, 552 U.S. 214, 222 (2008). Our sister", "paragraph_id": "para_584" }, { "text": "circuits too have seen fit to consider the application of the major", "paragraph_id": "para_585" }, { "text": "questions doctrine in cases where the relevant administrative", "paragraph_id": "para_586" }, { "text": "agency is not a party and is not actively making \"regulatory", "paragraph_id": "para_587" }, { "text": "assertions\" in that litigation. See United States v. White, 97", "paragraph_id": "para_588" }, { "text": "F.4th 532, 540 (7th Cir.) (considering major questions challenge", "paragraph_id": "para_589" }, { "text": "to Sentencing Commission's authority in a criminal case), cert.", "paragraph_id": "para_590" }, { "text": "denied, 145 S. Ct. 293 (2024); N.C. Coastal Fisheries Reform Grp.", "paragraph_id": "para_591" }, { "text": "v. Capt. Gaston LLC, 76 F.4th 291, 296-301 (4th Cir. 2023)", "paragraph_id": "para_592" }, { "text": "(applying major questions doctrine in suit between environmental", "paragraph_id": "para_593" }, { "text": "advocacy group and shrimp trawlers).", "paragraph_id": "para_594" }, { "text": "- 23 -", "paragraph_id": "para_595" }, { "text": "764 (2021) (quotation marks omitted) (quoting Util. Air Regul.", "paragraph_id": "para_596" }, { "text": "Grp., 573 U.S. at 324). In basic terms, the major questions", "paragraph_id": "para_597" }, { "text": "doctrine tells us that when an administrative agency in the", "paragraph_id": "para_598" }, { "text": "executive branch wants to do something that is an extraordinarily", "paragraph_id": "para_599" }, { "text": "big deal, it must show that Congress clearly gave it permission to", "paragraph_id": "para_600" }, { "text": "do so in the statutory text. See Nebraska, 600 U.S. at 514", "paragraph_id": "para_601" }, { "text": "(Barrett, J., concurring) (analogizing major questions doctrine to", "paragraph_id": "para_602" }, { "text": "expectation that a parent authorizing a babysitter to take the", "paragraph_id": "para_603" }, { "text": "children on an overnight trip would provide \"much more clarity", "paragraph_id": "para_604" }, { "text": "than a general instruction to 'make sure the kids have fun'\").", "paragraph_id": "para_605" }, { "text": "What, then, makes for an extraordinary case? The Supreme", "paragraph_id": "para_606" }, { "text": "Court defines it in broad strokes as one \"in which the 'history", "paragraph_id": "para_607" }, { "text": "and the breadth of the authority that [the agency] has asserted,'", "paragraph_id": "para_608" }, { "text": "and the 'economic and political significance' of that assertion,", "paragraph_id": "para_609" }, { "text": "provide a 'reason to hesitate before concluding that Congress'", "paragraph_id": "para_610" }, { "text": "meant to confer such authority.\" West Virginia, 597 U.S. at 721", "paragraph_id": "para_611" }, { "text": "(quoting Brown & Williamson, 529 U.S. at 159-60). Within this", "paragraph_id": "para_612" }, { "text": "rather wide framework, our sister circuits, in carefully examining", "paragraph_id": "para_613" }, { "text": "what the Supreme Court has said about the breadth of an agency's", "paragraph_id": "para_614" }, { "text": "authority to regulate, have zeroed in on certain \"hallmarks that", "paragraph_id": "para_615" }, { "text": "should send us searching for clear authorization from Congress.\"14", "paragraph_id": "para_616" }, { "text": "14 Our circuit has addressed the major questions doctrine only", "paragraph_id": "para_617" }, { "text": "in passing since the doctrine was formalized in West Virginia.", "paragraph_id": "para_618" }, { "text": "See Hornof v. United States, 107 F.4th 46, 59 n.14 (2024) (noting", "paragraph_id": "para_619" }, { "text": "- 24 -", "paragraph_id": "para_620" }, { "text": "N.C. Coastal Fisheries, 76 F.4th at 297 (recognizing that doctrine", "paragraph_id": "para_621" }, { "text": "is more likely to apply where the agency's asserted powers are", "paragraph_id": "para_622" }, { "text": "inconsistent with congressional intent, conflict with a distinct", "paragraph_id": "para_623" }, { "text": "and existing statutory scheme, raise federalism concerns, \"fall[]", "paragraph_id": "para_624" }, { "text": "outside the agency's traditional expertise,\" are rooted in \"an", "paragraph_id": "para_625" }, { "text": "ancillary provision\" of a statute, or are drawn from \"old statutes", "paragraph_id": "para_626" }, { "text": "against a backdrop of an agency failing to invoke them", "paragraph_id": "para_627" }, { "text": "previously\"); see also Bradford v. U.S. Dep't of Lab., 101 F.4th", "paragraph_id": "para_628" }, { "text": "707, 725-28 (10th Cir. 2024) (rejecting application of major", "paragraph_id": "para_629" }, { "text": "questions doctrine where agency did not \"locate expansive", "paragraph_id": "para_630" }, { "text": "authority in modest words, vague terms or ancillary provisions,\"", "paragraph_id": "para_631" }, { "text": "was not regulating private industry, did not \"discover regulatory", "paragraph_id": "para_632" }, { "text": "authority for the first time in a long-extant statute,\" and did", "paragraph_id": "para_633" }, { "text": "not \"lack[] expertise in the relevant area of policymaking\"", "paragraph_id": "para_634" }, { "text": "(citation modified)), cert. denied, 145 S. Ct. 1047 (2025). Our", "paragraph_id": "para_635" }, { "text": "review of the Supreme Court's precedent and of our sister circuits'", "paragraph_id": "para_636" }, { "text": "helpful interpretation of it convinces us that this case lacks the", "paragraph_id": "para_637" }, { "text": "hallmarks of a major questions case. We'll explain our thinking", "paragraph_id": "para_638" }, { "text": "below around the two organizing principles identified by the", "paragraph_id": "para_639" }, { "text": "Supreme Court, starting with \"the history and the breadth\" of", "paragraph_id": "para_640" }, { "text": "FinCEN's assertion of authority and follow that with addressing", "paragraph_id": "para_641" }, { "text": "that statute enabling Coast Guard to regulate oil tankers \"speak[s]", "paragraph_id": "para_642" }, { "text": "clearly\").", "paragraph_id": "para_643" }, { "text": "- 25 -", "paragraph_id": "para_644" }, { "text": "its \"economic and political significance.\"15 West Virginia, 597", "paragraph_id": "para_645" }, { "text": "U.S. at 721; see Nebraska v. Su, 121 F.4th 1, 14 (9th Cir. 2024)", "paragraph_id": "para_646" }, { "text": "(identifying a \"two-prong framework\").", "paragraph_id": "para_647" }, { "text": "History and Breadth of FinCEN's Assertion", "paragraph_id": "para_648" }, { "text": "History", "paragraph_id": "para_649" }, { "text": "To understand the \"history and breadth\" of FinCEN's", "paragraph_id": "para_650" }, { "text": "regulation as is relevant here, a short history of Section 5330 is", "paragraph_id": "para_651" }, { "text": "in order.16 As part of a statutory scheme (the Bank Secrecy Act)", "paragraph_id": "para_652" }, { "text": "designed to combat money laundering, Congress has long required", "paragraph_id": "para_653" }, { "text": "\"money transmitting businesses\" to register with the Treasury", "paragraph_id": "para_654" }, { "text": "Department. Riegle Community Development and Regulatory", "paragraph_id": "para_655" }, { "text": "Improvement Act of 1994, Pub. L. No. 103-325 § 408, 108 Stat. 2160,", "paragraph_id": "para_656" }, { "text": "2249-51 (1994) (codified at 31 U.S.C. § 5330). In the wake of the", "paragraph_id": "para_657" }, { "text": "September 11, 2001 terrorist attacks, Congress that year amended", "paragraph_id": "para_658" }, { "text": "15 In so doing, we acknowledge that the major questions", "paragraph_id": "para_659" }, { "text": "doctrine has been an area of dynamic development in the last few", "paragraph_id": "para_660" }, { "text": "years, and it is not always clear what factors fall under which", "paragraph_id": "para_661" }, { "text": "prong. For instance, a discussion of the wider statutory scheme", "paragraph_id": "para_662" }, { "text": "and legislative history might well be introduced as a relevant", "paragraph_id": "para_663" }, { "text": "piece of the agency's regulatory history or as indicative of the", "paragraph_id": "para_664" }, { "text": "political significance of the regulatory assertion. In today's", "paragraph_id": "para_665" }, { "text": "decision, we place less importance on categorizing the relevant", "paragraph_id": "para_666" }, { "text": "characteristics and focus on whether the facts of this case,", "paragraph_id": "para_667" }, { "text": "stripped of Freeman's rhetorical flourishes, actually fit into the", "paragraph_id": "para_668" }, { "text": "major questions precedent.", "paragraph_id": "para_669" }, { "text": "16 Our focus is on the legislative history of Section 5330", "paragraph_id": "para_670" }, { "text": "rather than Section 1960, because (1) that is what the parties", "paragraph_id": "para_671" }, { "text": "briefed and (2) Section 5330, which enables agency regulation, is", "paragraph_id": "para_672" }, { "text": "more squarely implicated by the major questions doctrine than", "paragraph_id": "para_673" }, { "text": "Section 1960, which focuses on the circumstances of criminal", "paragraph_id": "para_674" }, { "text": "liability.", "paragraph_id": "para_675" }, { "text": "- 26 -", "paragraph_id": "para_676" }, { "text": "the definition of \"money transmitting business\" in Section 5330 to", "paragraph_id": "para_677" }, { "text": "include \"any other person who engages as a business in the", "paragraph_id": "para_678" }, { "text": "transmission of funds, including any person who engages as a", "paragraph_id": "para_679" }, { "text": "business in an informal money transfer system or any network of", "paragraph_id": "para_680" }, { "text": "people who engage as a business in facilitating the transfer of", "paragraph_id": "para_681" }, { "text": "money domestically or internationally outside of the conventional", "paragraph_id": "para_682" }, { "text": "financial institutions system.\" USA PATRIOT Act § 359(b), 115", "paragraph_id": "para_683" }, { "text": "Stat. at 328 (emphases added). According to the report of the", "paragraph_id": "para_684" }, { "text": "Committee on Financial Services, the amendment did not expand the", "paragraph_id": "para_685" }, { "text": "definition of money transmitting business, but instead clarified", "paragraph_id": "para_686" }, { "text": "that the existing definition reached black market, non-bank money", "paragraph_id": "para_687" }, { "text": "exchangers —— what the Committee referred to as \"informal value", "paragraph_id": "para_688" }, { "text": "transfer banking systems\" —— which helped to fund terrorist and", "paragraph_id": "para_689" }, { "text": "criminal organizations. H.R. Rep. No. 107-250, at 34, 63-64", "paragraph_id": "para_690" }, { "text": "(2001).", "paragraph_id": "para_691" }, { "text": "This was the effective version of Section 5330 when", "paragraph_id": "para_692" }, { "text": "bitcoin came into being in 2008. Perkins, supra, at 2. In", "paragraph_id": "para_693" }, { "text": "Freeman's telling though, FinCEN's first step towards the", "paragraph_id": "para_694" }, { "text": "regulation of bitcoin didn't occur until 2011, when FinCEN updated", "paragraph_id": "para_695" }, { "text": "its regulatory definition of \"money transmission services\" to", "paragraph_id": "para_696" }, { "text": "require the \"acceptance of currency, funds, or other value that", "paragraph_id": "para_697" }, { "text": "substitutes for currency from one person.\" Bank Secrecy Act", "paragraph_id": "para_698" }, { "text": "Regulations; Definitions and Other Regulations Relating to Money", "paragraph_id": "para_699" }, { "text": "Services Businesses, 76 Fed. Reg. 43585, 43596 (July 21, 2011)", "paragraph_id": "para_700" }, { "text": "- 27 -", "paragraph_id": "para_701" }, { "text": "(codified at 31 C.F.R. § 1010.100(ff)(5)) (emphasis added). Such", "paragraph_id": "para_702" }, { "text": "a theory, he argues, is consistent with the guidance FinCEN issued", "paragraph_id": "para_703" }, { "text": "in 2013 which, for the first time, stated that \"value that", "paragraph_id": "para_704" }, { "text": "substitutes for currency\" includes virtual currencies.", "paragraph_id": "para_705" }, { "text": "Specifically, the guidance said, \"[t]he definition of a money", "paragraph_id": "para_706" }, { "text": "transmitter does not differentiate between real currencies and", "paragraph_id": "para_707" }, { "text": "convertible virtual currencies. Accepting and transmitting", "paragraph_id": "para_708" }, { "text": "anything of value that substitutes for currency makes a person a", "paragraph_id": "para_709" }, { "text": "money transmitter under the regulations implementing the [Bank", "paragraph_id": "para_710" }, { "text": "Secrecy Act].\"17 FinCEN, FIN-2013-G001, Application of FinCEN's", "paragraph_id": "para_711" }, { "text": "Regulations to Persons Administering, Exchanging, or Using Virtual", "paragraph_id": "para_712" }, { "text": "Currencies, at 3 (2013). Freeman says the fact that FinCEN never", "paragraph_id": "para_713" }, { "text": "sought to regulate bitcoin before 2013 demonstrates the agency's", "paragraph_id": "para_714" }, { "text": "understanding of its statutory inability to do so. Needless to", "paragraph_id": "para_715" }, { "text": "say, the government takes issue with Freeman's historical", "paragraph_id": "para_716" }, { "text": "17 FinCEN laid out precise definitions for \"real currency,\"", "paragraph_id": "para_717" }, { "text": "\"convertible currency,\" and \"virtual currency\" in its 2013", "paragraph_id": "para_718" }, { "text": "guidance. FIN-2013-G001, at 3. For the purposes of this opinion,", "paragraph_id": "para_719" }, { "text": "it suffices to say that \"real currency\" is equivalent to what we", "paragraph_id": "para_720" }, { "text": "have been calling \"fiat currency\" and that bitcoin is a form of", "paragraph_id": "para_721" }, { "text": "\"convertible virtual currency.\" The guidance clarified that the", "paragraph_id": "para_722" }, { "text": "fact that a business exchanged bitcoin instead of fiat currency", "paragraph_id": "para_723" }, { "text": "would not exempt it from registration as a money transmitter. Id.", "paragraph_id": "para_724" }, { "text": "at 2 (explaining that \"a person engaged as a business in the", "paragraph_id": "para_725" }, { "text": "exchange of virtual currency for real currency, funds, or other", "paragraph_id": "para_726" }, { "text": "virtual currency\" is a money transmitter under FinCEN's", "paragraph_id": "para_727" }, { "text": "regulation).", "paragraph_id": "para_728" }, { "text": "- 28 -", "paragraph_id": "para_729" }, { "text": "interpretation,18 but neither party has pointed to any evidence", "paragraph_id": "para_730" }, { "text": "that FinCEN engaged in any enforcement activities against", "paragraph_id": "para_731" }, { "text": "businesses transmitting bitcoin which sought to compel them to", "paragraph_id": "para_732" }, { "text": "register (or comply with other regulations) prior to issuance of", "paragraph_id": "para_733" }, { "text": "the 2013 guidance. And for the purposes of this opinion, we'll", "paragraph_id": "para_734" }, { "text": "operate with the understanding that FinCEN, at least, first began", "paragraph_id": "para_735" }, { "text": "to regulate businesses that transmit virtual currencies in 2013.", "paragraph_id": "para_736" }, { "text": "Doing so lets us focus on the parties' key dispute: whether", "paragraph_id": "para_737" }, { "text": "FinCEN, nonetheless, had statutory authority to regulate virtual", "paragraph_id": "para_738" }, { "text": "currencies when it issued the 2013 guidance.", "paragraph_id": "para_739" }, { "text": "Freeman would like us to conclude it \"inconceivable\" (as", "paragraph_id": "para_740" }, { "text": "he tells it) that the single word \"funds\" as contained in the", "paragraph_id": "para_741" }, { "text": "effective version could refer to virtual currency, but we believe", "paragraph_id": "para_742" }, { "text": "his focus on that single word is misplaced and here's why. In", "paragraph_id": "para_743" }, { "text": "full, the effective definition (when bitcoin was created)", "paragraph_id": "para_744" }, { "text": "specified that businesses engaged in the \"transmission of funds\"", "paragraph_id": "para_745" }, { "text": "could include an \"informal money transfer system . . . outside of", "paragraph_id": "para_746" }, { "text": "the conventional financial institutions system.\" USA PATRIOT Act", "paragraph_id": "para_747" }, { "text": "§ 359(b), 115 Stat. at 328. Bitcoin and virtual currencies seem", "paragraph_id": "para_748" }, { "text": "18 Freeman takes the view that FinCEN did not begin regulating", "paragraph_id": "para_749" }, { "text": "bitcoin until \"long after the invention of bitcoin\" in 2008, when", "paragraph_id": "para_750" }, { "text": "it added the phrase \"value that substitutes for currency\" into its", "paragraph_id": "para_751" }, { "text": "regulations and then interpreted that phrase to refer to virtual", "paragraph_id": "para_752" }, { "text": "currencies. The government claims that FinCEN was regulating", "paragraph_id": "para_753" }, { "text": "virtual currencies all along and that FinCEN's actions in 2011 and", "paragraph_id": "para_754" }, { "text": "2013 merely \"confirmed\" its existing regulatory scheme.", "paragraph_id": "para_755" }, { "text": "- 29 -", "paragraph_id": "para_756" }, { "text": "to fall within this broad definition of a system that allows users", "paragraph_id": "para_757" }, { "text": "to transfer money without the participation of banks or other", "paragraph_id": "para_758" }, { "text": "traditional money movers. Freeman argues that in utilizing this", "paragraph_id": "para_759" }, { "text": "language in the 2001 amendment, Congress intended to target a", "paragraph_id": "para_760" }, { "text": "different informal money system -- \"the ancient South Asian money", "paragraph_id": "para_761" }, { "text": "exchange system called hawala\" and other \"hawala-type systems.\"19", "paragraph_id": "para_762" }, { "text": "But we find this to be a strained reading of the Committee Report", "paragraph_id": "para_763" }, { "text": "accompanying the 2001 legislation. A more natural reading is that", "paragraph_id": "para_764" }, { "text": "Congress was more generally concerned about \"underground black", "paragraph_id": "para_765" }, { "text": "market banking systems,\" whatever the form, H.R. Rep. No. 107-250,", "paragraph_id": "para_766" }, { "text": "at 33, and described hawalas as simply one example of the \"informal", "paragraph_id": "para_767" }, { "text": "value transfer banking systems\" on which FinCEN should focus", "paragraph_id": "para_768" }, { "text": "attention, id. at 63-64. Moreover, Congress highlighted", "paragraph_id": "para_769" }, { "text": "particular characteristics of \"value transfer systems\" that are", "paragraph_id": "para_770" }, { "text": "equally true of today's bitcoin use, including that such systems", "paragraph_id": "para_771" }, { "text": "frequently operated through \"messages relating to receipt or", "paragraph_id": "para_772" }, { "text": "disbursement of funds\" rather than transfer of physical funds", "paragraph_id": "para_773" }, { "text": "themselves, and that they were preferred by criminals because of", "paragraph_id": "para_774" }, { "text": "19 According to the findings of the House Committee on", "paragraph_id": "para_775" }, { "text": "Financial Services, \"hawala\" is the word for an \"ancient South", "paragraph_id": "para_776" }, { "text": "Asian money exchange system\" which \"consists of an international", "paragraph_id": "para_777" }, { "text": "network of non-bank financial agents, often built on trusted family", "paragraph_id": "para_778" }, { "text": "or cultural relationships.