The sacking of a crypto mecca

TheThe sky was still dark when the agents arrived at Leverett St. in Keene, New Hampshire, a leafy block of kit houses at the quiet edges of the small college town. They settled on a house at the corner, surrounding it with two armored BearCat G3s and a fleet of unmarked SUVs. Both BearCats had gunners stationed in a hatch on the roof, clad in camo fatigues. The only light came from the blue-and-red sirens, strobing off houses in every direction.

Inside, Ian Freeman was asleep with his girlfriend and their small dog Coconut. He woke to the sound of exploding glass. A ramming pole, tethered to the front of one of the BearCats, had plowed through a first floor window, tearing off the frame as it backed up. Freeman threw on a bathrobe and stumbled downstairs, still shaking off sleep. There was shattered glass everywhere. His first thought was that some stranger had thrown a brick. But then he heard a whirring sound, a small hovering drone that police had deployed to explore the house. He looked outside and saw blinding lights. Coming into focus beside the lights, men pointed rifles at him.

One mile east, Freeman’s talk radio co-host Aria DiMezzo stumbled downstairs in her underwear only to be met by a tactical assault team, who told her they would shoot her if she moved. At the town’s Bitcoin Embassy, a group of agents tore a Bitcoin dispenser from the concrete floor, leaving four symmetrical holes where it had been bolted down. They took another machine from the Campus Convenience in central Keene, another from a bar called Murphy’s Taproom, and a fourth from the Red Arrow Diner in Nashua. Together, they held more than $50,000 in cash.

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

Video: Christopher Waid

Video: Christopher Waid

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

News of the raid spread fast. A local Linux developer and crypto activist named Christopher Waid rushed to Freeman’s house to film the last gasps of the raid, catching footage of the BearCats, the drone, and the bizarre militarism of it all. When he was done there, he headed to the Bitcoin Embassy, where a crowd had gathered to watch police carry out duffel bags and plastic tubs full of loose paper. Despite the name, the embassy was little more than a side room to a convenience store. The most radical part of it was the bookshelf, offering DevOps manuals alongside copies of Ludwig von Mises’ Socialism and Robert A. Heinlein’s The Moon is a Harsh Mistress.

For years, Freeman had been warning about federal encroachment, broadcasting every night on the radio about the tightening fist of the state. His Bitcoin venture was part of a broader Free State movement in New Hampshire, turning a quiet corner of New England into a libertarian paradise. Now the counterforce was here, like a prophecy fulfilled, and the Free Staters understood their role perfectly. They were ready with cameras, asking for warrants and litigating precisely where they were allowed to stand while the raid dragged on. When police herded the crowd across the street, it just meant they had to yell that much louder.

“You guys are the fucking enemy!” one of the protestors told the agents, as they carried out another tub of papers. “You’re not protecting anybody’s fucking freedom. You’re all a bunch of gangsters.”

ByBy the end of the day on March 16th, six people were in custody: including Freeman, his girlfriend, and a married couple who lived nearby. Two co-hosts on the radio show were also named: DiMezzo and a man born as Richard Paul, who had legally changed his name to Nobody in protest of the bureaucratic state. According to the indictment, all six had been involved in Freeman’s Bitcoin dispenser business. An indictment filed under seal the day before the raid counted out thirteen instances when someone from the group had contacted a bank on behalf of the business since April 2017, listing each call or email as a count of wire fraud.

The defense lawyers describe the project in more idealistic terms. “The defendants were a loosely affiliated group of people with libertarian political leanings that included a strong belief that Bitcoin was a great development for those who champion human freedom,” one filing reads.

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

Freeman is best known as the host of Free Talk Live, a libertarian talk radio show syndicated to 185 radio stations across the country. Many of the activists outside the embassy had appeared on the show at some point, including Waid. When the BearCat rammed through the window, it was ramming into Freeman’s studio, a maze of cables and audio racks where the show is recorded, mixed, and distributed.

Free Talk Live gave Freeman the power to draw together a community of crypto-minded libertarians in Keene, but it also amplified his ugliest mistakes. Most recently, it gave center stage to his still-active lawsuit against New Hampshire’s mask mandate. (“I was never really convinced that COVID was a particularly dangerous thing,” Freeman tells me when I ask about the case.) The show also gave an early home to the infamous “crying nazi” Christopher Cantwell, who appeared on Free Talk Live when he was still trying to brand himself as a libertarian anti-police activist. (“When he became a racist, I fired him from Free Talk Live,” Freeman says. “He just kept getting deeper into that world.”)

The chaotic world of libertarian talk radio made Freeman’s show a natural gathering point for the early Bitcoin community. Free Talk’s first call about Bitcoin came in December 2010, the same month Satoshi Nakamoto disappeared from active development of the Bitcoin spec.

Hyped on the Free Talk Live site as the first consumer media mention of Bitcoin, the episode now comes off as a bizarre time capsule. The first 20 minutes are taken up with a discussion of voluntarist alternatives to the fire department and municipal road maintenance, after which the conversation turns to crystal meth and Venezuela. Around 40 minutes in, a caller named Jeremy from Australia chimes in to talk about a new digital currency called Bitcoin.

