After I was arrested by homeland security the justice department was very interested in taking over my localbitcoins account.  As part of the plea deals they offered me they wanted the account so they could use it for undercover operations.

I am certain that many who are arrested will turn over their accounts as part of their plea deals.  I did not accept any plea deal so I never turned my account over to them, however I have not used it since the arrest since using the darn thing is what got me into trouble in the first place.

If I had never advertised on localbitcoins they would have never been able to claim what I was doing was a business and they would not have been able to arrest me for running a business without the proper license.

At least some localbitcoins account are run by federal agents, cooperating witnesses or undercover agents in local jurisdictions.  That is a fact.

Much of the evidence presented against me was from undercover operations where they video and audio taped me in a coffee shop doing a trade of BTC for cash or cash for BTC - all arranged through their accounts or cooperating witnesses on localbitcoins.

It is not illegal to use localbitcoins as a customer to buy or sell BTC.  Always assume you are dealing with an cop so be very careful what you say.  If they ask you what you are going to use the BTC for they may be trying to get you to admit you are going to use them for something illegal.

Advertising on localbitcoins is a whole other matter.  The US federal law enforcement can use the fact that you are advertising to claim you need a license.  That is what happened to me.  The whole thing cost me over $250,000 to clear my name and avoid going to prison.