\" H.R. Rep. NO. 107-250, at 34. These", "paragraph_id": "para_779" }, { "text": "trusted relationships permit value to be transferred based on", "paragraph_id": "para_780" }, { "text": "messages rather than the physical movement of funds from one party", "paragraph_id": "para_781" }, { "text": "to another. Id. Presumably, when Freeman refers to \"hawala-type", "paragraph_id": "para_782" }, { "text": "systems,\" he refers to value transfer systems that function in a", "paragraph_id": "para_783" }, { "text": "similar manner.", "paragraph_id": "para_784" }, { "text": "- 30 -", "paragraph_id": "para_785" }, { "text": "\"the lack of record-keeping and opportunity for anonymity.\" Id.", "paragraph_id": "para_786" }, { "text": "at 34. Importantly, Congress believed that these sorts of", "paragraph_id": "para_787" }, { "text": "alternative transfer systems were \"already adequately covered\" by", "paragraph_id": "para_788" }, { "text": "the pre-2001 version of Section 5330. Id. at 63-64. The Committee", "paragraph_id": "para_789" }, { "text": "Report gives us no reason to think that a non-bank system allowing", "paragraph_id": "para_790" }, { "text": "people to transfer value using messages between trusted parties", "paragraph_id": "para_791" }, { "text": "should be treated differently than one which accomplishes the same", "paragraph_id": "para_792" }, { "text": "purpose using cryptographic protocols between strangers.", "paragraph_id": "para_793" }, { "text": "And even if we adopted Freeman's approach and looked at", "paragraph_id": "para_794" }, { "text": "the word \"funds\" in isolation, we'd be hard-pressed to think it", "paragraph_id": "para_795" }, { "text": "\"inconceivable\" that Congress would have intended \"funds\" to reach", "paragraph_id": "para_796" }, { "text": "cryptocurrency given that judicial decisions dating back to 2008", "paragraph_id": "para_797" }, { "text": "had already interpreted \"funds\" expansively to capture non-", "paragraph_id": "para_798" }, { "text": "physical currency. See, e.g., United States v. E-Gold, Ltd., 550", "paragraph_id": "para_799" }, { "text": "F. Supp. 2d 82, 85, 94-97 (D.D.C. 2008) (concluding that Section", "paragraph_id": "para_800" }, { "text": "5330's definition of money transmitting business included internet", "paragraph_id": "para_801" }, { "text": "service which allowed users to exchange fiat currency for digital", "paragraph_id": "para_802" }, { "text": "currency).20", "paragraph_id": "para_803" }, { "text": "20 We are mindful, as Freeman points out, that the virtual", "paragraph_id": "para_804" }, { "text": "currency at issue in E-Gold is not a \"cryptocurrency\" like bitcoin.", "paragraph_id": "para_805" }, { "text": "See 550 F. Supp. 2d at 85; FIN-2013-G001, at 3 & n.13 (describing", "paragraph_id": "para_806" }, { "text": "e-currencies and e-precious metals as a system where a broker or", "paragraph_id": "para_807" }, { "text": "dealer electronically distributes digital certificates of", "paragraph_id": "para_808" }, { "text": "ownership of fiat currency or precious metals); see also supra", "paragraph_id": "para_809" }, { "text": "note 2. But the fact that e-gold was backed by precious metals", "paragraph_id": "para_810" }, { "text": "while bitcoin transactions are recorded on a cryptographic ledger", "paragraph_id": "para_811" }, { "text": "is not a difference-maker in our current analysis because FinCEN", "paragraph_id": "para_812" }, { "text": "- 31 -", "paragraph_id": "para_813" }, { "text": "Nor does Freeman, relative to his historical argument,", "paragraph_id": "para_814" }, { "text": "make a showing that FinCEN has engaged in the sort of about-face", "paragraph_id": "para_815" }, { "text": "agency behavior typically found in the major questions cases. That", "paragraph_id": "para_816" }, { "text": "is significant because the Supreme Court, in applying the doctrine,", "paragraph_id": "para_817" }, { "text": "has particularly scrutinized with suspicion when an agency", "paragraph_id": "para_818" }, { "text": "reverses course on its long-standing decision not to regulate in", "paragraph_id": "para_819" }, { "text": "a particular field or in a particular manner. See West Virginia,", "paragraph_id": "para_820" }, { "text": "597 U.S. at 710-11, 713, 724 (striking regulation requiring", "paragraph_id": "para_821" }, { "text": "electricity generators to undergo sector-wide switch to sources", "paragraph_id": "para_822" }, { "text": "that produced less carbon dioxide, where EPA had previously only", "paragraph_id": "para_823" }, { "text": "exercised power under Section 111 of the Clean Air Act to set", "paragraph_id": "para_824" }, { "text": "emissions limits for individual plants). FinCEN had no history of", "paragraph_id": "para_825" }, { "text": "explicitly disclaiming its authority to regulate virtual currency", "paragraph_id": "para_826" }, { "text": "(or any other type of \"informal transfer banking system\") prior to", "paragraph_id": "para_827" }, { "text": "its 2011 and 2013 updates to its regulatory regime. Cf. Brown", "paragraph_id": "para_828" }, { "text": "& Williamson, 529 U.S. at 143-48 (concluding that the Food and", "paragraph_id": "para_829" }, { "text": "Drug Administration's (\"FDA\") decades-long position that it had no", "paragraph_id": "para_830" }, { "text": "jurisdiction over tobacco products and Congress's implicit", "paragraph_id": "para_831" }, { "text": "ratification of that position in subsequent tobacco-specific", "paragraph_id": "para_832" }, { "text": "views and treats both \"e-precious metals\" and cryptocurrencies as", "paragraph_id": "para_833" }, { "text": "convertible virtual currencies. 2013 Guidance at 3. Nor do we", "paragraph_id": "para_834" }, { "text": "understand why Freeman highlights that \"the e-Gold indictment", "paragraph_id": "para_835" }, { "text": "explicitly relied on FinCEN's implementing regulations\" as a point", "paragraph_id": "para_836" }, { "text": "of distinction. After all, Freeman similarly claims his", "paragraph_id": "para_837" }, { "text": "prosecution relies on FinCEN's implementing regulations (which is", "paragraph_id": "para_838" }, { "text": "the premise for applying the major questions doctrine).", "paragraph_id": "para_839" }, { "text": "- 32 -", "paragraph_id": "para_840" }, { "text": "legislation demonstrated a lack of legislative intent to delegate", "paragraph_id": "para_841" }, { "text": "authority over tobacco products to the FDA).", "paragraph_id": "para_842" }, { "text": "And simply because FinCEN declined to exercise such", "paragraph_id": "para_843" }, { "text": "authority prior to issuance of the 2013 guidance can hardly, by", "paragraph_id": "para_844" }, { "text": "our lights, be held against it; by Freeman's count, the agency", "paragraph_id": "para_845" }, { "text": "acted only five years after bitcoin was invented.21 The five-year", "paragraph_id": "para_846" }, { "text": "delay —— if we can call it such —— is understandable because the", "paragraph_id": "para_847" }, { "text": "money laundering risk posed by bitcoin and other cryptocurrencies", "paragraph_id": "para_848" }, { "text": "(and thus the need for targeted regulation) may not have been", "paragraph_id": "para_849" }, { "text": "instantly apparent upon bitcoin's invention. Cf. Ocean State", "paragraph_id": "para_850" }, { "text": "Tactical, LLC v. Rhode Island, 95 F.4th 38, 50 (1st Cir. 2024)", "paragraph_id": "para_851" }, { "text": "(\"Law advances more slowly than the technology it regulates, but", "paragraph_id": "para_852" }, { "text": "must nonetheless be able to respond when the ramifications of a", "paragraph_id": "para_853" }, { "text": "technological development become more apparent over time.\"). Plus", "paragraph_id": "para_854" }, { "text": "five years is a far cry from the decades of regulatory inaction", "paragraph_id": "para_855" }, { "text": "emphasized in the Supreme Court's major questions cases. See,", "paragraph_id": "para_856" }, { "text": "e.g., West Virginia, 597 U.S. at 734 (noting that \"it is pertinent", "paragraph_id": "para_857" }, { "text": "to our analysis that EPA has acted consistent with such a", "paragraph_id": "para_858" }, { "text": "limitation [on its regulatory power] for the first four decades of", "paragraph_id": "para_859" }, { "text": "the statute's existence\"); Ala. Ass'n of Realtors, 594 U.S. at 761", "paragraph_id": "para_860" }, { "text": "21 In fact, FinCEN proposed the addition of the phrase \"value", "paragraph_id": "para_861" }, { "text": "that substitutes for currency\" as early as 2009, the year following", "paragraph_id": "para_862" }, { "text": "bitcoin's invention. Amendment to the Bank Secrecy Act", "paragraph_id": "para_863" }, { "text": "Regulations-Definitions and Other Regulations Relating to Money", "paragraph_id": "para_864" }, { "text": "Services Businesses, 74 Fed. Reg. 22129, 22137, 22142 (proposed", "paragraph_id": "para_865" }, { "text": "May 12, 2009) (to be codified at 31 C.F.R. pt. 103).", "paragraph_id": "para_866" }, { "text": "- 33 -", "paragraph_id": "para_867" }, { "text": "(explaining that 1944 statutory provision had \"rarely been", "paragraph_id": "para_868" }, { "text": "invoked —— and never before to justify an eviction moratorium\";", "paragraph_id": "para_869" }, { "text": "instead \"[r]egulations under this authority have generally been", "paragraph_id": "para_870" }, { "text": "limited to quarantining infected individuals and prohibiting the", "paragraph_id": "para_871" }, { "text": "import or sale of animals known to transmit disease\"). In 2008,", "paragraph_id": "para_872" }, { "text": "cryptocurrencies were an emerging technology whose significance", "paragraph_id": "para_873" }, { "text": "within the money transfer marketplace was less than clear.", "paragraph_id": "para_874" }, { "text": "Freeman's own brief indicates that the market capitalization of", "paragraph_id": "para_875" }, { "text": "bitcoin in July 2010, roughly two years after its invention, was", "paragraph_id": "para_876" }, { "text": "only $200,000, a pittance in the nation's overall financial scheme,", "paragraph_id": "para_877" }, { "text": "and perhaps one not yet worthy of an expenditure of the limited", "paragraph_id": "para_878" }, { "text": "resources Congress appropriates to FinCEN.", "paragraph_id": "para_879" }, { "text": "\"Subsequent\" History", "paragraph_id": "para_880" }, { "text": "Unable to find a firm foothold in the history leading up", "paragraph_id": "para_881" }, { "text": "to FinCEN's exercise of regulatory authority over bitcoin, Freeman", "paragraph_id": "para_882" }, { "text": "points to events that occurred after FinCEN's issuance of the 2013", "paragraph_id": "para_883" }, { "text": "guidance. Reliance on this sort of \"subsequent\" history is rather", "paragraph_id": "para_884" }, { "text": "unorthodox. As the government notes, we've previously warned", "paragraph_id": "para_885" }, { "text": "against using the views of a later Congress to interpret \"the", "paragraph_id": "para_886" }, { "text": "meaning of statutes enacted by an earlier Congress\" when conducting", "paragraph_id": "para_887" }, { "text": "traditional statutory interpretation. Parlane Sportswear Co. v.", "paragraph_id": "para_888" }, { "text": "Weinberger, 513 F.2d 835, 837 n.2 (1st Cir. 1975); see also", "paragraph_id": "para_889" }, { "text": "Bruesewitz v. Wyeth LLC, 562 U.S. 223, 242 (2011) (\"Post-enactment", "paragraph_id": "para_890" }, { "text": "legislative history (a contradiction in terms) is not a legitimate", "paragraph_id": "para_891" }, { "text": "- 34 -", "paragraph_id": "para_892" }, { "text": "tool of statutory interpretation.\"); Doe v. Chao, 540 U.S. 614,", "paragraph_id": "para_893" }, { "text": "626–27 (2004) (\"[W]e have said repeatedly that subsequent", "paragraph_id": "para_894" }, { "text": "legislative history will rarely override a reasonable", "paragraph_id": "para_895" }, { "text": "interpretation of a statute that can be gleaned from its language", "paragraph_id": "para_896" }, { "text": "and legislative history prior to its enactment.\" (citation and", "paragraph_id": "para_897" }, { "text": "quotation marks omitted)). Tellingly, Freeman does not cite to a", "paragraph_id": "para_898" }, { "text": "single major questions case when arguing that these subsequent", "paragraph_id": "para_899" }, { "text": "events call for an alternative interpretation of Section 5330.", "paragraph_id": "para_900" }, { "text": "But as best we can glean, he believes that certain events post-", "paragraph_id": "para_901" }, { "text": "dating the 2013 guidance amount to noteworthy hallmarks of the", "paragraph_id": "para_902" }, { "text": "major questions cases.", "paragraph_id": "para_903" }, { "text": "First, Freeman discusses subsequent legislative activity", "paragraph_id": "para_904" }, { "text": "related to the regulation of virtual currencies, including failed", "paragraph_id": "para_905" }, { "text": "legislation and the 2021 amendment that enacted the current", "paragraph_id": "para_906" }, { "text": "definition of \"money transmitting business\" in Section 5330, and", "paragraph_id": "para_907" }, { "text": "concludes that Congress \"considered and repeatedly rejected", "paragraph_id": "para_908" }, { "text": "legislation\" that would have expressly empowered FinCEN to", "paragraph_id": "para_909" }, { "text": "regulate virtual currencies. Second, Freeman identifies", "paragraph_id": "para_910" }, { "text": "statements that FinCEN made regarding virtual currencies after", "paragraph_id": "para_911" }, { "text": "issuing the 2013 guidance and claims the statements reveal that", "paragraph_id": "para_912" }, { "text": "\"the agency recognized that the statute did not authorize the", "paragraph_id": "para_913" }, { "text": "regulation\" but nevertheless \"expanded\" its authority \"before the", "paragraph_id": "para_914" }, { "text": "authorization from Congress.\" Accepting Freeman's", "paragraph_id": "para_915" }, { "text": "characterization of these occurrences, we see there may be some", "paragraph_id": "para_916" }, { "text": "- 35 -", "paragraph_id": "para_917" }, { "text": "facial resemblance between these facts and a major questions case.", "paragraph_id": "para_918" }, { "text": "See Util. Air Regul. Grp., 573 U.S. at 321 (explaining that \"EPA", "paragraph_id": "para_919" }, { "text": "itself has repeatedly acknowledged\" that proposed regulation", "paragraph_id": "para_920" }, { "text": "\"would overthrow\" the \"structure and design\" of the enabling act);", "paragraph_id": "para_921" }, { "text": "Brown & Williamson, 529 U.S. at 144 (explaining that \"Congress", "paragraph_id": "para_922" }, { "text": "has acted against the backdrop of the FDA's consistent and repeated", "paragraph_id": "para_923" }, { "text": "statements that it lacked authority under the FDCA to regulate", "paragraph_id": "para_924" }, { "text": "tobacco\" and \"considered and rejected bills that would have granted", "paragraph_id": "para_925" }, { "text": "the FDA such jurisdiction\"). But given the Supreme Court's", "paragraph_id": "para_926" }, { "text": "eschewal of the importance of post-enactment legislative history", "paragraph_id": "para_927" }, { "text": "outside the major questions context, we express skepticism of these", "paragraph_id": "para_928" }, { "text": "events' relevance. See Bruesewitz, 562 U.S. at 242; Chao, 540", "paragraph_id": "para_929" }, { "text": "U.S. at 626–27. That said, despite our skepticism, in the absence", "paragraph_id": "para_930" }, { "text": "of a clear statement by the Supreme Court that subsequent history", "paragraph_id": "para_931" }, { "text": "has no bearing on the major questions determination,22 and given", "paragraph_id": "para_932" }, { "text": "the presence of thorough briefing from both parties on the point,", "paragraph_id": "para_933" }, { "text": "we will consider whether what happened after FinCEN issued its", "paragraph_id": "para_934" }, { "text": "2013 guidance influences our analysis of Freeman's argument.", "paragraph_id": "para_935" }, { "text": "22 In some instances, the Court's major questions cases have", "paragraph_id": "para_936" }, { "text": "referenced congressional acts or omissions that post-date the", "paragraph_id": "para_937" }, { "text": "agency's challenged regulatory assertion, but without relying on", "paragraph_id": "para_938" }, { "text": "them to resolve the major questions determination. See Ala. Ass'n", "paragraph_id": "para_939" }, { "text": "of Realtors, 594 U.S. at 760, 766 (recounting Congress's failure", "paragraph_id": "para_940" }, { "text": "to enact multiple extensions of CDC's challenged eviction", "paragraph_id": "para_941" }, { "text": "moratorium and noting that \"Congress was on notice that a further", "paragraph_id": "para_942" }, { "text": "extension would almost surely require new legislation, yet it", "paragraph_id": "para_943" }, { "text": "failed to act in the several weeks leading up to the moratorium's", "paragraph_id": "para_944" }, { "text": "expiration\").", "paragraph_id": "para_945" }, { "text": "- 36 -", "paragraph_id": "para_946" }, { "text": "In our view, the subsequent history only confirms that", "paragraph_id": "para_947" }, { "text": "FinCEN's interpretation of the breadth of its authority to regulate", "paragraph_id": "para_948" }, { "text": "was consistent with congressional intent. That is because \"when", "paragraph_id": "para_949" }, { "text": "Congress revisits a statute giving rise to a longstanding", "paragraph_id": "para_950" }, { "text": "administrative interpretation without pertinent change, the", "paragraph_id": "para_951" }, { "text": "'congressional failure to revise or repeal the agency's", "paragraph_id": "para_952" }, { "text": "interpretation is persuasive evidence that the interpretation is", "paragraph_id": "para_953" }, { "text": "the one intended by Congress.'\" Commodity Futures Trading Comm'n", "paragraph_id": "para_954" }, { "text": "v. Schor, 478 U.S. 833, 845-46 (1986) (citation omitted)", "paragraph_id": "para_955" }, { "text": "(concluding that deference to agency's interpretation was", "paragraph_id": "para_956" }, { "text": "warranted where Congress had twice amended the statute without", "paragraph_id": "para_957" }, { "text": "overruling the agency's assertion of jurisdiction); see Am. Forest", "paragraph_id": "para_958" }, { "text": "Res. Council v. United States, 77 F.4th 787, 801 n.16 (D.C. Cir.", "paragraph_id": "para_959" }, { "text": "2023), cert. denied, 144 S. Ct. 1110 (2024); Strickland v. Me.", "paragraph_id": "para_960" }, { "text": "Dep't of Hum. Servs., 96 F.3d 542, 547 (1st Cir. 1996). Typically,", "paragraph_id": "para_961" }, { "text": "courts invoke this principle of statutory interpretation to infer", "paragraph_id": "para_962" }, { "text": "legislative approval from Congress's silence and inaction, such as", "paragraph_id": "para_963" }, { "text": "when Congress re-enacts a statute without amendment to the portion", "paragraph_id": "para_964" }, { "text": "on which the agency has relied. See Clean Harbors Env't Servs.,", "paragraph_id": "para_965" }, { "text": "Inc. v. Herman, 146 F.3d 12, 20 (1st Cir. 1998); Strickland, 96", "paragraph_id": "para_966" }, { "text": "F.3d at 547. We think it applies with even more force when, as", "paragraph_id": "para_967" }, { "text": "here, an agency informs Congress of its interpretation of its", "paragraph_id": "para_968" }, { "text": "statutory authority and Congress affirmatively revises the", "paragraph_id": "para_969" }, { "text": "relevant statute to codify that interpretation. See Altman v.", "paragraph_id": "para_970" }, { "text": "- 37 -", "paragraph_id": "para_971" }, { "text": "SEC, 666 F.3d 1322, 1326 (D.C. Cir. 2011) (upholding SEC's", "paragraph_id": "para_972" }, { "text": "interpretation of enabling statute and explaining that SEC's rules", "paragraph_id": "para_973" }, { "text": "of practice were codified in 2002); cf. Tex. Dep't of Hous. & Cmty.", "paragraph_id": "para_974" }, { "text": "Affs. v. Inclusive Communities Project, Inc., 576 U.S. 519, 537-38", "paragraph_id": "para_975" }, { "text": "(2015) (explaining that Congress \"presupposed\" the existence of", "paragraph_id": "para_976" }, { "text": "disparate impact claims under the Fair Housing Act when it", "paragraph_id": "para_977" }, { "text": "subsequently added exemptions from disparate impact claims into", "paragraph_id": "para_978" }, { "text": "the statute). And to repeat, that's exactly what happened here.", "paragraph_id": "para_979" }, { "text": "In the years following FinCEN's issuance of the 2013", "paragraph_id": "para_980" }, { "text": "guidance, FinCEN informed Congress on multiple occasions that it", "paragraph_id": "para_981" }, { "text": "had been regulating virtual currency exchangers as businesses that", "paragraph_id": "para_982" }, { "text": "transmit \"value that substitutes for currency.