“It was about six cents for a Bitcoin in August and now it’s 26 cents, so it’s already increased quite a bit,” Jeremy says.

“My initial concern was that it’s essentially a fiat currency, because it’s not backed by anything,” Freeman responds. “It’s a neat idea. I don’t know if it’s yet a fantastic alternative.”

Freeman came around to Bitcoin in the months that followed, eventually fitting it into broader complaints about the way the US government controls the value of the dollar. The price kept rising: within three years it had cleared $1,000, then $10,000 four years after that. According to the forfeiture documents, Freeman’s cryptocurrency holdings are now worth well over $5 million.

As more money flooded into cryptocurrency, something else came with it. The version of Bitcoin that’s become popular in recent years is less political and more straightforwardly interested in making money. Venture capital has embraced the blockchain as an opportunity on the same scale as targeted advertising or independent-contractor labor schemes. It’s rare to hear concerns about the Federal Reserve at a Bitcoin conference these days, and few are interested in standoffs with regulators — there’s just no money in it.

But if you’re ready to work with regulators, the money is almost endless. Coinbase, an early adherent to federal Know Your Customer rules, is now processing more than $100 billion of transactions every month, while the company itself is valued at $50 billion. New wallet regulations are creeping forward from the Financial Crimes Enforcement Network, and while some activists cry foul, most entrepreneurs have welcomed them with open arms. At the Bitcoin 2021 conference in Miami, the Winklevoss twins promised a crowd of real estate moguls and retail investors that anyone who owns a Bitcoin will one day be a millionaire.

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

But if Mt. Gox and the Silk Road represented a transfer of power, the power is now shifting back the other way. In 2017, international raids took down BTC-e (then the largest unregulated exchange), with a money laundering sting revealed the following year. An Ohio man was arrested last year for running a Bitcoin tumbler called Helix, which mixed blockchain records with obscure transactions; a month after the New Hampshire raid, a Russian-Swedish national was arrested for running a similar service called Bitcoin Fog.

In public statements, prosecutors refer to these as “darknet” cases, treating the unregulated Bitcoin system as a loosely organized criminal conspiracy. There is a lot of tainted money on the blockchain: money from drug sales, online scams, or stolen from individual users as part of a breach. Tumblers and anonymous exchanges let criminals escape with that money, so law enforcement agencies are trying to shut them down one by one, like plugging holes in a dam. With so much dirty money trying to get clean, the prosecutions take on a kind of fatalist logic. Any unregulated exchange will eventually be used for money-laundering; any unmonitored flow of coins will eventually be an accomplice to a crime.

For the Keene project, keeping those coins unmonitored was the whole point. Their goal was to maintain the privacy and freedom of Bitcoin’s original design while staying just inside the bounds of the law. But to the federal government, it just looked like one more hole to be plugged.

ByBy the end of May, both Freeman and DiMezzo were out on bail, with the trial scheduled for October 2022. Waid announced Freeman’s release with a wry blog post on Free Keene: “After Significant Delays Hostage Takers Release Ian From From Merrimack County Spiritual Retreat.”

The conditions of the bail are stringent, befitting the aftermath of the raid: they can’t leave their homes, trade Bitcoin, or communicate with other co-defendants. That last provision created significant problems for Free Talk Live, since it meant the main two co-hosts could no longer speak to each other without risking more jail time. Within a few weeks, the court granted a relief order letting them talk for the purposes of coordinating the show, and the show returned to its usual troublemaking. By the end of July, they were drumming up support for a ballot measure that would allow New Hampshire to secede from the United States.

Nobody took a more adversarial stance toward the legal system and stayed in jail for months longer. According to court records, his calls with the public defender broke down into screaming matches. After two weeks in jail, he made a phone call so alarming that it halted his efforts for pretrial release. The recording itself is sealed, but a filing gives alarming titles for the exhibits, including “audio clip — needs to die,” “audio clip — start shooting pigs,” and “audio clip — kill himself if sentenced.”

Prosecutors say he made threats against his public defender’s life, and the public defender withdrew from the case the next day, putting the bail hearing on hold. As late as August, he was still in jail. Supporters rallied outside the corrections building, waving signs that said “Free Nobody.”

Freeman’s cohort had always lived at the margins of the broader Free State Project — but after the arrest, a new wave of libertarian activism sprung up around him. The Free Keene website became a flurry of daily news about bail hearings and protests. Waid started a website to support “the Crypto6,” as he called them. Soon, T-shirts bearing the name were a regular sight around town. A longtime Free State activist named Dave Ridley started organizing jail rallies, lending more local credibility to the cause.