\" Illicit Use of", "paragraph_id": "para_983" }, { "text": "Virtual Currency and the Law Enforcement Response: Hearing Before", "paragraph_id": "para_984" }, { "text": "the Subcomm. on Terrorism and Illicit Fin. of the H. Comm. on Fin.", "paragraph_id": "para_985" }, { "text": "Servs. 9, 25 (2018) (statement of Thomas Ott, Associate Director,", "paragraph_id": "para_986" }, { "text": "FinCEN Enf't Division) (testifying that \"value that substitutes", "paragraph_id": "para_987" }, { "text": "for currency\" is \"sufficient to cover virtual currency\")", "paragraph_id": "para_988" }, { "text": "[hereinafter H. Hrg. 115-102]; The Present and Future Impact of", "paragraph_id": "para_989" }, { "text": "Virtual Currency: Joint Hearing Before the Subcomm. on Econ. Pol'y", "paragraph_id": "para_990" }, { "text": "and Subcomm. on Nat'l Sec. and Int'l Trade and Fin. of the S. Comm.", "paragraph_id": "para_991" }, { "text": "on Banking, Hous., and Urban Affs., 113th Cong. 8, 11 (2013)", "paragraph_id": "para_992" }, { "text": "(statement of Jennifer Shasky Calvery, Director, FinCEN)", "paragraph_id": "para_993" }, { "text": "(testifying that FinCEN was \"able to cover [virtual currency] under", "paragraph_id": "para_994" }, { "text": "our pre-existing definitions and regulations, which include the", "paragraph_id": "para_995" }, { "text": "- 38 -", "paragraph_id": "para_996" }, { "text": "concept of other value that substitutes for currency\")", "paragraph_id": "para_997" }, { "text": "[hereinafter S. Hrg. 113-210]. Indeed FinCEN wrote to a Senate", "paragraph_id": "para_998" }, { "text": "committee that FinCEN \"would not object to Congress considering", "paragraph_id": "para_999" }, { "text": "codifying elements of money transmission to involve the", "paragraph_id": "para_1000" }, { "text": "transmission of currency, as well as value that substitutes for", "paragraph_id": "para_1001" }, { "text": "currency.\" Combatting Money Laundering and Other Forms of Illicit", "paragraph_id": "para_1002" }, { "text": "Finance: Regulator and Law Enforcement Perspective on Reform:", "paragraph_id": "para_1003" }, { "text": "Hearing Before the S. Comm. on Banking, Hous., and Urb. Affs.,", "paragraph_id": "para_1004" }, { "text": "115th Cong. 59, 62 (2018) (written statement of Kenneth A. Blanco,", "paragraph_id": "para_1005" }, { "text": "Director, FinCEN). As we previewed earlier, Congress subsequently", "paragraph_id": "para_1006" }, { "text": "added \"currency\" and \"value that substitutes for currency\" into", "paragraph_id": "para_1007" }, { "text": "the definition of \"money transmitting business\" in Section", "paragraph_id": "para_1008" }, { "text": "5330(d)(1). NDAA § 6102(d)(1)(2), 134 Stat. at 4553. In our view,", "paragraph_id": "para_1009" }, { "text": "that Congress not only declined to criticize or correct FinCEN's", "paragraph_id": "para_1010" }, { "text": "approach (despite having been informed of it on more than one", "paragraph_id": "para_1011" }, { "text": "occasion), but instead chose to codify it, strongly suggests that", "paragraph_id": "para_1012" }, { "text": "FinCEN's interpretation was consistent with Congress's intent.", "paragraph_id": "para_1013" }, { "text": "Freeman takes an alternative view of the same sequence", "paragraph_id": "para_1014" }, { "text": "of events, arguing that we should treat the 2021 amendment instead", "paragraph_id": "para_1015" }, { "text": "as evidence that the effective definition could not have supported", "paragraph_id": "para_1016" }, { "text": "FinCEN's earlier reading. This view relies on a principle of", "paragraph_id": "para_1017" }, { "text": "statutory interpretation that tells us to give meaning to the words", "paragraph_id": "para_1018" }, { "text": "of a statute in a manner that avoids redundancies. See City of", "paragraph_id": "para_1019" }, { "text": "Providence, 954 F.3d at 43. (We usually call this principle the", "paragraph_id": "para_1020" }, { "text": "- 39 -", "paragraph_id": "para_1021" }, { "text": "canon against superfluities or canon against surplusage.) To", "paragraph_id": "para_1022" }, { "text": "follow Freeman's logic, if \"funds\" pre-2021 already captured", "paragraph_id": "para_1023" }, { "text": "virtual currencies, it would be unnecessary to add language to the", "paragraph_id": "para_1024" }, { "text": "statute that also refers to virtual currencies. Because it is", "paragraph_id": "para_1025" }, { "text": "undisputed that Congress intended the addition of the phrase \"value", "paragraph_id": "para_1026" }, { "text": "that substitutes for currency\" to refer to virtual currencies, see", "paragraph_id": "para_1027" }, { "text": "NDAA § 6102(a) 134 Stat. at 4552, we should presume that the", "paragraph_id": "para_1028" }, { "text": "previous formulation of the statute did not capture this meaning.", "paragraph_id": "para_1029" }, { "text": "But we have previously warned that the canon against", "paragraph_id": "para_1030" }, { "text": "superfluities \"is not a straitjacket\" and \"should not, therefore,", "paragraph_id": "para_1031" }, { "text": "be employed inflexibly to rule out every interpretation of a", "paragraph_id": "para_1032" }, { "text": "statute that treats certain language as illustrative or", "paragraph_id": "para_1033" }, { "text": "clarifying.\" City of Providence, 954 F.3d at 43 (concluding that", "paragraph_id": "para_1034" }, { "text": "amendment \"appears calculated to remove any doubt\" that executive", "paragraph_id": "para_1035" }, { "text": "officer could exercise particular power consistent with", "paragraph_id": "para_1036" }, { "text": "pre-existing statutory authority). The prefatory language to the", "paragraph_id": "para_1037" }, { "text": "2021 amendment, NDAA § 6102(a), 134 Stat. at 4552, supports reading", "paragraph_id": "para_1038" }, { "text": "the addition of \"value that substitutes for currency\" as stressing", "paragraph_id": "para_1039" }, { "text": "that regulation of virtual currencies should be a FinCEN priority,", "paragraph_id": "para_1040" }, { "text": "rather than as giving FinCEN permission to regulate virtual", "paragraph_id": "para_1041" }, { "text": "currencies for the first time. NDAA § 6102(a)(4), 134 Stat. at", "paragraph_id": "para_1042" }, { "text": "4552 (explaining that FinCEN should \"mak[e] sure that steps to", "paragraph_id": "para_1043" }, { "text": "address emerging methods of such illicit financing [like virtual", "paragraph_id": "para_1044" }, { "text": "currencies] are high priorities\"); see Jerman v. Carlisle,", "paragraph_id": "para_1045" }, { "text": "- 40 -", "paragraph_id": "para_1046" }, { "text": "McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 592 (2010)", "paragraph_id": "para_1047" }, { "text": "(explaining that \"Congress may simply have intended to codify", "paragraph_id": "para_1048" }, { "text": "existing judicial interpretations to remove any potential for", "paragraph_id": "para_1049" }, { "text": "doubt in jurisdictions where courts had not yet addressed the", "paragraph_id": "para_1050" }, { "text": "issue\").", "paragraph_id": "para_1051" }, { "text": "And it's worth noting that Congress also has a history", "paragraph_id": "para_1052" }, { "text": "of revising the Section 5330 definition of \"money transmitting", "paragraph_id": "para_1053" }, { "text": "businesses\" for the purpose of clarification, rather than", "paragraph_id": "para_1054" }, { "text": "substantive expansion. H.R. Rep. No. 107-250, at 63-64 (\"Although", "paragraph_id": "para_1055" }, { "text": "the Committee believes that informal value transfer banking", "paragraph_id": "para_1056" }, { "text": "systems like hawalas are already adequately covered by references", "paragraph_id": "para_1057" }, { "text": "to money transmitting businesses in certain provisions of existing", "paragraph_id": "para_1058" }, { "text": "law, this section makes that understanding explicit.\"). Under", "paragraph_id": "para_1059" }, { "text": "these circumstances, we need not blindly apply the canon against", "paragraph_id": "para_1060" }, { "text": "surplusage to invalidate an agency regulation that Congress deemed", "paragraph_id": "para_1061" }, { "text": "worthy of codification. See Bufkin v. Collins, 145 S. Ct. 728,", "paragraph_id": "para_1062" }, { "text": "742 (2025) (\"[S]ometimes the better overall reading of the statute", "paragraph_id": "para_1063" }, { "text": "contains some redundancy.\" (citation omitted)); City of", "paragraph_id": "para_1064" }, { "text": "Providence, 954 F.3d at 43.", "paragraph_id": "para_1065" }, { "text": "Freeman nevertheless insists that \"Congress struggled", "paragraph_id": "para_1066" }, { "text": "with deciding how to classify and regulate virtual currencies\" and", "paragraph_id": "para_1067" }, { "text": "\"considered and repeatedly rejected legislation to assign", "paragraph_id": "para_1068" }, { "text": "regulatory authority to agencies like FinCEN.\" See West Virginia,", "paragraph_id": "para_1069" }, { "text": "597 U.S. at 731. But his position does not hold up to scrutiny.", "paragraph_id": "para_1070" }, { "text": "- 41 -", "paragraph_id": "para_1071" }, { "text": "To begin with, the legislative record simply doesn't show the sort", "paragraph_id": "para_1072" }, { "text": "of \"struggle\" that Freeman claims exists. In support of his", "paragraph_id": "para_1073" }, { "text": "contention, Freeman first points to the FinCEN Improvement Acts of", "paragraph_id": "para_1074" }, { "text": "2018 and 2019, two bills that passed in the House of", "paragraph_id": "para_1075" }, { "text": "Representatives but failed in the Senate. H.R. 6411, 115th Cong.", "paragraph_id": "para_1076" }, { "text": "(2018); H.R. 1414, 116th Cong. (2019). In relevant portion, these", "paragraph_id": "para_1077" }, { "text": "bills would have revised FinCEN's duty and power to \"[c]oordinate", "paragraph_id": "para_1078" }, { "text": "with financial intelligence units in other countries on anti-", "paragraph_id": "para_1079" }, { "text": "terrorism and anti-money laundering initiatives,\" 31 U.S.C.", "paragraph_id": "para_1080" }, { "text": "§ 310(b)(2)(H), to specifically \"includ[e] matters involving", "paragraph_id": "para_1081" }, { "text": "emerging technologies or value that substitutes for currency.\"", "paragraph_id": "para_1082" }, { "text": "H.R. 6411, § 3; H.R. 1414, § 3. But those bills did not address", "paragraph_id": "para_1083" }, { "text": "the definition of money transmitting business. Freeman also points", "paragraph_id": "para_1084" }, { "text": "us to the Improving Laundering Laws and Increasing Comprehensive", "paragraph_id": "para_1085" }, { "text": "Information Tracking of Criminal Activity in Shell Holdings Act", "paragraph_id": "para_1086" }, { "text": "(\"ILLICIT Cash Act\"), S. 2563 § 308, 116th Cong. (2019), which", "paragraph_id": "para_1087" }, { "text": "would have revised the definition of \"money transmitting business\"", "paragraph_id": "para_1088" }, { "text": "in Section 5330 to include \"value that substitutes for currency.\"", "paragraph_id": "para_1089" }, { "text": "Freeman emphasizes that this bill \"failed to even make it out of", "paragraph_id": "para_1090" }, { "text": "committee.\" Yet he concedes that the text of this bill eventually", "paragraph_id": "para_1091" }, { "text": "\"formed the basis for the [anti-money laundering] provisions of", "paragraph_id": "para_1092" }, { "text": "the 2021 NDAA.\" In other words, while Congress did fail to pass", "paragraph_id": "para_1093" }, { "text": "the ILLICIT Cash Act, it adopted the relevant language from this", "paragraph_id": "para_1094" }, { "text": "- 42 -", "paragraph_id": "para_1095" }, { "text": "bill two terms later as part of the 2021 amendment. NDAA § 6102,", "paragraph_id": "para_1096" }, { "text": "134 Stat. at 4552-53. Let us further explain.", "paragraph_id": "para_1097" }, { "text": "In a major questions case, an agency's assertion that it", "paragraph_id": "para_1098" }, { "text": "can regulate in a manner in which Congress has refused to legislate", "paragraph_id": "para_1099" }, { "text": "might give us reason to question whether the agency is contravening", "paragraph_id": "para_1100" }, { "text": "congressional intent. See West Virginia, 597 U.S. at 731 (applying", "paragraph_id": "para_1101" }, { "text": "major questions doctrine where EPA enacted program to reduce", "paragraph_id": "para_1102" }, { "text": "greenhouse gas emissions despite Congress's rejection of similar", "paragraph_id": "para_1103" }, { "text": "proposals); Ala. Ass'n of Realtors, 594 U.S. at 760 (explaining", "paragraph_id": "para_1104" }, { "text": "that Centers for Disease Control (\"CDC\") \"decided to do what", "paragraph_id": "para_1105" }, { "text": "Congress had not\" by imposing administrative eviction moratorium", "paragraph_id": "para_1106" }, { "text": "after Congress declined to extend its own statutory moratorium).", "paragraph_id": "para_1107" }, { "text": "But what we've chronicled as per Freeman's argument is hardly the", "paragraph_id": "para_1108" }, { "text": "sort of history that calls for application of the major questions", "paragraph_id": "para_1109" }, { "text": "doctrine. FinCEN did not watch Congress reject a proposal to", "paragraph_id": "para_1110" }, { "text": "regulate virtual currency exchanges as money transmitting", "paragraph_id": "para_1111" }, { "text": "businesses, only to sua sponte take up the same proposal itself.", "paragraph_id": "para_1112" }, { "text": "Instead, the bills that Freeman identifies were all introduced", "paragraph_id": "para_1113" }, { "text": "after FinCEN started regulating virtual currencies in 2013, and", "paragraph_id": "para_1114" }, { "text": "each bill would have codified FinCEN's \"value that substitutes for", "paragraph_id": "para_1115" }, { "text": "currency\" formulation, rather than curtailing any perceived", "paragraph_id": "para_1116" }, { "text": "administrative overreach. The bill containing the broadest", "paragraph_id": "para_1117" }, { "text": "amendment ultimately was incorporated into legislation that", "paragraph_id": "para_1118" }, { "text": "passed, codifying FinCEN's interpretation. See NDAA § 6102, 134", "paragraph_id": "para_1119" }, { "text": "- 43 -", "paragraph_id": "para_1120" }, { "text": "Stat. at 4552-53; ILLICIT Cash Act S. 2563 § 308. None of the", "paragraph_id": "para_1121" }, { "text": "Supreme Court's major questions cases have overturned agency", "paragraph_id": "para_1122" }, { "text": "action when a Congress takes the agency interpretation being", "paragraph_id": "para_1123" }, { "text": "challenged and chooses to enact it into law.23", "paragraph_id": "para_1124" }, { "text": "Finally, Freeman claims that \"FinCEN admitted that it", "paragraph_id": "para_1125" }, { "text": "had to expand its authority beyond the statutory language to", "paragraph_id": "para_1126" }, { "text": "capture virtual currency.\" He seemingly raises this argument", "paragraph_id": "para_1127" }, { "text": "because at times, the Supreme Court has emphasized that the", "paragraph_id": "para_1128" }, { "text": "agency's express disclaimer of its authority to regulate a", "paragraph_id": "para_1129" }, { "text": "particular industry or in a particular manner shows that a later", "paragraph_id": "para_1130" }, { "text": "attempt to assert the same authority exceeds the bounds of the", "paragraph_id": "para_1131" }, { "text": "23 The Supreme Court came closest to doing so in Alabama", "paragraph_id": "para_1132" }, { "text": "Association of Realtors, 594 U.S. 758. That case involved a", "paragraph_id": "para_1133" }, { "text": "challenge to an eviction moratorium issued by the CDC after", "paragraph_id": "para_1134" }, { "text": "Congress had allowed a legislative eviction moratorium to expire.", "paragraph_id": "para_1135" }, { "text": "Id. at 760. When the CDC's administrative moratorium was set to", "paragraph_id": "para_1136" }, { "text": "expire for the first time, Congress passed legislation extending", "paragraph_id": "para_1137" }, { "text": "the CDC's moratorium for one month, but subsequently declined to", "paragraph_id": "para_1138" }, { "text": "extend the moratorium any further. Id. The CDC nevertheless", "paragraph_id": "para_1139" }, { "text": "renewed the moratorium several times. Id. The Court's analysis", "paragraph_id": "para_1140" }, { "text": "in its per curiam opinion focused on the political and economic", "paragraph_id": "para_1141" }, { "text": "significance of the eviction moratorium rather than on whether", "paragraph_id": "para_1142" }, { "text": "Congress's subsequent legislative activity (and inactivity)", "paragraph_id": "para_1143" }, { "text": "amounted to tacit approval (or disapproval) of the moratorium.", "paragraph_id": "para_1144" }, { "text": "Id. at 764-65. In any event, Congress's one-month extension of", "paragraph_id": "para_1145" }, { "text": "the eviction moratorium did not amount to a word-for-word", "paragraph_id": "para_1146" }, { "text": "codification of the agency's interpretation of its statutory", "paragraph_id": "para_1147" }, { "text": "authority into the enabling statute, as occurred in this case.", "paragraph_id": "para_1148" }, { "text": "See Consolidated Appropriations Act, 2021, Pub. L. No. 116–260,", "paragraph_id": "para_1149" }, { "text": "§ 502, 134 Stat. 1182, 2078–2079 (2020) (stating simply that CDC's", "paragraph_id": "para_1150" }, { "text": "order \"is extended through January 31, 2021\" without amending", "paragraph_id": "para_1151" }, { "text": "enabling statute). And, moreover, Freeman does not attempt to", "paragraph_id": "para_1152" }, { "text": "argue that Alabama Association of Realtors stands for the", "paragraph_id": "para_1153" }, { "text": "proposition that the major questions doctrine applies even when", "paragraph_id": "para_1154" }, { "text": "Congress expressly approves of the agency's decision.", "paragraph_id": "para_1155" }, { "text": "- 44 -", "paragraph_id": "para_1156" }, { "text": "governing statute. See Util. Air Regul. Grp., 573 U.S. at 321", "paragraph_id": "para_1157" }, { "text": "(\"EPA itself has repeatedly acknowledged that applying the PSD and", "paragraph_id": "para_1158" }, { "text": "Title V permitting requirements to greenhouse gases would be", "paragraph_id": "para_1159" }, { "text": "inconsistent with —— in fact, would overthrow —— the Act's", "paragraph_id": "para_1160" }, { "text": "structure and design.\"); Brown & Williamson, 529 U.S. at 146", "paragraph_id": "para_1161" }, { "text": "(noting FDA's \"disavowal of jurisdiction\" over tobacco products).", "paragraph_id": "para_1162" }, { "text": "But we see no such history of disclaimer here. The supposed agency", "paragraph_id": "para_1163" }, { "text": "admissions Freeman refers to in support of his argument are various", "paragraph_id": "para_1164" }, { "text": "statements made by FinCEN officials in testimony before Congress", "paragraph_id": "para_1165" }, { "text": "and in a bar association speech. See, e.g., Crypto Crime in", "paragraph_id": "para_1166" }, { "text": "Context: Breaking Down the Illicit Activity in Digital Assets:", "paragraph_id": "para_1167" }, { "text": "Hearing Before the Subcomm. on Digit. Assets, Fin. Tech. and", "paragraph_id": "para_1168" }, { "text": "Inclusion of the H. Comm. on Fin. Servs., 118th Cong. (2023)", "paragraph_id": "para_1169" }, { "text": "(witness statement of Jane Khodarkovsky, Former Trial Att'y and", "paragraph_id": "para_1170" }, { "text": "Hum. Trafficking Fin. Specialist, Dep't of Justice) (no official", "paragraph_id": "para_1171" }, { "text": "transcript of hearing available) (quoted material appears on page", "paragraph_id": "para_1172" }, { "text": "11 of written witness statement), https://perma.cc/7RBZ-CPWX", "paragraph_id": "para_1173" }, { "text": "[hereinafter Khodarkovsky Statement]; H. Hrg. 115-102, supra, at", "paragraph_id": "para_1174" }, { "text": "9, 25 (statement of Thomas Ott, Associate Director, FinCEN Enf't", "paragraph_id": "para_1175" }, { "text": "Division); S. Hrg. 113-210, supra, at 5, 36 (statement of Jennifer", "paragraph_id": "para_1176" }, { "text": "Shasky Calvery, Director, FinCEN); FinCEN, Prepared Remarks of", "paragraph_id": "para_1177" }, { "text": "FinCEN Acting Dir. Him Das Delivered Virtually at the American", "paragraph_id": "para_1178" }, { "text": "Bankers Association/ American Bar Association Financial Crimes", "paragraph_id": "para_1179" }, { "text": "Enforcement Conference (Jan. 13, 2022), https://perma.cc/JXQ9-", "paragraph_id": "para_1180" }, { "text": "- 45 -", "paragraph_id": "para_1181" }, { "text": "BLNR. In Freeman's telling, these statements acknowledge that", "paragraph_id": "para_1182" }, { "text": "FinCEN lacked statutory authorization to regulate virtual", "paragraph_id": "para_1183" }, { "text": "currency.", "paragraph_id": "para_1184" }, { "text": "As an initial matter, we note that Freeman's argument", "paragraph_id": "para_1185" }, { "text": "appears to be an odd fit with the major questions cases, where a", "paragraph_id": "para_1186" }, { "text": "later assertion of authority contradicts an earlier disclaimer.", "paragraph_id": "para_1187" }, { "text": "That is so because each of the statements Freeman references", "paragraph_id": "para_1188" }, { "text": "post-date FinCEN's assertion in 2013, that virtual currency", "paragraph_id": "para_1189" }, { "text": "exchangers were subject to its regulations. And when we take a", "paragraph_id": "para_1190" }, { "text": "closer look at the statements Freeman has identified, we do not", "paragraph_id": "para_1191" }, { "text": "see FinCEN acknowledging any discrepancy between its statutory", "paragraph_id": "para_1192" }, { "text": "authority and its regulatory assertion (as Freeman claims it has).", "paragraph_id": "para_1193" }, { "text": "Most of these statements express FinCEN's concerns that virtual", "paragraph_id": "para_1194" }, { "text": "currencies might not be adequately addressed by the pre-existing", "paragraph_id": "para_1195" }, { "text": "regulatory framework (rather than concerns about any gap in the", "paragraph_id": "para_1196" }, { "text": "statutory scheme) and inform Congress of how FinCEN had updated", "paragraph_id": "para_1197" }, { "text": "its definitions to be in sync with Congress's statutory intent.", "paragraph_id": "para_1198" }, { "text": "See, e.g., S. Hrg. 113-210, supra, at 5, 36 (warning that virtual", "paragraph_id": "para_1199" }, { "text": "currencies are preferred by \"[i]llicit actors\" in part because", "paragraph_id": "para_1200" }, { "text": "they \"provide[] a loophole from the [anti-money laundering and", "paragraph_id": "para_1201" }, { "text": "combatting the financing of terrorism] regulatory safeguards in", "paragraph_id": "para_1202" }, { "text": "most countries around the world\" and explaining that FinCEN's", "paragraph_id": "para_1203" }, { "text": "regulatory guidance, rulings, and updates \"have been able to", "paragraph_id": "para_1204" }, { "text": "accommodate the development of new payment systems, including", "paragraph_id": "para_1205" }, { "text": "- 46 -", "paragraph_id": "para_1206" }, { "text": "virtual currency\"); H. Hrg. 115-102, supra, at 9, 25 (statement of", "paragraph_id": "para_1207" }, { "text": "Thomas Ott, Associate Director, FinCEN Enf't Division) (recounting", "paragraph_id": "para_1208" }, { "text": "regulatory acts intended to address virtual currencies and", "paragraph_id": "para_1209" }, { "text": "testifying that the \"regulatory regime right now, that we have in", "paragraph_id": "para_1210" }, { "text": "place, is sufficient to cover virtual currency . . . whether or", "paragraph_id": "para_1211" }, { "text": "not . . . a money transmitter is located within the continental", "paragraph_id": "para_1212" }, { "text": "United States\"); Das, supra (\"[W]e need a regulatory regime to", "paragraph_id": "para_1213" }, { "text": "match, one that accounts for crypto and other digital assets,", "paragraph_id": "para_1214" }, { "text": "evolution in the payments space, and other innovations that are", "paragraph_id": "para_1215" }, { "text": "driving the creation of new products, services, and delivery", "paragraph_id": "para_1216" }, { "text": "channels.\").24 Another simply acknowledges the codification of", "paragraph_id": "para_1217" }, { "text": "FinCEN's existing interpretation in 2021. Khodarkovsky Statement,", "paragraph_id": "para_1218" }, { "text": "supra, at 11. None of these statements amounts to an admission", "paragraph_id": "para_1219" }, { "text": "that FinCEN lacked statutory authority to regulate virtual", "paragraph_id": "para_1220" }, { "text": "currency exchangers as money transmitting businesses.", "paragraph_id": "para_1221" }, { "text": "Freeman also latches onto the following sentence from a", "paragraph_id": "para_1222" }, { "text": "2019 guidance document issued by FinCEN stating, \"The term 'other", "paragraph_id": "para_1223" }, { "text": "24 Freeman also claims that \"[a] former acting director of", "paragraph_id": "para_1224" }, { "text": "FinCEN, Himamauli Das, stated that the 2021 updates to the Patriot", "paragraph_id": "para_1225" }, { "text": "Act, including the amendment to § 5330, were necessary because the", "paragraph_id": "para_1226" }, { "text": "2001 law 'never anticipated the challenges of the 2020s: digital", "paragraph_id": "para_1227" }, { "text": "assets . . . .\" Appellant's Br. 49 (alterations in original)", "paragraph_id": "para_1228" }, { "text": "(quoting Das, supra). But of course, Congress did not need to", "paragraph_id": "para_1229" }, { "text": "\"anticipate\" the application of Section 5330 to virtual currencies", "paragraph_id": "para_1230" }, { "text": "in order for FinCEN to apply the statute's plain terms. See", "paragraph_id": "para_1231" }, { "text": "Bostock, 590 U.S. at 683. Nor does a high-level remark on the", "paragraph_id": "para_1232" }, { "text": "need to modernize the anti-money laundering legal framework amount", "paragraph_id": "para_1233" }, { "text": "to an admission that FinCEN had no statutory authority over virtual", "paragraph_id": "para_1234" }, { "text": "currencies until passage of the 2021 law.", "paragraph_id": "para_1235" }, { "text": "- 47 -", "paragraph_id": "para_1236" }, { "text": "value that substitutes for currency' encompasses situations in", "paragraph_id": "para_1237" }, { "text": "which the transmission does not involve currency, or funds, but", "paragraph_id": "para_1238" }, { "text": "instead involves something that the parties to a transaction", "paragraph_id": "para_1239" }, { "text": "recognize has value that is equivalent to or can substitute for", "paragraph_id": "para_1240" }, { "text": "currency.\" FinCEN, Application of FinCEN's Regulations to Certain", "paragraph_id": "para_1241" }, { "text": "Business Models Involving Convertible Virtual Currencies, FIN-", "paragraph_id": "para_1242" }, { "text": "2019-G001, at 4 (2019).25 According to Freeman, this sentence", "paragraph_id": "para_1243" }, { "text": "shows that FinCEN recognized that \"funds\" are different from \"value", "paragraph_id": "para_1244" }, { "text": "that substitutes for currency\" and \"that the word 'funds' in the", "paragraph_id": "para_1245" }, { "text": "2001 version of § 5330 did not capture virtual currency.\" We note,", "paragraph_id": "para_1246" }, { "text": "however, that the 2019 guidance does not mention Section 5330 at", "paragraph_id": "para_1247" }, { "text": "all and does not attempt to define the meaning of \"funds,\" even", "paragraph_id": "para_1248" }, { "text": "within the limited universe of the guidance document. Elsewhere", "paragraph_id": "para_1249" }, { "text": "in the same document, the word \"funds\" is used when referring to", "paragraph_id": "para_1250" }, { "text": "convertible virtual currencies. FIN-2019-G001, at 15, 19", "paragraph_id": "para_1251" }, { "text": "(referring to \"funds\" held in virtual currency wallets and \"funds\"", "paragraph_id": "para_1252" }, { "text": "accepted and retransmitted by service providers that anonymize", "paragraph_id": "para_1253" }, { "text": "virtual currency transactions). To read FinCEN's use of \"funds\"", "paragraph_id": "para_1254" }, { "text": "in this guidance document as a disclaimer of its statutory", "paragraph_id": "para_1255" }, { "text": "authority to regulate virtual currency under Section 5330 would", "paragraph_id": "para_1256" }, { "text": "simply blink reality.", "paragraph_id": "para_1257" }, { "text": "25 Freeman's brief incorrectly identifies the source of this", "paragraph_id": "para_1258" }, { "text": "sentence as the 2013 guidance. The language Freeman quotes", "paragraph_id": "para_1259" }, { "text": "actually appears in a separate document. FIN-2019-G001, at 4.", "paragraph_id": "para_1260" }, { "text": "- 48 -", "paragraph_id": "para_1261" }, { "text": "Breadth", "paragraph_id": "para_1262" }, { "text": "With the relevant history in mind, we examine the breadth", "paragraph_id": "para_1263" }, { "text": "of the power FinCEN has asserted, another factor the Supreme Court", "paragraph_id": "para_1264" }, { "text": "has directed us to consider as we decide if \"hesitation\" is called", "paragraph_id": "para_1265" }, { "text": "for before we affirm an agency's claim of regulatory authority.", "paragraph_id": "para_1266" }, { "text": "See West Virginia, 597 U.S. at 721. To begin, we do not buy", "paragraph_id": "para_1267" }, { "text": "Freeman's argument that FinCEN \"claim[ed] to discover in a long-", "paragraph_id": "para_1268" }, { "text": "extant statute an unheralded power.\" Util. Air Regul. Grp., 573", "paragraph_id": "para_1269" }, { "text": "U.S. at 324. In requiring virtual currency transmitters to", "paragraph_id": "para_1270" }, { "text": "register, FinCEN was not regulating in an \"unheralded\" or", "paragraph_id": "para_1271" }, { "text": "\"unprecedented\" manner, West Virginia, 597 U.S. at 724-25, 728", "paragraph_id": "para_1272" }, { "text": "(citations omitted) (explaining that EPA had never before", "paragraph_id": "para_1273" }, { "text": "attempted to systemically reduce emissions by \"'shifting'", "paragraph_id": "para_1274" }, { "text": "polluting activity 'from dirtier to cleaner sources'\" (citations", "paragraph_id": "para_1275" }, { "text": "omitted)), nor was FinCEN relying on an obscure, \"ancillary\" or", "paragraph_id": "para_1276" }, { "text": "\"gap filler\" statutory provision, id. at 724. To the contrary,", "paragraph_id": "para_1277" }, { "text": "that agency has continuously relied on Section 5330 as authority", "paragraph_id": "para_1278" }, { "text": "to regulate money transmitters since 1994. See Riegle Community", "paragraph_id": "para_1279" }, { "text": "Development and Regulatory Improvement Act of 1994, Pub. L. No.", "paragraph_id": "para_1280" }, { "text": "103-325 § 408, 108 Stat. 2160, 2249-51 (1994) (codified at 31", "paragraph_id": "para_1281" }, { "text": "U.S.C. § 5330). All it did in 2013 was explicitly specify that", "paragraph_id": "para_1282" }, { "text": "businesses transmitting virtual currency would be treated the same", "paragraph_id": "para_1283" }, { "text": "as those transmitting physical currency. In short, this", "paragraph_id": "para_1284" }, { "text": "\"unheralded power\" argument is doomed because FinCEN's regulation", "paragraph_id": "para_1285" }, { "text": "- 49 -", "paragraph_id": "para_1286" }, { "text": "of bitcoin is not the kind of \"unprecedented\" program, one so", "paragraph_id": "para_1287" }, { "text": "unlike FinCEN's historical approach to regulation, that would call", "paragraph_id": "para_1288" }, { "text": "for application of the major questions doctrine. See Biden v.", "paragraph_id": "para_1289" }, { "text": "Missouri, 595 U.S. 87, 90-91, 94 (2022) (holding that Secretary of", "paragraph_id": "para_1290" }, { "text": "Health and Human Services did not exceed statutory authority in", "paragraph_id": "para_1291" }, { "text": "promulgating rule conditioning receipt of Medicaid and Medicare", "paragraph_id": "para_1292" }, { "text": "funds on vaccination of healthcare providers where \"the Secretary", "paragraph_id": "para_1293" }, { "text": "routinely imposes conditions of participation that relate to the", "paragraph_id": "para_1294" }, { "text": "qualifications and duties of healthcare workers\"); cf. Nebraska,", "paragraph_id": "para_1295" }, { "text": "600 U.S. at 501 (reversing program by Secretary of Education to", "paragraph_id": "para_1296" }, { "text": "cancel loan obligations where \"Secretary has never previously", "paragraph_id": "para_1297" }, { "text": "claimed powers of this magnitude under the HEROES Act\" and \"past", "paragraph_id": "para_1298" }, { "text": "waivers and modifications issued under the Act have been extremely", "paragraph_id": "para_1299" }, { "text": "modest and narrow in scope\"); Ala. Ass'n of Realtors, 594 U.S. at", "paragraph_id": "para_1300" }, { "text": "765 (concluding that CDC could not impose eviction moratorium in", "paragraph_id": "para_1301" }, { "text": "counties experiencing substantial or high levels of COVID-19", "paragraph_id": "para_1302" }, { "text": "transmission where since the enactment of the claimed statutory", "paragraph_id": "para_1303" }, { "text": "authority in 1944, \"no regulation premised on it has even begun to", "paragraph_id": "para_1304" }, { "text": "approach the size or scope of the eviction moratorium\").", "paragraph_id": "para_1305" }, { "text": "Nor in challenging FinCEN's breadth of reach does", "paragraph_id": "para_1306" }, { "text": "Freeman attempt to argue that FinCEN's exercise of regulatory", "paragraph_id": "para_1307" }, { "text": "authority over virtual currency transmitters somehow falls outside", "paragraph_id": "para_1308" }, { "text": "its \"sphere of expertise.\" See Nat'l Fed'n of Indep. Bus. v. OSHA,", "paragraph_id": "para_1309" }, { "text": "595 U.S. 109, 117-18 (2022) (explaining that a \"broad public health", "paragraph_id": "para_1310" }, { "text": "- 50 -", "paragraph_id": "para_1311" }, { "text": "measure[],\" like a vaccine mandate, was \"outside of OSHA's sphere", "paragraph_id": "para_1312" }, { "text": "of expertise\" and was not authorized by 29 U.S.C. § 655(b)).", "paragraph_id": "para_1313" }, { "text": "FinCEN's enumerated statutory duties and powers specifically", "paragraph_id": "para_1314" }, { "text": "include analysis of \"emerging trends and methods in money", "paragraph_id": "para_1315" }, { "text": "laundering and other financial crimes\" and the identification of", "paragraph_id": "para_1316" }, { "text": "\"emerging threats\" and \"emerging technology\" to assist in federal", "paragraph_id": "para_1317" }, { "text": "investigations and in countering money laundering and terrorism.", "paragraph_id": "para_1318" }, { "text": "See 31 U.S.C. 310(b)(2)(C)(v), (b)(2)(M)-(N); cf. Missouri, 595", "paragraph_id": "para_1319" }, { "text": "U.S. at 93 (affirming vaccine mandate for healthcare workers", "paragraph_id": "para_1320" }, { "text": "promulgated under the Secretary of Health and Human Services'", "paragraph_id": "para_1321" }, { "text": "authority to pass regulation \"necessary in the interest of the", "paragraph_id": "para_1322" }, { "text": "health and safety of individuals who are furnished services\").", "paragraph_id": "para_1323" }, { "text": "Ultimately, and in the absence of facts suggesting", "paragraph_id": "para_1324" }, { "text": "FinCEN tried to wield unheralded power, or regulate in an area", "paragraph_id": "para_1325" }, { "text": "beyond its expertise, what Freeman's case seems to boil down to is", "paragraph_id": "para_1326" }, { "text": "this: Congress, in amending Section 5330 in 2001, simply could", "paragraph_id": "para_1327" }, { "text": "not have intended to regulate something that did not yet exist.", "paragraph_id": "para_1328" }, { "text": "But there is nothing compelling about this timing-of-events", "paragraph_id": "para_1329" }, { "text": "argument. Taken to its logical conclusion, Freeman's argument", "paragraph_id": "para_1330" }, { "text": "more or less advocates for a principle of statutory construction", "paragraph_id": "para_1331" }, { "text": "that exempts new technologies from existing statutory schemes", "paragraph_id": "para_1332" }, { "text": "unless Congress had somehow foreseen the course of technological", "paragraph_id": "para_1333" }, { "text": "innovation and had expressly accounted for it ahead of time. But", "paragraph_id": "para_1334" }, { "text": "no such legal principle exists that we are aware of. Cf. Steele", "paragraph_id": "para_1335" }, { "text": "- 51 -", "paragraph_id": "para_1336" }, { "text": "v. Comm'r of Soc. Sec., 51 F.4th 1059, 1060-61 (11th Cir. 2022)", "paragraph_id": "para_1337" }, { "text": "(certifying questions related to whether a child conceived via in", "paragraph_id": "para_1338" }, { "text": "vitro fertilization with cryo-preserved sperm after father's death", "paragraph_id": "para_1339" }, { "text": "was entitled to benefits as father's child under the Social", "paragraph_id": "para_1340" }, { "text": "Security Act and Florida law), certified question answered, 385", "paragraph_id": "para_1341" }, { "text": "So. 3d 587 (Fla. 2024); Application of Sarkar, 588 F.2d 1330, 1333", "paragraph_id": "para_1342" }, { "text": "(C.C.P.A. 1978) (\"Congress cannot be expected to foresee, or to", "paragraph_id": "para_1343" }, { "text": "annually amend [the Patent Act] to incorporate, every future", "paragraph_id": "para_1344" }, { "text": "breakthrough onto entirely new technological terrain.\"). Courts", "paragraph_id": "para_1345" }, { "text": "routinely enforce \"plain statutory commands\" even where Congress", "paragraph_id": "para_1346" }, { "text": "may not have expected the statute to apply to certain factual", "paragraph_id": "para_1347" }, { "text": "situations at the time of passage. See Bostock, 590 U.S. at 683.", "paragraph_id": "para_1348" }, { "text": "The only case Freeman cites in support of his timing", "paragraph_id": "para_1349" }, { "text": "theory is National Federation of Independent Business v. OSHA.", "paragraph_id": "para_1350" }, { "text": "595 U.S. at 114-19. According to Freeman, the Supreme Court", "paragraph_id": "para_1351" }, { "text": "rightly rejected the Occupational Health and Safety", "paragraph_id": "para_1352" }, { "text": "Administration's (\"OSHA\") \"attempt to impose a COVID vaccine", "paragraph_id": "para_1353" }, { "text": "mandate based on a statutory provision adopted 50 years before the", "paragraph_id": "para_1354" }, { "text": "pandemic,\" and, says Freeman, \"[t]he same principles [should]", "paragraph_id": "para_1355" }, { "text": "apply here.\" Yet nothing in the decision suggests that the Court", "paragraph_id": "para_1356" }, { "text": "based its opinion on the fact that COVID-19 was a \"new\" virus that", "paragraph_id": "para_1357" }, { "text": "did not exist when Congress enacted the Occupational Safety and", "paragraph_id": "para_1358" }, { "text": "Health Act in 1970. See id. at 114. Instead, the Court's focus", "paragraph_id": "para_1359" }, { "text": "was the unprecedented nature of OSHA's action in mandating", "paragraph_id": "para_1360" }, { "text": "- 52 -", "paragraph_id": "para_1361" }, { "text": "universal vaccination and the apparent disconnect between such a", "paragraph_id": "para_1362" }, { "text": "vaccine mandate and OSHA's actual sphere of expertise. Id. at 119", "paragraph_id": "para_1363" }, { "text": "(\"OSHA, in its half century of existence, has never before adopted", "paragraph_id": "para_1364" }, { "text": "a broad public health regulation of this kind —— addressing a", "paragraph_id": "para_1365" }, { "text": "threat that is untethered, in any causal sense, from the", "paragraph_id": "para_1366" }, { "text": "workplace.