As the jail rallies tapered off, Ridley turned to a more ostentatious kind of activism: branding himself as “Bitcoin Gandhi” and launching a 24-day march from Keene to Concord dressed in robes in a historically accurate Gandhi costume. A string of YouTube videos show him walking down the narrow shoulders of two-lane highways, picking up trash and occasionally being questioned by confused but genial highway patrollers. In an open letter to the head of New England’s General Services Agency, Ridley called for the federal government to distance itself from the case, saying, “escalations of this type indicate a Venezuelan-style slide into currency-fascism.” The month after, Ridley’s Gandhi alter ego took part in another protest outside the Concord federal building with Mr. Bitcoin, a Mr. Met-style foam suit embodiment of a physical Bitcoin.

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

Looking at his Bitcoin business, it can be hard to tell where that activism ends and the straightforward business begins. Freeman’s machines were real, and he was making money by building out cryptocurrency infrastructure like any entrepreneur. But he arranged the business in a self-consciously risky way, avoiding financial licensing and other measures that insulate many Bitcoin businesses from prosecution. Even more than his Wall Street competitors, Freeman was deeply familiar with cryptocurrency prosecutions. He knew that his Bitcoin dispenser left him exposed, but it never slowed him down.

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

Still, it wasn’t enough to make Freeman drop the project. As he tells it, his Bitcoin work was too important to give up, a kind of moral crusade against the American state and its ability to wage war.

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

Freeman also didn’t think the FBI could make a case. “We believed that this was legal,” he says. “There was a legal opinion written by our church attorney that looked at both federal and state regulations and he said, this is just a sale of a product; this isn’t money transmission.”

That opinion, prepared by the Shire Free Church, rests on a unique technical point that makes Freeman’s Bitcoin dispensers more like vending machines than an ATM. The machines look like a Cupertino-fried version of your standard cash machine, but each one holds its own wallet, akin to a stash of Bitcoins held physically inside the machine. So instead of transmitting your money from somewhere else, Freeman argues it’s merely dispensing a locally controlled inventory. It’s a clever distinction, although one can see how the FBI might not be convinced.

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

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

But if Freeman was ready to butt heads with the federal government, he wasn’t ready for the dramatic violence of the raid. “They could have just come and knocked,” Freeman says. “No one had to get their windows busted in.”

He also wasn’t ready for the full scope of the charges. Reviewing the case now, he’s particularly alarmed by the charge of operating a “continuing financial crimes enterprise,” which was levied against him specifically. It seems to have been triggered by the Shire Free Church allegedly bringing in more than $5 million in gross receipts over two years, which puts it in a different class of criminal organization. When we spoke, Freeman was still expecting more charges to emerge from ongoing grand jury proceedings.

“It was worse than I expected it to be,” he tells me. “And they’re not done yet.”

OnceOnce DiMezzo was released, one of her biggest surprises was the bail restriction on Bitcoin. It’s a reasonable request from prosecutors — you can’t let an accused diamond smuggler sell diamonds — but it’s meant a huge change in her lifestyle because, unlike most cryptocurrency enthusiasts, DiMezzo actually uses Bitcoin as money. She tells me she made about 80 percent of her purchases directly off the blockchain before the arrest, usually businesses in the Keene area that have set up Bitcoin payments through a local point-of-sale system called AnyPay. DiMezzo says she could eat at a different restaurant every night and always pay in crypto. This isn’t how Bitcoin works for most people and it can feel like Keene’s crypto mecca is a kind of island, blissfully cut off from the broader motion of cryptocurrency.

After the raid, the island is shrinking. In a phone call from the Merrimack jail, Freeman’s co-host Nobody spoke to me bitterly about Bitcoin developers’ refusal to increase the block size, a disagreement that ultimately led to the 2017 Bitcoin Cash split. His side lost that fight — the block size didn’t change, pushing the price of Bitcoin up while on-blockchain transactions got slower and slower. The Keene contingent still uses Bitcoin Cash where possible or fully anonymous alternatives like Monero, but it’s a much harder sell than Bitcoin.

The financial side of Bitcoin (the side you would find partying in Miami) isn’t interested in Bitcoin Cash. They don’t care about on-chain transactions or anonymity or anything else that would add friction to the vast sums of money pouring into cryptocurrency. For most of the new arrivals, Bitcoin is about profit, not politics.

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

That division is particularly stark after the raids, now that supporters are trying to raise money and awareness. It would be a good time to have rich and powerful friends, but Freeman doesn’t have any expectation that the institutional Bitcoin world will step in. “They probably won’t speak up in any of our cases,” Freeman tells me. “We’re irrelevant to them.”

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

“They’re gonna regulate the exchanges,” he says. “We know that. They’re going to regulate the banks, wherever else they can apply pressure… But regardless of how much effort they put into trying to control cryptocurrency, it will fail because of the decentralized nature of it.”

It is a point of almost religious faith for him. No matter how hard the clampdown, it will be incomplete. The wilder forces will survive just out of reach.

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

Correction: A previous version of this piece misstated the total of Freeman’s physical Bitcoin holdings (101 btc, rather than 11), as well as the date of Spinella’s contact with the FBI (2018, not 2016) and the nature of AnyPay’s point-of-sale service. The Verge regrets the errors.