\"). Giving some credence to Freeman's assertion, the", "paragraph_id": "para_1367" }, { "text": "reasoning in National Federation might resonate with us if, say,", "paragraph_id": "para_1368" }, { "text": "FinCEN decided to regulate materials used to manufacture illegal", "paragraph_id": "para_1369" }, { "text": "drugs on the basis that fewer illegal drug sales would reduce money", "paragraph_id": "para_1370" }, { "text": "laundering. Freeman's view of National Federation's holding", "paragraph_id": "para_1371" }, { "text": "appears to be an alternate reality in which OSHA had long exercised", "paragraph_id": "para_1372" }, { "text": "statutory authority to issue vaccine mandates to address viral", "paragraph_id": "para_1373" }, { "text": "spread, only for the Supreme Court to strike down its COVID-19", "paragraph_id": "para_1374" }, { "text": "vaccine mandate on the basis that COVID-19 was a new type of virus", "paragraph_id": "para_1375" }, { "text": "with an extraordinary and unforeseen impact on the United States.", "paragraph_id": "para_1376" }, { "text": "That simply is not what National Federation is about, and there is", "paragraph_id": "para_1377" }, { "text": "no coherent analogy between the unprecedented nature of OSHA's", "paragraph_id": "para_1378" }, { "text": "regulatory assertion in that case and what happened here.", "paragraph_id": "para_1379" }, { "text": "Put differently, under Freeman's characterization of", "paragraph_id": "para_1380" }, { "text": "National Federation, the major questions doctrine would apply any", "paragraph_id": "para_1381" }, { "text": "time an agency relied on a long extant statute to regulate an", "paragraph_id": "para_1382" }, { "text": "impactful new technology. This would transform a legal doctrine", "paragraph_id": "para_1383" }, { "text": "meant for extraordinary cases into a commonplace principle of", "paragraph_id": "para_1384" }, { "text": "statutory interpretation. Because nothing in the history or", "paragraph_id": "para_1385" }, { "text": "- 53 -", "paragraph_id": "para_1386" }, { "text": "breadth of FinCEN's regulation of money transmitting businesses", "paragraph_id": "para_1387" }, { "text": "calls for application of the major questions doctrine, we turn now", "paragraph_id": "para_1388" }, { "text": "to the political and economic significance of the regulation to", "paragraph_id": "para_1389" }, { "text": "see if those considerations are difference-makers.", "paragraph_id": "para_1390" }, { "text": "Political and Economic Significance", "paragraph_id": "para_1391" }, { "text": "Political Significance", "paragraph_id": "para_1392" }, { "text": "Freeman asserts that virtual currencies have \"provoked", "paragraph_id": "para_1393" }, { "text": "much political debate\" (though he identifies no specific example", "paragraph_id": "para_1394" }, { "text": "of it), and by this assertion seems to suggest that political", "paragraph_id": "para_1395" }, { "text": "debate equates to political significance. As best we can tell, he", "paragraph_id": "para_1396" }, { "text": "relies on his account of the legislative history of Section 5330", "paragraph_id": "para_1397" }, { "text": "(which we've just explained only shows Congress's approval of", "paragraph_id": "para_1398" }, { "text": "FinCEN's regulation of virtual currencies) rather than on any", "paragraph_id": "para_1399" }, { "text": "meaningful or controversial legislative flashpoint that might call", "paragraph_id": "para_1400" }, { "text": "into question Congress's intent to regulate virtual currencies.", "paragraph_id": "para_1401" }, { "text": "To his nebulous \"provoked much political debate\" political", "paragraph_id": "para_1402" }, { "text": "significance contention, Freeman, in his reply brief, adds a", "paragraph_id": "para_1403" }, { "text": "federalism concern —— that FinCEN's regulation of virtual", "paragraph_id": "para_1404" }, { "text": "currencies \"intrudes into an area that is the particular domain of", "paragraph_id": "para_1405" }, { "text": "state law.\" See Ala. Ass'n of Realtors, 594 U.S. at 764. We think", "paragraph_id": "para_1406" }, { "text": "this after-thought argument is likely waived, given that he had", "paragraph_id": "para_1407" }, { "text": "- 54 -", "paragraph_id": "para_1408" }, { "text": "every reason to make it in his opening brief.26 United States v.", "paragraph_id": "para_1409" }, { "text": "Tosi, 897 F.3d 12, 15 (1st Cir. 2018) (\"[A]rguments available at", "paragraph_id": "para_1410" }, { "text": "the outset but raised for the first time in a reply brief need not", "paragraph_id": "para_1411" }, { "text": "be considered.\"). Even if we were to give him the courtesy of the", "paragraph_id": "para_1412" }, { "text": "doubt, his only support for this federalism proposition is a single", "paragraph_id": "para_1413" }, { "text": "sentence from a Congressional Research Service report indicating", "paragraph_id": "para_1414" }, { "text": "that \"[m]oney transmitters are regulated and licensed at the state", "paragraph_id": "para_1415" }, { "text": "level.\" See Andrew P. Scott, Cong. Rsch. Serv., R46486,", "paragraph_id": "para_1416" }, { "text": "Telegraphs, Steamships, and Virtual Currency: An Analysis of Money", "paragraph_id": "para_1417" }, { "text": "Transmitter Regulation 1 n.1 (2020). That federal and state anti-", "paragraph_id": "para_1418" }, { "text": "money laundering regulatory regimes might co-exist hardly", "paragraph_id": "para_1419" }, { "text": "demonstrates that the registration requirement is \"significantly", "paragraph_id": "para_1420" }, { "text": "alter[ing] the balance between federal and state power and the", "paragraph_id": "para_1421" }, { "text": "power of the Government over private property\" in the same manner", "paragraph_id": "para_1422" }, { "text": "as an eviction moratorium. See Ala. Ass'n of Realtors, 594 U.S.", "paragraph_id": "para_1423" }, { "text": "at 764 (reasoning that \"the landlord-tenant relationship\" is a", "paragraph_id": "para_1424" }, { "text": "\"particular domain of state law\" upon which eviction moratorium", "paragraph_id": "para_1425" }, { "text": "26 Freeman claims that this argument properly responds to the", "paragraph_id": "para_1426" }, { "text": "government's assertion that he had not made any showing of an", "paragraph_id": "para_1427" }, { "text": "intrusion into the particular domain of state law and is thus a", "paragraph_id": "para_1428" }, { "text": "proper subject for a reply brief. See Wills v. Brown Univ., 184", "paragraph_id": "para_1429" }, { "text": "F.3d 20, 27 (1st Cir. 1999) (\"Reply briefs are to counter the", "paragraph_id": "para_1430" }, { "text": "appellee's arguments, not to offer new theories of error for the", "paragraph_id": "para_1431" }, { "text": "first time.\"). In our view, Freeman is not responding to a", "paragraph_id": "para_1432" }, { "text": "counterargument. He is belatedly raising an argument which the", "paragraph_id": "para_1433" }, { "text": "government pointed out he had neglected to include in his opening", "paragraph_id": "para_1434" }, { "text": "brief. See United States v. Mojica-Ramos, 103 F.4th 844, 849 n.3", "paragraph_id": "para_1435" }, { "text": "(1st Cir. 2024).", "paragraph_id": "para_1436" }, { "text": "- 55 -", "paragraph_id": "para_1437" }, { "text": "intrudes). Accordingly, we see no indication that when FinCEN", "paragraph_id": "para_1438" }, { "text": "began regulating virtual currencies in 2013, it was acting on a", "paragraph_id": "para_1439" }, { "text": "question of vast political significance.", "paragraph_id": "para_1440" }, { "text": "Economic Significance", "paragraph_id": "para_1441" }, { "text": "Freeman puts some more elbow grease into his argument", "paragraph_id": "para_1442" }, { "text": "regarding economic significance, citing statistics to show the", "paragraph_id": "para_1443" }, { "text": "growth in the bitcoin market in the last decade and a half.", "paragraph_id": "para_1444" }, { "text": "According to Freemans's sources, the overall market capitalization", "paragraph_id": "para_1445" }, { "text": "of bitcoin grew from less than $200,000 to approximately $1.2", "paragraph_id": "para_1446" }, { "text": "trillion between July 2010 and May 2024, and virtual currencies", "paragraph_id": "para_1447" }, { "text": "combined had a total market capitalization of approximately $2.22", "paragraph_id": "para_1448" }, { "text": "trillion in July 2024. But Freeman's citation to the value of", "paragraph_id": "para_1449" }, { "text": "bitcoin and other virtual currencies misunderstands the nature of", "paragraph_id": "para_1450" }, { "text": "our inquiry in at least two ways. First, the major questions cases", "paragraph_id": "para_1451" }, { "text": "direct our attention to, inter alia, the economic significance of", "paragraph_id": "para_1452" }, { "text": "the agency's assertion of regulatory power, not just the size of", "paragraph_id": "para_1453" }, { "text": "the industry being regulated. West Virginia, 597 U.S. at 721.", "paragraph_id": "para_1454" }, { "text": "For instance, in applying the major questions doctrine to a", "paragraph_id": "para_1455" }, { "text": "Department of Education attempt to cancel student debt, the Supreme", "paragraph_id": "para_1456" }, { "text": "Court did not cite to the total amount of outstanding student loan", "paragraph_id": "para_1457" }, { "text": "debt nationwide; instead it calculated the economic impact based", "paragraph_id": "para_1458" }, { "text": "on an estimated total amount of debt to be cancelled by the agency.", "paragraph_id": "para_1459" }, { "text": "Nebraska, 600 U.S. at 496, 502 (emphasizing cancellation of $430", "paragraph_id": "para_1460" }, { "text": "billion in federal debt for 43 million Americans, presumably based", "paragraph_id": "para_1461" }, { "text": "- 56 -", "paragraph_id": "para_1462" }, { "text": "on planned cancellation of $10,000 for each qualifying borrower).", "paragraph_id": "para_1463" }, { "text": "Similarly, in cases holding that the Environmental Protection", "paragraph_id": "para_1464" }, { "text": "Agency had exceeded its statutory authority, the Court's focus was", "paragraph_id": "para_1465" }, { "text": "on the cost of compliance, not merely on the size of energy sector.", "paragraph_id": "para_1466" }, { "text": "West Virginia, 597 U.S. at 714 (emphasizing that \"EPA's own", "paragraph_id": "para_1467" }, { "text": "modeling concluded that the rule would entail billions of dollars", "paragraph_id": "para_1468" }, { "text": "in compliance costs\"); Util. Air Regul. Grp., 573 U.S. at 321-22", "paragraph_id": "para_1469" }, { "text": "(describing growth in administrative and permitting costs that", "paragraph_id": "para_1470" }, { "text": "would result from the proposed rule).", "paragraph_id": "para_1471" }, { "text": "As the district court recognized below (and the", "paragraph_id": "para_1472" }, { "text": "government repeats on appeal), FinCEN has not banned all", "paragraph_id": "para_1473" }, { "text": "transactions in virtual currency or attempted to regulate all users", "paragraph_id": "para_1474" }, { "text": "of virtual currency (such as those who use virtual currency to", "paragraph_id": "para_1475" }, { "text": "purchase other goods or services). See FIN-2013-G001, at 2", "paragraph_id": "para_1476" }, { "text": "(explaining that a \"user who obtains convertible virtual currency", "paragraph_id": "para_1477" }, { "text": "and uses it to purchase real or virtual goods or services", "paragraph_id": "para_1478" }, { "text": "is . . . not subject to FinCEN's registration, reporting, and", "paragraph_id": "para_1479" }, { "text": "recordkeeping regulations.\"). Instead, it is simply requiring", "paragraph_id": "para_1480" }, { "text": "businesses that transmit virtual currencies to register.27 Thus,", "paragraph_id": "para_1481" }, { "text": "27 This opinion focuses on the registration requirement under", "paragraph_id": "para_1482" }, { "text": "Section 5330 and does not address other aspects of compliance for", "paragraph_id": "para_1483" }, { "text": "money transmitting businesses, such as reporting. See", "paragraph_id": "para_1484" }, { "text": "FIN-2013-G001, at 2. This is because neither party has developed", "paragraph_id": "para_1485" }, { "text": "any argument about the other regulatory requirements, and so we", "paragraph_id": "para_1486" }, { "text": "have no information to go on. See Borrás-Borrero v. Corporación", "paragraph_id": "para_1487" }, { "text": "del Fondo del Seguro del Estado, 958 F.3d 26, 34 (1st Cir. 2020)", "paragraph_id": "para_1488" }, { "text": "- 57 -", "paragraph_id": "para_1489" }, { "text": "the relevant question, in our view, is whether the cost of", "paragraph_id": "para_1490" }, { "text": "complying with FinCEN's regulation is so high that we should", "paragraph_id": "para_1491" }, { "text": "hesitate before assuming that FinCEN was permitted to enact such", "paragraph_id": "para_1492" }, { "text": "a regulation. Freeman has made no attempt to demonstrate the cost", "paragraph_id": "para_1493" }, { "text": "of compliance. By contrast, the government cites trial testimony", "paragraph_id": "para_1494" }, { "text": "suggesting that registration is free and that other small", "paragraph_id": "para_1495" }, { "text": "businesses that exchanged virtual currencies complied or planned", "paragraph_id": "para_1496" }, { "text": "to comply with the registration requirement. Indeed Freeman's", "paragraph_id": "para_1497" }, { "text": "breathless account of the rise of virtual currencies suggests that", "paragraph_id": "para_1498" }, { "text": "FinCEN's regulation placed no meaningful economic burden on the", "paragraph_id": "para_1499" }, { "text": "industry.", "paragraph_id": "para_1500" }, { "text": "Second, it seems rather puzzling for Freeman to argue to", "paragraph_id": "para_1501" }, { "text": "us that FinCEN undertook an extraordinary expansion of its", "paragraph_id": "para_1502" }, { "text": "regulatory authority in 2013, by citing to the market", "paragraph_id": "para_1503" }, { "text": "capitalization of bitcoin and other virtual currencies eleven", "paragraph_id": "para_1504" }, { "text": "years later in May and July of 2024. To illustrate the problem", "paragraph_id": "para_1505" }, { "text": "with Freeman's approach, we look to the motion to dismiss papers", "paragraph_id": "para_1506" }, { "text": "(joined by Freeman), which asserted that the relevant data point", "paragraph_id": "para_1507" }, { "text": "was the overall market capitalization of \"non-state issued digital", "paragraph_id": "para_1508" }, { "text": "assets\" in November 2021, estimated to be $3 trillion. Apparently,", "paragraph_id": "para_1509" }, { "text": "in less than three years, the market capitalization of virtual", "paragraph_id": "para_1510" }, { "text": "(explaining that \"we are generally reluctant to venture beyond the", "paragraph_id": "para_1511" }, { "text": "ambit of the parties' arguments to decide an issue without full", "paragraph_id": "para_1512" }, { "text": "briefing\").", "paragraph_id": "para_1513" }, { "text": "- 58 -", "paragraph_id": "para_1514" }, { "text": "currencies fell by roughly $800 billion (which would be more than", "paragraph_id": "para_1515" }, { "text": "a quarter of the 2021 value). By relying on this data, does", "paragraph_id": "para_1516" }, { "text": "Freeman intend to assert that a legal defense positing that", "paragraph_id": "para_1517" }, { "text": "regulation of virtual currencies is a major question would have", "paragraph_id": "para_1518" }, { "text": "been more likely to succeed in November 2021 than in July 2024?", "paragraph_id": "para_1519" }, { "text": "Clearly it would be absurd to hold that FinCEN's regulatory", "paragraph_id": "para_1520" }, { "text": "authority waxes and wanes with the price of volatile assets like", "paragraph_id": "para_1521" }, { "text": "bitcoin. In our view, the relevant inquiry is whether regulation", "paragraph_id": "para_1522" }, { "text": "of virtual currencies was a matter of vast political and economic", "paragraph_id": "para_1523" }, { "text": "significance at or around the time FinCEN purportedly decided to", "paragraph_id": "para_1524" }, { "text": "exercise its authority (back in 2011 and 2013). See West Virginia,", "paragraph_id": "para_1525" }, { "text": "597 U.S. at 714 (noting an estimate of compliance costs that would", "paragraph_id": "para_1526" }, { "text": "total billions of dollars from a 2015 regulatory impact analysis", "paragraph_id": "para_1527" }, { "text": "as support for the economic significance of a 2015 rule); Ala.", "paragraph_id": "para_1528" }, { "text": "Ass'n of Realtors, 594 U.S. at 764 (treating \"nearly $50 billion", "paragraph_id": "para_1529" }, { "text": "in emergency rental assistance\" passed in January 2021 as \"a", "paragraph_id": "para_1530" }, { "text": "reasonable proxy\" of the economic impact of eviction moratorium", "paragraph_id": "para_1531" }, { "text": "imposed in 2020 and extended into 2021 (citing Temporary Halt in", "paragraph_id": "para_1532" }, { "text": "Residential Evictions in Communities With Substantial or High", "paragraph_id": "para_1533" }, { "text": "Transmission of COVID-19 To Prevent the Further Spread of COVID-19,", "paragraph_id": "para_1534" }, { "text": "86 Fed. Reg. 43244, 43247 (Aug. 6, 2021))). According to the", "paragraph_id": "para_1535" }, { "text": "motion to dismiss papers, the market capitalization of bitcoin was", "paragraph_id": "para_1536" }, { "text": "only $1.17 billion in May 2013, as opposed to the $1.2 trillion", "paragraph_id": "para_1537" }, { "text": "figure from May 2024 that Freeman would like us to focus on. The", "paragraph_id": "para_1538" }, { "text": "- 59 -", "paragraph_id": "para_1539" }, { "text": "fact that the relevant industry grows substantially while subject", "paragraph_id": "para_1540" }, { "text": "to a regulatory scheme does not heighten the economic significance", "paragraph_id": "para_1541" }, { "text": "of the regulatory assertion. If anything, greater growth would", "paragraph_id": "para_1542" }, { "text": "seem to suggest a financial marketplace unhampered by FinCEN's", "paragraph_id": "para_1543" }, { "text": "regulatory scheme.", "paragraph_id": "para_1544" }, { "text": "* * *", "paragraph_id": "para_1545" }, { "text": "Summing up, Freeman's appeal is chock-full of major-", "paragraph_id": "para_1546" }, { "text": "questions rhetoric, but under scrutiny, it bears little", "paragraph_id": "para_1547" }, { "text": "resemblance to the line of extraordinary cases the Supreme Court", "paragraph_id": "para_1548" }, { "text": "has held triggers the major questions doctrine. Requiring money", "paragraph_id": "para_1549" }, { "text": "transmitting businesses that deal in virtual currency to register", "paragraph_id": "para_1550" }, { "text": "is not a matter of such vast political and economic significance,", "paragraph_id": "para_1551" }, { "text": "nor so broad as to be inconsistent with FinCEN's history, that we", "paragraph_id": "para_1552" }, { "text": "should \"hesitate\" to interpret Section 5330 consistent with the", "paragraph_id": "para_1553" }, { "text": "existence of such regulation. West Virginia, 597 U.S. at 721", "paragraph_id": "para_1554" }, { "text": "(citation omitted). Because there is no major question, we need", "paragraph_id": "para_1555" }, { "text": "not reach the question of whether Congress spoke with sufficient", "paragraph_id": "para_1556" }, { "text": "clarity to permit FinCEN's to registration requirement for money", "paragraph_id": "para_1557" }, { "text": "transmitters dealing in virtual currencies.28 We thus affirm the", "paragraph_id": "para_1558" }, { "text": "district court's ruling on the motion to dismiss the indictment.", "paragraph_id": "para_1559" }, { "text": "28 That said, we have difficulty imagining how Congress could", "paragraph_id": "para_1560" }, { "text": "have spoken more clearly under these circumstances, where (1) the", "paragraph_id": "para_1561" }, { "text": "plain meaning of \"funds\" includes virtual currency; (2) the", "paragraph_id": "para_1562" }, { "text": "effective statute also explicitly refers to \"an informal money", "paragraph_id": "para_1563" }, { "text": "transfer system\" and \"the transfer of money . . . outside of the", "paragraph_id": "para_1564" }, { "text": "- 60 -", "paragraph_id": "para_1565" }, { "text": "Sufficiency of Tax Evasion Evidence", "paragraph_id": "para_1566" }, { "text": "We turn now to Freeman's claim that the government", "paragraph_id": "para_1567" }, { "text": "presented insufficient evidence of tax evasion to support his", "paragraph_id": "para_1568" }, { "text": "conviction. Because Freeman preserved this argument below, we", "paragraph_id": "para_1569" }, { "text": "conduct de novo review of the district court's denial of his motion", "paragraph_id": "para_1570" }, { "text": "for judgment of acquittal. See United States v. Soler-Montalvo,", "paragraph_id": "para_1571" }, { "text": "44 F.4th 1, 7 (1st Cir. 2022). To resolve a sufficiency challenge,", "paragraph_id": "para_1572" }, { "text": "we examine \"the evidence, both direct and circumstantial, in the", "paragraph_id": "para_1573" }, { "text": "light most favorable to the prosecution,\" and will uphold the", "paragraph_id": "para_1574" }, { "text": "conviction if \"in this light, any reasonable jury could find all", "paragraph_id": "para_1575" }, { "text": "the elements of the crime beyond a reasonable doubt.\" United", "paragraph_id": "para_1576" }, { "text": "States v. Azubike, 564 F.3d 59, 64 (1st Cir. 2009) (citations", "paragraph_id": "para_1577" }, { "text": "omitted). In other words, we do not need to conclude that \"the", "paragraph_id": "para_1578" }, { "text": "government succeeded in eliminating every possible theory", "paragraph_id": "para_1579" }, { "text": "consistent with the defendant's innocence,\" only that \"the guilty", "paragraph_id": "para_1580" }, { "text": "verdict finds support in a plausible rendition of the record.\"", "paragraph_id": "para_1581" }, { "text": "Soler-Montalvo, 44 F.4th at 7 (quoting United States v. Seary-", "paragraph_id": "para_1582" }, { "text": "Colón, 997 F.3d 1, 11, 14 (1st Cir. 2021)). To sustain a tax", "paragraph_id": "para_1583" }, { "text": "evasion conviction, the government had to prove three elements:", "paragraph_id": "para_1584" }, { "text": "conventional financial institutions system,\" USA PATRIOT Act", "paragraph_id": "para_1585" }, { "text": "§ 359(b), 115 Stat. at 328; (3) the legislative history of the", "paragraph_id": "para_1586" }, { "text": "effective definition supports application of the statute to", "paragraph_id": "para_1587" }, { "text": "emerging technologies for the transfer of value outside of", "paragraph_id": "para_1588" }, { "text": "traditional banks; and (4) Congress was aware of and subsequently", "paragraph_id": "para_1589" }, { "text": "codified the agency's interpretation. See Hornof, 107 F.4th at 59", "paragraph_id": "para_1590" }, { "text": "n.28 (dismissing major questions argument in a footnote on the", "paragraph_id": "para_1591" }, { "text": "basis that \"the statute speaks clearly\").", "paragraph_id": "para_1592" }, { "text": "- 61 -", "paragraph_id": "para_1593" }, { "text": "\"(1) the existence of a tax deficiency, (2) an affirmative act", "paragraph_id": "para_1594" }, { "text": "constituting an evasion or attempted evasion of the tax, and (3)", "paragraph_id": "para_1595" }, { "text": "willfulness.\" United States v. Lavoie, 433 F.3d 95, 97 (1st Cir.", "paragraph_id": "para_1596" }, { "text": "2005). Freeman claims that the government failed to carry its", "paragraph_id": "para_1597" }, { "text": "burden on the first and third elements.", "paragraph_id": "para_1598" }, { "text": "The government can prove a tax deficiency exists by", "paragraph_id": "para_1599" }, { "text": "showing that the defendant did not file a tax return and had a tax", "paragraph_id": "para_1600" }, { "text": "liability pursuant to the tax code. See United States v. Hogan,", "paragraph_id": "para_1601" }, { "text": "861 F.2d 312, 315 (1st Cir. 1988) (citing United States v. Dack,", "paragraph_id": "para_1602" }, { "text": "747 F.2d 1172, 1174 (7th Cir. 1984)). To make its case here, the", "paragraph_id": "para_1603" }, { "text": "government called a revenue agent of the Internal Revenue Service", "paragraph_id": "para_1604" }, { "text": "(\"IRS\"), Colleen Ranahan, to testify. Ranahan testified that", "paragraph_id": "para_1605" }, { "text": "Freeman had not filed tax returns for the years 2016, 2017, 2018,", "paragraph_id": "para_1606" }, { "text": "and 2019. Ranahan also testified that Freeman owed taxes on income", "paragraph_id": "para_1607" }, { "text": "he received from localbitcoins.com from those four years. To", "paragraph_id": "para_1608" }, { "text": "determine tax liability, she calculated his total annual profit", "paragraph_id": "para_1609" }, { "text": "from trades made on localbitcoins.com, using information gleaned", "paragraph_id": "para_1610" }, { "text": "from Freeman's advertisements and trade history. She also", "paragraph_id": "para_1611" }, { "text": "identified certain deductions that would have reduced Freeman's", "paragraph_id": "para_1612" }, { "text": "tax liability, including a self-employment tax adjustment, a", "paragraph_id": "para_1613" }, { "text": "qualified business income deduction, and the standard deduction", "paragraph_id": "para_1614" }, { "text": "and personal exemptions applicable to every taxpayer. Based on", "paragraph_id": "para_1615" }, { "text": "those deductions and the total profit, Ranahan calculated the", "paragraph_id": "para_1616" }, { "text": "amount that Freeman would have owed in taxes for that income:", "paragraph_id": "para_1617" }, { "text": "- 62 -", "paragraph_id": "para_1618" }, { "text": "$19,182.65 in 2016, $66,033.55 in 2017, $56,174.21 in 2018, and", "paragraph_id": "para_1619" }, { "text": "$140,198.28 in 2019. This was sufficient evidence to show that", "paragraph_id": "para_1620" }, { "text": "Freeman had a tax deficiency from 2016-2019. See Hogan, 861 F.2d", "paragraph_id": "para_1621" }, { "text": "at 315-16; United States v. Russell, 998 F.2d 1001 (1st Cir. 1993)", "paragraph_id": "para_1622" }, { "text": "(unpublished table decision) (affirming conviction based on", "paragraph_id": "para_1623" }, { "text": "failure to file tax return and rejecting argument that no liability", "paragraph_id": "para_1624" }, { "text": "existed because IRS could not make a valid assessment without a", "paragraph_id": "para_1625" }, { "text": "tax return).", "paragraph_id": "para_1626" }, { "text": "Freeman does not dispute Ranahan's method for", "paragraph_id": "para_1627" }, { "text": "determining his profits from localbitcoins.com or the accuracy of", "paragraph_id": "para_1628" }, { "text": "her calculations. Freeman primarily argues that Ranahan did not", "paragraph_id": "para_1629" }, { "text": "have a complete view of his finances from 2016 through 2019 and", "paragraph_id": "para_1630" }, { "text": "admitted on the witness stand that he might well have no", "paragraph_id": "para_1631" }, { "text": "liability.29 To get our bearings, we start with one aspect of", "paragraph_id": "para_1632" }, { "text": "Ranahan's testimony. On cross-examination, Ranahan admitted that", "paragraph_id": "para_1633" }, { "text": "her calculation of Freeman's tax liability was based on a standard", "paragraph_id": "para_1634" }, { "text": "deduction instead of itemized deductions for \"things like", "paragraph_id": "para_1635" }, { "text": "overhead,\" \"property tax,\" and \"charitable giving.\" She further", "paragraph_id": "para_1636" }, { "text": "agreed that \"if [Freeman] went through an itemization . . . he may", "paragraph_id": "para_1637" }, { "text": "29 Freeman also emphasizes that the IRS never sent him an", "paragraph_id": "para_1638" }, { "text": "audit letter explaining that he owed taxes, but whether the IRS", "paragraph_id": "para_1639" }, { "text": "conducted a formal assessment of Freeman's liability and", "paragraph_id": "para_1640" }, { "text": "forewarned him is irrelevant to whether he actually owed those", "paragraph_id": "para_1641" }, { "text": "taxes. See Hogan, 861 F.2d at 315-16 (rejecting insufficiency", "paragraph_id": "para_1642" }, { "text": "challenge based on lack of \"proper assessment of the tax due and", "paragraph_id": "para_1643" }, { "text": "owing\").", "paragraph_id": "para_1644" }, { "text": "- 63 -", "paragraph_id": "para_1645" }, { "text": "owe nothing.\" Read in context, Ranahan agreed to the hypothetical", "paragraph_id": "para_1646" }, { "text": "possibility that if Freeman had submitted a tax return with", "paragraph_id": "para_1647" }, { "text": "itemized deductions, those deductions could have reduced his tax", "paragraph_id": "para_1648" }, { "text": "liability to zero.", "paragraph_id": "para_1649" }, { "text": "But the government was not required to disprove every", "paragraph_id": "para_1650" }, { "text": "hypothetical version of events in which Freeman was innocent. See", "paragraph_id": "para_1651" }, { "text": "Soler-Montalvo, 44 F.4th at 7. Although the government bore the", "paragraph_id": "para_1652" }, { "text": "ultimate burden of persuasion to show that a tax was due and owing,", "paragraph_id": "para_1653" }, { "text": "the rule \"uniformly applied in tax evasion cases\" is \"that evidence", "paragraph_id": "para_1654" }, { "text": "of unexplained receipts,\" that is, a tax liability, \"shifts to the", "paragraph_id": "para_1655" }, { "text": "taxpayer\" (here, Freeman) \"the burden of coming forward with", "paragraph_id": "para_1656" }, { "text": "evidence as to the amount of offsetting expenses.\" Siravo v.", "paragraph_id": "para_1657" }, { "text": "United States, 377 F.2d 469, 473 (1st Cir. 1967); see also United", "paragraph_id": "para_1658" }, { "text": "States v. Stayback, 212 F.2d 313, 317 (3d Cir. 1954); United States", "paragraph_id": "para_1659" }, { "text": "v. Hiett, 581 F.2d 1199, 1202 (5th Cir. 1978); Elwert v. United", "paragraph_id": "para_1660" }, { "text": "States, 231 F.2d 928, 933 (9th Cir. 1956). Here, the government", "paragraph_id": "para_1661" }, { "text": "identified unreported income from localbitcoins.com and applied", "paragraph_id": "para_1662" }, { "text": "deductions based on the available information, which shifted to", "paragraph_id": "para_1663" }, { "text": "Freeman the burden of producing evidence rebutting Ranahan's tax", "paragraph_id": "para_1664" }, { "text": "calculation. Siravo, 377 F.2d at 472. Freeman never did. He is", "paragraph_id": "para_1665" }, { "text": "not entitled to attack the government's case on appeal with", "paragraph_id": "para_1666" }, { "text": "hypothetical facts which might have exonerated him. See United", "paragraph_id": "para_1667" }, { "text": "States v. Davenport, 824 F.2d 1511, 1516–17 (7th Cir. 1987) (\"It", "paragraph_id": "para_1668" }, { "text": "is neither necessary nor reasonably practicable to require the", "paragraph_id": "para_1669" }, { "text": "- 64 -", "paragraph_id": "para_1670" }, { "text": "government to prove that there are no other conceivable deductions", "paragraph_id": "para_1671" }, { "text": "of any sort to which the defendant might be entitled in the absence", "paragraph_id": "para_1672" }, { "text": "of some indication that they may in fact exist.\"); Clark v. United", "paragraph_id": "para_1673" }, { "text": "States, 211 F.2d 100, 103 (8th Cir. 1954) (explaining that", "paragraph_id": "para_1674" }, { "text": "government need not \"prove the non-existence of any other", "paragraph_id": "para_1675" }, { "text": "deductions than those which the taxpayer has claimed in his return\"", "paragraph_id": "para_1676" }, { "text": "to establish prima facie tax evasion case).", "paragraph_id": "para_1677" }, { "text": "Another problem for Freeman is that taxpayers are not", "paragraph_id": "para_1678" }, { "text": "automatically entitled to itemized deductions. Instead, under the", "paragraph_id": "para_1679" }, { "text": "tax code, \"no itemized deduction shall be allowed\" unless the", "paragraph_id": "para_1680" }, { "text": "taxpayer \"makes an election\" on his or her tax return. 26 U.S.C.", "paragraph_id": "para_1681" }, { "text": "§ 63(e)(1)-(2). Thus, even if Freeman had presented evidence of", "paragraph_id": "para_1682" }, { "text": "a factual basis for claiming itemized deductions, he was not", "paragraph_id": "para_1683" }, { "text": "entitled to those deductions under the tax code, because he never", "paragraph_id": "para_1684" }, { "text": "filed a tax return, much less elected to itemize deductions. See", "paragraph_id": "para_1685" }, { "text": "George v. Comm'r of Internal Revenue, 821 F. App'x 76, 77 (3d Cir.", "paragraph_id": "para_1686" }, { "text": "2020) (concluding that taxpayer's \"arguments regarding itemized", "paragraph_id": "para_1687" }, { "text": "deductions are meritless\" because \"the Internal Revenue Code's", "paragraph_id": "para_1688" }, { "text": "statutory language makes clear that, absent a filed return that", "paragraph_id": "para_1689" }, { "text": "makes the appropriate election, a taxpayer is not entitled to", "paragraph_id": "para_1690" }, { "text": "itemize\"). Thus, the fact that Ranahan could not eliminate the", "paragraph_id": "para_1691" }, { "text": "possibility that Freeman would have been entitled to an itemized", "paragraph_id": "para_1692" }, { "text": "deduction is not a thing which renders the evidence insufficient.", "paragraph_id": "para_1693" }, { "text": "- 65 -", "paragraph_id": "para_1694" }, { "text": "As to willfulness, the government must prove that", "paragraph_id": "para_1695" }, { "text": "Freeman voluntarily and intentionally violated a known legal duty", "paragraph_id": "para_1696" }, { "text": "to pay taxes on his income. United States v. Stierhoff, 549 F.3d", "paragraph_id": "para_1697" }, { "text": "19, 26 (1st Cir. 2008) (quoting Cheek v. United States, 498 U.S.", "paragraph_id": "para_1698" }, { "text": "192, 201 (1991)). Willfulness \"may be inferred from 'any conduct,", "paragraph_id": "para_1699" }, { "text": "the likely effect of which would be to mislead or to conceal.'\"", "paragraph_id": "para_1700" }, { "text": "Id. (quoting Spies v. United States, 317 U.S. 492, 499 (1943))", "paragraph_id": "para_1701" }, { "text": "(identifying defendant's \"employment of aliases and nominee", "paragraph_id": "para_1702" }, { "text": "entities when conducting business,\" \"pervasive use of non-", "paragraph_id": "para_1703" }, { "text": "interest-bearing accounts (which do not trigger mechanical", "paragraph_id": "para_1704" }, { "text": "reporting of income earned),\" and regular use of cash or", "paragraph_id": "para_1705" }, { "text": "\"untraceable money orders\" even though \"checks normally would be", "paragraph_id": "para_1706" }, { "text": "used\" as facts supporting inference of willfulness (citations", "paragraph_id": "para_1707" }, { "text": "omitted)); see United States v. Zanghi, 189 F.3d 71, 81 (1st Cir.", "paragraph_id": "para_1708" }, { "text": "1999) (holding that \"[c]onsistent patterns of understatement", "paragraph_id": "para_1709" }, { "text": "coupled with conduct tending to conceal\" was sufficient to sustain", "paragraph_id": "para_1710" }, { "text": "willful tax evasion conviction). Such conduct includes a", "paragraph_id": "para_1711" }, { "text": "defendant's \"persistent failure to file income tax returns over", "paragraph_id": "para_1712" }, { "text": "several years,\" especially where the defendant \"earn[ed]", "paragraph_id": "para_1713" }, { "text": "substantial income\" during those years. Stierhoff, 549 F.3d at", "paragraph_id": "para_1714" }, { "text": "26-27 (first citing United States v. Greenlee, 517 F.2d 899, 903", "paragraph_id": "para_1715" }, { "text": "(3d Cir. 1975); and then citing United States v. Bohrer, 807 F.2d", "paragraph_id": "para_1716" }, { "text": "159, 162 (10th Cir. 1986)). Freeman is correct, of course, that", "paragraph_id": "para_1717" }, { "text": "\"ignorance of the law is a defense in tax evasion cases\" and a", "paragraph_id": "para_1718" }, { "text": "- 66 -", "paragraph_id": "para_1719" }, { "text": "defendant who \"possessed a good-faith, subjective belief that he", "paragraph_id": "para_1720" }, { "text": "did not owe taxes on the income in question\" is innocent. United", "paragraph_id": "para_1721" }, { "text": "States v. McGill, 953 F.2d 10, 12 (1st Cir. 1992). Even so, the", "paragraph_id": "para_1722" }, { "text": "government may prove its case by showing willful blindness, that", "paragraph_id": "para_1723" }, { "text": "is a showing that the defendant \"recogniz[ed] the likelihood of", "paragraph_id": "para_1724" }, { "text": "wrongdoing,\" but \"nonetheless consciously refuse[d] to take basic", "paragraph_id": "para_1725" }, { "text": "investigatory steps.\" United States v. Anthony, 545 F.3d 60, 64,", "paragraph_id": "para_1726" }, { "text": "65 (1st Cir. 2008) (citation omitted). This is because \"deliberate", "paragraph_id": "para_1727" }, { "text": "ignorance of a duty to pay taxes is contrary to a good-faith", "paragraph_id": "para_1728" }, { "text": "belief.\" Id. at 65 (emphasis added).30", "paragraph_id": "para_1729" }, { "text": "We think the government presented sufficient evidence of", "paragraph_id": "para_1730" }, { "text": "concealment to permit a jury to infer that Freeman acted willfully.", "paragraph_id": "para_1731" }, { "text": "For a period of four years, Freeman earned a substantial amount of", "paragraph_id": "para_1732" }, { "text": "income and never reported that income or filed a tax return on it.", "paragraph_id": "para_1733" }, { "text": "He accepted large cash transactions by mail. And when customers", "paragraph_id": "para_1734" }, { "text": "sent him money through bank wires, he instructed them to lie to", "paragraph_id": "para_1735" }, { "text": "their banks about the purpose of their purchase, often telling", "paragraph_id": "para_1736" }, { "text": "30 Our analysis that follows does not draw a fine line between", "paragraph_id": "para_1737" }, { "text": "evidence relevant to \"willfulness\" and evidence relevant to", "paragraph_id": "para_1738" }, { "text": "\"willful blindness,\" as some of the government's evidence supports", "paragraph_id": "para_1739" }, { "text": "both theories. See Azubike, 564 F.3d at 67 (explaining that", "paragraph_id": "para_1740" }, { "text": "evidence need not \"be placed in either an actual knowledge or a", "paragraph_id": "para_1741" }, { "text": "deliberate ignorance category\" (quoting United States v. Griffin,", "paragraph_id": "para_1742" }, { "text": "524 F.3d 71, 79 (1st Cir. 2008))). Freeman does not challenge the", "paragraph_id": "para_1743" }, { "text": "appropriateness of the willful blindness instruction, only the", "paragraph_id": "para_1744" }, { "text": "sufficiency of the evidence, so whether there was \"separate and", "paragraph_id": "para_1745" }, { "text": "distinct\" evidence of willful blindness is not an issue in this", "paragraph_id": "para_1746" }, { "text": "case. Id.", "paragraph_id": "para_1747" }, { "text": "- 67 -", "paragraph_id": "para_1748" }, { "text": "them to call it a \"church donation.\" During trial, the jury also", "paragraph_id": "para_1749" }, { "text": "heard that Freeman was conducting business through multiple", "paragraph_id": "para_1750" }, { "text": "churches: Shire Free Church, the Church of the Invisible Hand, the", "paragraph_id": "para_1751" }, { "text": "New Hampshire Peace Church, and the Crypto Church of New Hampshire.", "paragraph_id": "para_1752" }, { "text": "And there was evidence that at least some of these churches were", "paragraph_id": "para_1753" }, { "text": "organized simply as nominal entities for Freeman to invoke at his", "paragraph_id": "para_1754" }, { "text": "convenience.31", "paragraph_id": "para_1755" }, { "text": "The government also offered evidence suggesting that", "paragraph_id": "para_1756" }, { "text": "Freeman had a political or philosophical objection to paying taxes.", "paragraph_id": "para_1757" }, { "text": "Such an objection, however sincerely held, does not negate", "paragraph_id": "para_1758" }, { "text": "willfulness. United States v. Bonneau, 970 F.2d 929, 932 (1st", "paragraph_id": "para_1759" }, { "text": "Cir. 1992) (citing Cheek, 498 U.S. at 205). Freeman displayed a", "paragraph_id": "para_1760" }, { "text": "sign on his front porch that read \"Stop paying taxes.\" In a text", "paragraph_id": "para_1761" }, { "text": "message to an acquaintance, Freeman wrote \"[o]nly suckers pay tax", "paragraph_id": "para_1762" }, { "text": "on crypto\" and complained that he never \"opted in\" to the", "paragraph_id": "para_1763" }, { "text": "31 For instance, one of Freeman's friends signed the formation", "paragraph_id": "para_1764" }, { "text": "documents of the Crypto Church of New Hampshire as a director or", "paragraph_id": "para_1765" }, { "text": "trustee. At trial, the friend testified that apart from signing", "paragraph_id": "para_1766" }, { "text": "the formation documents, he had no other participation in the", "paragraph_id": "para_1767" }, { "text": "activities of the church and did not know what its religious", "paragraph_id": "para_1768" }, { "text": "principles were. Another acquaintance testified that Freeman", "paragraph_id": "para_1769" }, { "text": "would discuss his church \"[w]hen he needed it as a legal entity", "paragraph_id": "para_1770" }, { "text": "for some legal reason.\" Freeman reportedly asked that same", "paragraph_id": "para_1771" }, { "text": "acquaintance to prepare an accountant certification letter to send", "paragraph_id": "para_1772" }, { "text": "to a cryptocurrency exchange because he was \"in the unusual", "paragraph_id": "para_1773" }, { "text": "position of not legally owning things but having the ability to", "paragraph_id": "para_1774" }, { "text": "control well over 2.5M in various assets.\" The acquaintance, who", "paragraph_id": "para_1775" }, { "text": "was not a certified accountant, prepared a letter stating that", "paragraph_id": "para_1776" }, { "text": "Freeman held \"$2.4 million in various liquid assets\" without", "paragraph_id": "para_1777" }, { "text": "reference to a church.", "paragraph_id": "para_1778" }, { "text": "- 68 -", "paragraph_id": "para_1779" }, { "text": "\"obligation to pay taxes.\" A rational reading of this statement", "paragraph_id": "para_1780" }, { "text": "is that Freeman was aware that there might be a general obligation", "paragraph_id": "para_1781" }, { "text": "to pay taxes on the sale of virtual currencies, but deliberately", "paragraph_id": "para_1782" }, { "text": "blinded himself as to whether that obligation applied to him.", "paragraph_id": "para_1783" }, { "text": "Combined with the evidence of concealment, the jury had sufficient", "paragraph_id": "para_1784" }, { "text": "evidence of both willfulness and willful blindness to convict", "paragraph_id": "para_1785" }, { "text": "Freeman of tax evasion.", "paragraph_id": "para_1786" }, { "text": "Of course, that is not to say that the government's", "paragraph_id": "para_1787" }, { "text": "evidence left him no room to argue his innocence. As Freeman", "paragraph_id": "para_1788" }, { "text": "points out, there is no evidence that he received any letter or", "paragraph_id": "para_1789" }, { "text": "notification from the IRS regarding taxes owed. But the absence", "paragraph_id": "para_1790" }, { "text": "of certain types of evidence (such as notification letters) does", "paragraph_id": "para_1791" }, { "text": "not make the evidence insufficient. While the jury may infer", "paragraph_id": "para_1792" }, { "text": "willfulness from the presence of such evidence, \"it is by no means", "paragraph_id": "para_1793" }, { "text": "a necessary part of the needed mosaic of proof.\" Stierhoff, 549", "paragraph_id": "para_1794" }, { "text": "F.3d at 26. Freeman also cites to his own testimony that he held", "paragraph_id": "para_1795" }, { "text": "a sincere belief he had no tax liability because, according to his", "paragraph_id": "para_1796" }, { "text": "own research, \"churches under the IRS rules don't pay taxes.\"", "paragraph_id": "para_1797" }, { "text": "Certainly, if the jury credited Freeman's testimony and determined", "paragraph_id": "para_1798" }, { "text": "that he sincerely believed that he had no tax liability, it would", "paragraph_id": "para_1799" }, { "text": "have been \"duty bound to acquit.\" McGill, 953 F.2d at 12. But", "paragraph_id": "para_1800" }, { "text": "the jury was also free to disbelieve this testimony, especially in", "paragraph_id": "para_1801" }, { "text": "light of the evidence we've just described tending to show willful", "paragraph_id": "para_1802" }, { "text": "opposition to the tax laws. See United States v. Nishnianidze,", "paragraph_id": "para_1803" }, { "text": "- 69 -", "paragraph_id": "para_1804" }, { "text": "342 F.3d 6, 14 (1st Cir. 2003) (\"We are mindful that the jury's", "paragraph_id": "para_1805" }, { "text": "duty is to assess credibility, and it may accept or reject, in", "paragraph_id": "para_1806" }, { "text": "whole or in part, any testimony.\"). As an appellate court, our", "paragraph_id": "para_1807" }, { "text": "role is simply to verify that the evidence, viewed in a light most", "paragraph_id": "para_1808" }, { "text": "favorable to the guilty verdict, was sufficient to sustain all", "paragraph_id": "para_1809" }, { "text": "elements of the offense. See Seary-Colón, 997 F.3d at 12. With", "paragraph_id": "para_1810" }, { "text": "that in mind, we presume the jury discredited the testimony", "paragraph_id": "para_1811" }, { "text": "supporting Freeman's good faith belief as it was permitted to do.", "paragraph_id": "para_1812" }, { "text": "See United States v. Tierney, 266 F.3d 37, 40 (1st Cir. 2001)", "paragraph_id": "para_1813" }, { "text": "(explaining that appellate court does not \"second-guess\" the", "paragraph_id": "para_1814" }, { "text": "jury's credibility calls and \"make[s] all credibility choices in", "paragraph_id": "para_1815" }, { "text": "favor of the verdict\"); see also Bonneau, 970 F.2d at 933", "paragraph_id": "para_1816" }, { "text": "(acknowledging that defendant could believe both that wages were", "paragraph_id": "para_1817" }, { "text": "not income under the tax code and that tax laws were", "paragraph_id": "para_1818" }, { "text": "unconstitutional \"at the same time,\" but affirming guilty verdict", "paragraph_id": "para_1819" }, { "text": "where \"the force and persistence of the defendant's views on the", "paragraph_id": "para_1820" }, { "text": "constitutional issue certainly were evidence for the jury to", "paragraph_id": "para_1821" }, { "text": "consider in deciding what he actually believed\"); United States v.", "paragraph_id": "para_1822" }, { "text": "Street, 370 F. App'x 343, 345 (3d Cir. 2010) (\"The jury was free", "paragraph_id": "para_1823" }, { "text": "to reject [defendant's] testimony that he was acting with a good", "paragraph_id": "para_1824" }, { "text": "faith belief he was not required to file tax returns.\"). As laid", "paragraph_id": "para_1825" }, { "text": "out above, the evidence of a tax deficiency and Freeman's", "paragraph_id": "para_1826" }, { "text": "willfulness were sufficient to sustain a verdict. We thus affirm", "paragraph_id": "para_1827" }, { "text": "Freeman's convictions for tax evasion.", "paragraph_id": "para_1828" }, { "text": "- 70 -", "paragraph_id": "para_1829" }, { "text": "Spillover Prejudice", "paragraph_id": "para_1830" }, { "text": "In a final attack on his convictions, Freeman asserts", "paragraph_id": "para_1831" }, { "text": "that we should order a new trial because he was acquitted of the", "paragraph_id": "para_1832" }, { "text": "money laundering charge by the district court after the trial.", "paragraph_id": "para_1833" }, { "text": "His theory is that \"the evidence admitted to prove [the money", "paragraph_id": "para_1834" }, { "text": "laundering] charge as to which [he] was acquitted was so extensive,", "paragraph_id": "para_1835" }, { "text": "inflammatory, and prejudicial that it necessarily spilled over", "paragraph_id": "para_1836" }, { "text": "into the jury's consideration of his guilt on other charges.\"32", "paragraph_id": "para_1837" }, { "text": "See United States v. Correia, 55 F.4th 12, 36 (1st Cir. 2022)", "paragraph_id": "para_1838" }, { "text": "(citation and quotation marks omitted). In previous cases, we've", "paragraph_id": "para_1839" }, { "text": "sometimes described this type of claim as \"spillover prejudice\" or", "paragraph_id": "para_1840" }, { "text": "\"evidentiary spillover.\" United States v. Abdelaziz, 68 F.4th 1,", "paragraph_id": "para_1841" }, { "text": "60-61 (1st Cir. 2023). As the defendant, Freeman bears the burden", "paragraph_id": "para_1842" }, { "text": "to \"show 'prejudice so pervasive that a miscarriage of justice", "paragraph_id": "para_1843" }, { "text": "looms'\" if we do not remand for a new trial. Correia, 55 F.4th at", "paragraph_id": "para_1844" }, { "text": "36-37 (quoting United States v. Simon, 12 F.4th 1, 43-44 (1st Cir.", "paragraph_id": "para_1845" }, { "text": "2021)). We review the district court's denial of a new trial on", "paragraph_id": "para_1846" }, { "text": "this basis for abuse of discretion. Id. at 36.", "paragraph_id": "para_1847" }, { "text": "Freeman argues, as he did below in his motion for a new", "paragraph_id": "para_1848" }, { "text": "trial, that \"[t]he government relied heavily on the money", "paragraph_id": "para_1849" }, { "text": "32 Freeman's brief asserts that his spillover prejudice", "paragraph_id": "para_1850" }, { "text": "argument would be \"even stronger\" if we vacated his other", "paragraph_id": "para_1851" }, { "text": "convictions for operation of an unlicensed money transmitting", "paragraph_id": "para_1852" }, { "text": "business and tax evasion. Because we do not vacate those", "paragraph_id": "para_1853" }, { "text": "convictions, we do not need to consider whether any evidence", "paragraph_id": "para_1854" }, { "text": "spilled over from those charges.", "paragraph_id": "para_1855" }, { "text": "- 71 -", "paragraph_id": "para_1856" }, { "text": "laundering charge to paint Freeman as a person connected to the", "paragraph_id": "para_1857" }, { "text": "sale of illegal drugs and to enhance his culpability for otherwise", "paragraph_id": "para_1858" }, { "text": "regulatory offenses.\" In his appellate brief and his motion,", "paragraph_id": "para_1859" }, { "text": "Freeman points to portions of the government's opening statement", "paragraph_id": "para_1860" }, { "text": "and closing argument which referred to Freeman's interactions with", "paragraph_id": "para_1861" }, { "text": "the undercover agent, and especially his awareness that the agent", "paragraph_id": "para_1862" }, { "text": "purportedly was exchanging his drug proceeds for bitcoin. The", "paragraph_id": "para_1863" }, { "text": "district court rejected his argument on the basis that any evidence", "paragraph_id": "para_1864" }, { "text": "regarding Freeman's interactions with the undercover agent would", "paragraph_id": "para_1865" }, { "text": "have been admissible to prove the allegation that Freeman conspired", "paragraph_id": "para_1866" }, { "text": "to commit money laundering (a conviction which Freeman was not", "paragraph_id": "para_1867" }, { "text": "acquitted of post-trial).33 Even though this was the basis for the", "paragraph_id": "para_1868" }, { "text": "district court's decision and emphasized in the government's", "paragraph_id": "para_1869" }, { "text": "appellate brief, Freeman has offered us no explanation as to what", "paragraph_id": "para_1870" }, { "text": "evidence regarding the undercover agent would have been excluded", "paragraph_id": "para_1871" }, { "text": "if the direct money laundering charge had been left out of the", "paragraph_id": "para_1872" }, { "text": "trial. We agree with the district court that the undercover", "paragraph_id": "para_1873" }, { "text": "agent's discussion of purported drug proceeds with Freeman was", "paragraph_id": "para_1874" }, { "text": "relevant to establishing whether Freeman conspired with the", "paragraph_id": "para_1875" }, { "text": "33 The district court granted Freeman's motion for judgment", "paragraph_id": "para_1876" }, { "text": "of acquittal only as to the direct money laundering conviction, on", "paragraph_id": "para_1877" }, { "text": "the basis that there was not sufficient evidence presented that", "paragraph_id": "para_1878" }, { "text": "Freeman knew that the undercover agent went to the bitcoin kiosk", "paragraph_id": "para_1879" }, { "text": "after Freeman told the agent that the kiosk was still there. The", "paragraph_id": "para_1880" }, { "text": "district court did not acquit Freeman of conspiracy to commit money", "paragraph_id": "para_1881" }, { "text": "laundering, a decision that Freeman has not challenged.", "paragraph_id": "para_1882" }, { "text": "- 72 -", "paragraph_id": "para_1883" }, { "text": "undercover agent to perpetrate money laundering and thus could", "paragraph_id": "para_1884" }, { "text": "have been admitted even if the underlying money laundering charge", "paragraph_id": "para_1885" }, { "text": "had never been brought. See United States v. George, 761 F.3d 42,", "paragraph_id": "para_1886" }, { "text": "48-49 (1st Cir. 2014) (concluding that sufficient evidence", "paragraph_id": "para_1887" }, { "text": "supported conviction for conspiracy to commit money laundering in", "paragraph_id": "para_1888" }, { "text": "part where that appellant had a conversation with his", "paragraph_id": "para_1889" }, { "text": "co-conspirator regarding the \"caper\" in which co-conspirator", "paragraph_id": "para_1890" }, { "text": "obtained ill-gotten gains); see also United States v. Tum, 707", "paragraph_id": "para_1891" }, { "text": "F.3d 68, 74 (1st Cir. 2013) (explaining that to be liable for", "paragraph_id": "para_1892" }, { "text": "conspiracy, a defendant must be a \"willing participant\" and know", "paragraph_id": "para_1893" }, { "text": "the \"essential nature\" of the \"collective endeavor\"). Thus, we", "paragraph_id": "para_1894" }, { "text": "affirm the district court's refusal to grant Freeman a new trial", "paragraph_id": "para_1895" }, { "text": "for evidentiary spillover.34 See Correia, 55 F.4th at 37 (affirming", "paragraph_id": "para_1896" }, { "text": "denial of motion for new trial where any retrial on the \"still-", "paragraph_id": "para_1897" }, { "text": "34 The cases in which we have granted a new trial for", "paragraph_id": "para_1898" }, { "text": "evidentiary spillover tend to involve multiple defendants or", "paragraph_id": "para_1899" }, { "text": "multiple conspiracies. See, e.g., United States v. Weadick, 15", "paragraph_id": "para_1900" }, { "text": "F.4th 1, 16 (1st Cir. 2021) (\"Some amount of spillover is inherent", "paragraph_id": "para_1901" }, { "text": "in trying multiple defendants together.\"). In such cases, \"one", "paragraph_id": "para_1902" }, { "text": "defendant allegedly may not be involved at all in one of the", "paragraph_id": "para_1903" }, { "text": "conspiracies, but may suffer from the evidence in support of the", "paragraph_id": "para_1904" }, { "text": "other defendants in those other conspiracies.\" United States v.", "paragraph_id": "para_1905" }, { "text": "Chan, 981 F.3d 39, 54-55 (1st Cir. 2020). Here, Freeman was tried", "paragraph_id": "para_1906" }, { "text": "alone and he makes no argument that confusion arose from the fact", "paragraph_id": "para_1907" }, { "text": "that he was charged with two conspiracies. Thus, this case lacks", "paragraph_id": "para_1908" }, { "text": "many of the factors that create a high risk of prejudicial", "paragraph_id": "para_1909" }, { "text": "spillover. Cf. United States v. Martínez, 994 F.3d 1, 15 (2021)", "paragraph_id": "para_1910" }, { "text": "(referring to risk that direct evidence of a co-defendant's corrupt", "paragraph_id": "para_1911" }, { "text": "intent and involvement in multiple schemes may have unfairly", "paragraph_id": "para_1912" }, { "text": "prejudiced appellant).", "paragraph_id": "para_1913" }, { "text": "- 73 -", "paragraph_id": "para_1914" }, { "text": "standing convictions . . . would have involved much of the same", "paragraph_id": "para_1915" }, { "text": "evidence\" as the evidence in support of the dismissed counts).", "paragraph_id": "para_1916" }, { "text": "Substantive Reasonableness of the Sentence", "paragraph_id": "para_1917" }, { "text": "We turn now to Freeman's challenge to the substantive", "paragraph_id": "para_1918" }, { "text": "reasonableness of his 96-month sentence, which represented a", "paragraph_id": "para_1919" }, { "text": "substantial downward variance from the 210- to 262-month sentence", "paragraph_id": "para_1920" }, { "text": "recommended by the United States Sentencing Guidelines. Freeman", "paragraph_id": "para_1921" }, { "text": "is in for an \"uphill\" battle. See United States v. Dávila-Bonilla,", "paragraph_id": "para_1922" }, { "text": "968 F.3d 1, 12 (1st Cir. 2020). We analyze Freeman's preserved", "paragraph_id": "para_1923" }, { "text": "sentencing arguments \"under the deferential abuse of discretion", "paragraph_id": "para_1924" }, { "text": "standard, reviewing findings of fact for clear error and issues of", "paragraph_id": "para_1925" }, { "text": "law de novo.\" United States v. Pupo, 995 F.3d 23, 29 (1st Cir.", "paragraph_id": "para_1926" }, { "text": "2021) (citations omitted). And we must affirm the sentence so", "paragraph_id": "para_1927" }, { "text": "long as the district court articulated a \"plausible sentencing", "paragraph_id": "para_1928" }, { "text": "rationale\" and \"reached a defensible result.\" Id. (quotation marks", "paragraph_id": "para_1929" }, { "text": "omitted) (quoting United States v. Flores-Quiñones, 985 F.3d 128,", "paragraph_id": "para_1930" }, { "text": "133 (1st Cir. 2021)). Under these standards, sentences falling", "paragraph_id": "para_1931" }, { "text": "significantly below the guidelines range, as here, are \"rarely\"", "paragraph_id": "para_1932" }, { "text": "disturbed for substantive unreasonableness. See, e.g., United", "paragraph_id": "para_1933" }, { "text": "States v. Rivera-Gerena, 112 F.4th 67, 73 (1st Cir. 2024); United", "paragraph_id": "para_1934" }, { "text": "States v. Millán-Machuca, 991 F.3d 7, 32 (1st Cir. 2021)).", "paragraph_id": "para_1935" }, { "text": "None of Freeman's arguments convince us that this is one", "paragraph_id": "para_1936" }, { "text": "of those rare cases. Freeman begins by listing several mitigating", "paragraph_id": "para_1937" }, { "text": "factors, including his \"minimal\" criminal history, the lack of any", "paragraph_id": "para_1938" }, { "text": "- 74 -", "paragraph_id": "para_1939" }, { "text": "evidence that he engaged in violent conduct, and his strong", "paragraph_id": "para_1940" }, { "text": "community support. To the extent that Freeman is arguing that the", "paragraph_id": "para_1941" }, { "text": "district court overlooked these factors, the record compels the", "paragraph_id": "para_1942" }, { "text": "opposite conclusion. In imposing the sentence, the district court", "paragraph_id": "para_1943" }, { "text": "explicitly referenced Freeman's \"peace advocacy,\" \"his lack of a", "paragraph_id": "para_1944" }, { "text": "violent history, his many supporters, many of whom submitted", "paragraph_id": "para_1945" }, { "text": "letters to the Court vouching for him and his character,\" and \"his", "paragraph_id": "para_1946" }, { "text": "lack of prior significant incarceration.\" The court believed that", "paragraph_id": "para_1947" }, { "text": "these were among the factors that \"make a variance below the", "paragraph_id": "para_1948" }, { "text": "guideline sentencing range appropriate in this case.\" Against", "paragraph_id": "para_1949" }, { "text": "this, the district court noted aggravating factors, some of which", "paragraph_id": "para_1950" }, { "text": "were reflected in the guidelines range, including the enhancement", "paragraph_id": "para_1951" }, { "text": "Freeman received as a \"manager or leader\" and the impact of the", "paragraph_id": "para_1952" }, { "text": "crimes on his victims. It also noted that Freeman had a criminal", "paragraph_id": "para_1953" }, { "text": "history but characterized it as \"not substantial.\" Considering", "paragraph_id": "para_1954" }, { "text": "all these circumstances, the court decided on \"a very serious", "paragraph_id": "para_1955" }, { "text": "sentence\" of 96 months, which it emphasized was \"less than half of", "paragraph_id": "para_1956" }, { "text": "the low end of the guideline sentencing range\" —— though more than", "paragraph_id": "para_1957" }, { "text": "the 38 months Freeman asked for. Given the district court's", "paragraph_id": "para_1958" }, { "text": "express attention to the factors identified by Freeman in his brief", "paragraph_id": "para_1959" }, { "text": "to us, we readily conclude that the district court articulated a", "paragraph_id": "para_1960" }, { "text": "plausible sentencing rationale. See United States v. Fuentes-", "paragraph_id": "para_1961" }, { "text": "Moreno, 954 F.3d 383, 396-97 (1st Cir. 2020) (concluding that the", "paragraph_id": "para_1962" }, { "text": "district court's consideration of the seriousness of the offenses", "paragraph_id": "para_1963" }, { "text": "- 75 -", "paragraph_id": "para_1964" }, { "text": "and \"recitation of [the defendant's] personal characteristics\"", "paragraph_id": "para_1965" }, { "text": "show that the sentence was \"plausibly reasoned\" (citation", "paragraph_id": "para_1966" }, { "text": "omitted)). And we further conclude that this below-the-", "paragraph_id": "para_1967" }, { "text": "guidelines-sentence was defensible, even if Freeman may wish that", "paragraph_id": "para_1968" }, { "text": "the district court had given the mitigating factors more weight or", "paragraph_id": "para_1969" }, { "text": "disregarded some of the aggravating factors. See Pupo, 995 F.3d", "paragraph_id": "para_1970" }, { "text": "at 32 (\"[W]e cannot assign error to a well-reasoned decision simply", "paragraph_id": "para_1971" }, { "text": "because the district judge chose not to attach more weight to", "paragraph_id": "para_1972" }, { "text": "certain mitigating factors.\"); Dávila-Bonilla, 968 F.3d at 12", "paragraph_id": "para_1973" }, { "text": "(explaining that the district judge's failure to attach more weight", "paragraph_id": "para_1974" }, { "text": "to mitigating factors does not render challenged sentence", "paragraph_id": "para_1975" }, { "text": "implausible or indefensible); United States v. Montijo-Maysonet,", "paragraph_id": "para_1976" }, { "text": "974 F.3d 34, 54-55 (1st Cir. 2020) (concluding that a 37-month", "paragraph_id": "para_1977" }, { "text": "downward variance was substantively reasonable, despite", "paragraph_id": "para_1978" }, { "text": "appellant's argument that the sentence was still too harsh); United", "paragraph_id": "para_1979" }, { "text": "States v. Floyd, 740 F.3d 22, 39 (1st Cir. 2014) (describing", "paragraph_id": "para_1980" }, { "text": "substantive reasonableness challenge to 84-month sentence which", "paragraph_id": "para_1981" }, { "text": "varied from a 121- to 151- month guidelines range as \"a pipe", "paragraph_id": "para_1982" }, { "text": "dream\").", "paragraph_id": "para_1983" }, { "text": "Freeman also points to six other \"virtual currency", "paragraph_id": "para_1984" }, { "text": "related money laundering crimes\" from around the country, in which", "paragraph_id": "para_1985" }, { "text": "the defendants were sentenced to between four and 36 months. As", "paragraph_id": "para_1986" }, { "text": "an initial matter, the government asserts that this sentencing", "paragraph_id": "para_1987" }, { "text": "disparity argument was not preserved because Freeman only objected", "paragraph_id": "para_1988" }, { "text": "- 76 -", "paragraph_id": "para_1989" }, { "text": "generally to the substantive reasonableness of this sentence", "paragraph_id": "para_1990" }, { "text": "below. As a result, the government says Freeman forfeited the", "paragraph_id": "para_1991" }, { "text": "argument and we must review this claim for plain error, a standard", "paragraph_id": "para_1992" }, { "text": "that is even tougher on appellants than the abuse of discretion", "paragraph_id": "para_1993" }, { "text": "standard advocated for by Freeman and which we've been relying on", "paragraph_id": "para_1994" }, { "text": "thus far. United States v. Cruz-Ramos, 987 F.3d 27, 44 (1st Cir.", "paragraph_id": "para_1995" }, { "text": "2021) (\"[T]he hard-to-satisfy plain-error standard requires a", "paragraph_id": "para_1996" }, { "text": "defendant to show error; plainness; an adverse effect on his", "paragraph_id": "para_1997" }, { "text": "substantial rights; and a serious compromise of the fairness,", "paragraph_id": "para_1998" }, { "text": "integrity, or reputation of the trial.\"). We need not expend ink", "paragraph_id": "para_1999" }, { "text": "on this preservation dispute, however, because Freeman's disparity", "paragraph_id": "para_2000" }, { "text": "argument fails even if we apply the more lenient, but still", "paragraph_id": "para_2001" }, { "text": "deferential, abuse of discretion standard. See United States v.", "paragraph_id": "para_2002" }, { "text": "Jiménez, 946 F.3d 8, 15 (1st Cir. 2019) (applying abuse of", "paragraph_id": "para_2003" }, { "text": "discretion standard to avoid \"somewhat blurred\" issue regarding", "paragraph_id": "para_2004" }, { "text": "standard of review for unpreserved substantive reasonableness", "paragraph_id": "para_2005" }, { "text": "challenge (citation omitted)).", "paragraph_id": "para_2006" }, { "text": "Freeman is right that 18 U.S.C. § 3553(a)(6) reflects a", "paragraph_id": "para_2007" }, { "text": "goal of avoiding unwarranted \"sentencing disparities among like", "paragraph_id": "para_2008" }, { "text": "criminals who commit like crimes\" across the nation. United States", "paragraph_id": "para_2009" }, { "text": "v. Romero, 906 F.3d 196, 211 (1st Cir. 2018). However, a", "paragraph_id": "para_2010" }, { "text": "sentencing disparity is not unwarranted \"if material differences", "paragraph_id": "para_2011" }, { "text": "between the defendant and the proposed comparator[s] suffice to", "paragraph_id": "para_2012" }, { "text": "explain the divergence.\" Id. (alteration in original) (quoting", "paragraph_id": "para_2013" }, { "text": "- 77 -", "paragraph_id": "para_2014" }, { "text": "United States v. Demers, 842 F.3d 8, 15 (1st Cir. 2016)); United", "paragraph_id": "para_2015" }, { "text": "States v. Gonzalez, 981 F.3d 11, 23 (1st Cir. 2020) (\"[W]hen a", "paragraph_id": "para_2016" }, { "text": "defendant makes a claim of sentencing disparity, he 'must compare", "paragraph_id": "para_2017" }, { "text": "apples to apples.'\" (citation omitted)). Such differences can", "paragraph_id": "para_2018" }, { "text": "include whether the defendant pled guilty or went to trial, details", "paragraph_id": "para_2019" }, { "text": "from the defendant's personal or criminal histories, and", "paragraph_id": "para_2020" }, { "text": "differences in the sentencing guidelines' advisory range. See,", "paragraph_id": "para_2021" }, { "text": "e.g., United States v. De La Cruz, 91 F.4th 550, 552-53, 555 (1st", "paragraph_id": "para_2022" }, { "text": "Cir. 2024) (rejecting claim of 45-month sentencing disparity", "paragraph_id": "para_2023" }, { "text": "between co-defendants where co-defendant had \"a much lower", "paragraph_id": "para_2024" }, { "text": "advisory sentencing guideline range\" and played a different role", "paragraph_id": "para_2025" }, { "text": "in the offense); Gonzalez, 981 F.3d at 23 (rejecting disparity", "paragraph_id": "para_2026" }, { "text": "claim where comparator committed one murder and pled guilty, but", "paragraph_id": "para_2027" }, { "text": "appellant committed two murders and elected to stand trial).", "paragraph_id": "para_2028" }, { "text": "Here, Freeman asks us to compare him to other defendants", "paragraph_id": "para_2029" }, { "text": "sentenced for processing millions of dollars in virtual currency", "paragraph_id": "para_2030" }, { "text": "and cherry picks the aspects of those cases most similar to his", "paragraph_id": "para_2031" }, { "text": "own. Cf. United States v. Rosario, __ F.4th __, 2025 WL 1831040,", "paragraph_id": "para_2032" }, { "text": "at *5 (1st Cir. July 3, 2025) (rejecting disparity claim where the", "paragraph_id": "para_2033" }, { "text": "defendant did not provide \"the necessary information to determine", "paragraph_id": "para_2034" }, { "text": "whether\" his proposed comparators were \"identically situated,\"", "paragraph_id": "para_2035" }, { "text": "such as their criminal histories, \"the specific circumstances of", "paragraph_id": "para_2036" }, { "text": "their plea agreements,\" or \"the particularities of their crime-", "paragraph_id": "para_2037" }, { "text": "spree conduct\"). But even with our limited insight into the", "paragraph_id": "para_2038" }, { "text": "- 78 -", "paragraph_id": "para_2039" }, { "text": "details of these cases, we see several obvious differences. The", "paragraph_id": "para_2040" }, { "text": "guidelines ranges calculated for each of these defendants were", "paragraph_id": "para_2041" }, { "text": "apparently far lower than Freeman's 210-262 months.35 See De La", "paragraph_id": "para_2042" }, { "text": "Cruz, 91 F.4th at 552-53. Half of these defendants were not", "paragraph_id": "para_2043" }, { "text": "sentenced for any of the same charges faced by Freeman.36 See", "paragraph_id": "para_2044" }, { "text": "United States v. Bishoff, 58 F.4th 18, 26 (1st Cir. 2023)", "paragraph_id": "para_2045" }, { "text": "(rejecting sentencing disparity claim between co-defendants in", "paragraph_id": "para_2046" }, { "text": "part because co-defendants were charged with different gun-related", "paragraph_id": "para_2047" }, { "text": "offenses). None of the cited cases include tax evasion charges.", "paragraph_id": "para_2048" }, { "text": "Setting that aside, five of the six defendants pled guilty rather", "paragraph_id": "para_2049" }, { "text": "35 Transcript of Sentencing Hearing at 17:2-3, United States", "paragraph_id": "para_2050" }, { "text": "v. Randol, 23-cr-00440 (C.D. Cal. Jan. 17, 2024), ECF No. 56 (six", "paragraph_id": "para_2051" }, { "text": "to 12 months); Government Sentencing Memorandum at 2, United States", "paragraph_id": "para_2052" }, { "text": "v. Farace, No. 21-cr-00294 (D. Md. Dec. 15, 2023), ECF No. 92", "paragraph_id": "para_2053" }, { "text": "(parties agreed to seek a sentence between 19 and 30 months based", "paragraph_id": "para_2054" }, { "text": "on consensus that guidelines range was 30 to 37 months);", "paragraph_id": "para_2055" }, { "text": "Government's Sentencing Memorandum at 3, United States v. Zhao,", "paragraph_id": "para_2056" }, { "text": "23-cr-00179 (W.D. Wash. Nov. 21, 2023), ECF No. 78 (arguing for", "paragraph_id": "para_2057" }, { "text": "range of 12 to 18 months); Transcript of Sentencing Hearing at", "paragraph_id": "para_2058" }, { "text": "5:8, United States v. Mejia, No. 21-cr-00008 (C.D. Cal. Nov. 18,", "paragraph_id": "para_2059" }, { "text": "2021), ECF No. 44 (57 to 71 months); Defendant's Sentencing", "paragraph_id": "para_2060" }, { "text": "Memorandum at 2, United States v. Tetley, No. 17-cr-00738 (C.D.", "paragraph_id": "para_2061" }, { "text": "Cal. June 4, 2018), ECF No. 32 (uncontested range of 46 to 57", "paragraph_id": "para_2062" }, { "text": "months); Defendant's Sentencing Memorandum at 27, United States v.", "paragraph_id": "para_2063" }, { "text": "Lebedev, No. 15-cr-00769 (S.D.N.Y. Aug. 29, 2017), ECF No. 585", "paragraph_id": "para_2064" }, { "text": "(108 to 135 months as calculated by probation, 10 to 16 months as", "paragraph_id": "para_2065" }, { "text": "argued by defendant).", "paragraph_id": "para_2066" }, { "text": "36 Judgment at 1, Unites States v. Zhao, 23-cr-00179, ECF No.", "paragraph_id": "para_2067" }, { "text": "90 (one count of failure to maintain an effective anti-money", "paragraph_id": "para_2068" }, { "text": "laundering program); Transcript of Sentencing Hearing at 26:2-5,", "paragraph_id": "para_2069" }, { "text": "Randol, 23-cr-00440, ECF No. 56 (same); Amended Judgment at 1-2,", "paragraph_id": "para_2070" }, { "text": "Lebedev, 15-cr-00769, ECF No. 748 (various bribery and fraud", "paragraph_id": "para_2071" }, { "text": "charges).", "paragraph_id": "para_2072" }, { "text": "- 79 -", "paragraph_id": "para_2073" }, { "text": "than taking their case to trial.37 Most also had no prior", "paragraph_id": "para_2074" }, { "text": "convictions, unlike Freeman.38 Finally, the district court in", "paragraph_id": "para_2075" }, { "text": "Freeman's case noted that Freeman was receiving an upward", "paragraph_id": "para_2076" }, { "text": "adjustment to his sentencing guidelines range based on his role as", "paragraph_id": "para_2077" }, { "text": "a manager or leader. Freeman has cited nothing to suggest that", "paragraph_id": "para_2078" }, { "text": "any of the defendants had a similarly culpable leadership role in", "paragraph_id": "para_2079" }, { "text": "their own offenses. See United States v. Coplin-Benjamin, 79 F.4th", "paragraph_id": "para_2080" }, { "text": "36, 44 (1st Cir. 2023) (holding that sentencing disparity was", "paragraph_id": "para_2081" }, { "text": "warranted where appellant was found to be leader of conspiracy,", "paragraph_id": "para_2082" }, { "text": "but co-defendants were \"mere participant[s]\"). Freeman has thus", "paragraph_id": "para_2083" }, { "text": "not established that these comparators were similarly situated to", "paragraph_id": "para_2084" }, { "text": "him such that a valid sentencing disparity claim exists. See,", "paragraph_id": "para_2085" }, { "text": "e.g., United States v. Candelario, 105 F.4th 20, 24 (1st Cir. 2024)", "paragraph_id": "para_2086" }, { "text": "(concluding that no unwarranted discrepancy between co-defendants", "paragraph_id": "para_2087" }, { "text": "existed where difference in guidelines range was \"critical datum", "paragraph_id": "para_2088" }, { "text": "in a disparity analysis\"); Jiménez, 946 F.3d at 15-16 (rejecting", "paragraph_id": "para_2089" }, { "text": "appellant's claim that sentence \"well below the guidelines range\"", "paragraph_id": "para_2090" }, { "text": "37 Plea Agreement, Zhao, 23-cr-00179, ECF No. 31; Transcript", "paragraph_id": "para_2091" }, { "text": "of Sentencing Hearing at 26:22-23, Randol, 23-cr-00440, ECF No. 56", "paragraph_id": "para_2092" }, { "text": "(noting acceptance of responsibility deduction from offense", "paragraph_id": "para_2093" }, { "text": "level); Plea Agreement, Farace, 21-cr-00294, ECF No. 79; Plea", "paragraph_id": "para_2094" }, { "text": "Agreement, Mejia, No. 21-cr-00008, ECF No. 5; Judgment at 1,", "paragraph_id": "para_2095" }, { "text": "Tetley, 17-cr-00738, ECF No. 45.", "paragraph_id": "para_2096" }, { "text": "38 Defendant's Sentencing Memorandum at 8, Zhao, 23-cr-00179,", "paragraph_id": "para_2097" }, { "text": "ECF No. 82; Government's Sentencing Memorandum at 3, Farace, 21-", "paragraph_id": "para_2098" }, { "text": "cr-00294, ECF No. 92; Government's Sentencing Memorandum at 16,", "paragraph_id": "para_2099" }, { "text": "Tetley, 17-cr-00738, ECF No. 31; Defendant's Sentencing Memorandum", "paragraph_id": "para_2100" }, { "text": "at 32, Lebedev, 15-cr-0069, ECF No. 585.", "paragraph_id": "para_2101" }, { "text": "- 80 -", "paragraph_id": "para_2102" }, { "text": "was unreasonable based on disparity with national average fraud", "paragraph_id": "para_2103" }, { "text": "sentence where appellant \"has not offered evidence that would show", "paragraph_id": "para_2104" }, { "text": "that her circumstances are sufficiently similar to the national", "paragraph_id": "para_2105" }, { "text": "median fraud defendant to create a meaningful point of", "paragraph_id": "para_2106" }, { "text": "comparison\").", "paragraph_id": "para_2107" }, { "text": "In sum, Freeman has failed to show that his sentence was", "paragraph_id": "para_2108" }, { "text": "substantively unreasonable, either based on the district court's", "paragraph_id": "para_2109" }, { "text": "assessment of the Section 3553(a) sentencing factors or based on", "paragraph_id": "para_2110" }, { "text": "any disparity with similarly situated defendants. Accordingly, we", "paragraph_id": "para_2111" }, { "text": "affirm his sentence.", "paragraph_id": "para_2112" }, { "text": "CONCLUSION", "paragraph_id": "para_2113" }, { "text": "For the reasons stated, we affirm.", "paragraph_id": "para_2114" } ], "word_count": 19487, "cites": [ "600 U.S. 477", "597 U.S.\n697", "573 U.S. 302", "590 U.S. 644", "510 U.S. 135", "529 U.S. 120", "594 U.S. 758", "552 U.S. 214", "562 U.S. 223", "540 U.S. 614", "478 U.S. 833", "576 U.S. 519", "559 U.S. 573", "595 U.S. 87", "595 U.S. 109", "498 U.S.\n192", "317 U.S. 492", "799\nF.3d 12", "786 F.3d 92", "78 F.4th 1", "954 F.3d 23", "106 F.4th 1", "45\nF.4th 899", "3 F.4th 484", "100\nF.4th 267", "127 F.4th 398", "97\nF.4th 532", "76 F.4th 291", "107 F.4th 46", "101 F.4th\n707", "121 F.4th 1", "95 F.4th 38", "513 F.2d 835", "77 F.4th 787", "96 F.3d 542", "146 F.3d 12", "666 F.3d 1322", "51 F.4th 1059", "588 F.2d 1330", "897 F.3d 12", "184\nF.3d 20", "103 F.4th 844", "958 F.3d 26", "44 F.4th 1", "564 F.3d 59", "997 F.3d 1", "433 F.3d 95", "861 F.2d 312", "747 F.2d 1172", "998 F.2d 1001", "377 F.2d 469", "212 F.2d 313", "581 F.2d 1199", "231 F.2d 928", "824 F.2d 1511", "211 F.2d 100", "549 F.3d\n19", "189 F.3d 71", "517 F.2d 899", "807 F.2d\n159", "953 F.2d 10", "545 F.3d 60", "524 F.3d 71", "970 F.2d 929", "342 F.3d 6", "266 F.3d 37", "55 F.4th 12", "68 F.4th 1", "12 F.4th 1", "761 F.3d 42", "707\nF.3d 68", "15\nF.4th 1", "981 F.3d 39", "994 F.3d 1", "968 F.3d 1", "995 F.3d 23", "985 F.3d 128", "112 F.4th 67", "991 F.3d 7", "954 F.3d 383", "974 F.3d 34", "740 F.3d 22", "987 F.3d 27", "946 F.3d 8", "906 F.3d 196", "842 F.3d 8", "981 F.3d 11", "91 F.4th 550", "58 F.4th 18", "79 F.4th\n36", "105 F.4th 20" ], "cited_by": [], "sha256": "06b42aa6d6eb21418b4c190c9d9d57fda93caf7d377e55965bac8bcdac962bf1", "source_url": "https://www.ca1.uscourts.gov/sites/ca1/files/opnfiles/23-1839P-01A.pdf", "fetched_at": "2026-10-04T02:18:03.871+00:00", "canonical": "https://legal.exploreworldai.com/ai/judgments/us/ca1-23-1839-2025-07-29", "risk_graph": "https://legal.exploreworldai.com/api/public/v1/risk?id=us:ca1-23-1839-2025-07-29", "relations_graph": "https://legal.exploreworldai.com/api/public/v1/relations?id=us:ca1-23-1839-2025-07-29", "changes": "https://legal.exploreworldai.com/api/public/v1/us-praxis/changes", "agent": "https://legal.exploreworldai.com/api/public/v1/us-praxis/agent?id=us:ca1-23-1839-2025-07-29", "verification": { "stored_sha256": "06b42aa6d6eb21418b4c190c9d9d57fda93caf7d377e55965bac8bcdac962bf1", "recomputed_sha256": "06b42aa6d6eb21418b4c190c9d9d57fda93caf7d377e55965bac8bcdac962bf1", "intact": true, "checked_at": "2026-10-11T06:58:13.013Z" } }, "hash": "sha256:4f112c65bee055ae7fc096eaa34bb3044c9281c5cb784ada65ad52c20552ec60", "version": "legal-2026-10-10", "expires": "2026-10-12T00:00:00.000Z", "dependency": { "index_version": "legal-2026-10-10+legal-2026-10-10+2026-10-10T17:32:53", "content_hash": "sha256:4f112c65bee055ae7fc096eaa34bb3044c9281c5cb784ada65ad52c20552ec60", "revalidate_after": "2026-10-11T07:58:13.154Z", "max_copy_age_seconds": 3600, "policy": "revalidate-required; attribution-preferred", "changelog": "https://legal.exploreworldai.com/api/public/v1/dependency", "verify": "https://legal.exploreworldai.com/api/public/v1/verify", "stale_copy_invalid": true }, "canonical": "https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:ca1-23-1839-2025-07-29", "follow": [ { "rel": "risk", "href": "https://legal.exploreworldai.com/api/public/v1/risk?id=us:ca1-23-1839-2025-07-29" }, { "rel": "relations", "href": "https://legal.exploreworldai.com/api/public/v1/relations?id=us:ca1-23-1839-2025-07-29" }, { "rel": "agent", "href": "https://legal.exploreworldai.com/api/public/v1/us-praxis/agent?id=us:ca1-23-1839-2025-07-29" }, { "rel": "obligations", "href": "https://legal.exploreworldai.com/api/public/v1/obligation-chain" }, { "rel": "changes", "href": "https://legal.exploreworldai.com/api/public/v1/whats-new?jurisdiction=us" } ], "disclaimer": "Source reference with official identifier. 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