Silk Road forums
Discussion => Security => Topic started by: Libertas on August 08, 2013, 08:10 am
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Thought this clearnet article might stimulate some debate on the future of Bitcoin as a recognized medium of exchange:
http://www.forbes.com/sites/kashmirhill/2013/08/07/federal-judge-rules-bitcoin-is-real-money/
Federal Judge Rules Bitcoin Is Real Money
Trendon Shavers is accused of being the Bernie Madoff of Bitcoin. The SEC is going after him for allegedly running a Bitcoin Ponzi scheme from 2011 to 2012. Through his Texas-based “Bitcoin Savings & Trust,” he, under the name “pirateat40,” took in 700,000 Bitcoin — worth $4.5 million at the time — from investors to whom he promised an up to 7% return. In fact, he was paying out Bitcoin from later investors to the earlier investors, taking a hefty cut for himself, and the scheme all eventually fell apart.
Shavers “misappropriated” over 150,000 Bitcoin, according to the SEC, but made poor Bitcoin-for-dollar day trades and wound up only making about $150,000 off of them. He used that money for “rent, car-related expenses, utilities, retail purchases, casinos, and meals,” according to the SEC. His 66 investors from across the country lost a total of 263,104 Bitcoin, worth almost $3 million at the time Bitcoin Savings & Trust (BTCST) went belly up, and worth $26 million today. Protip: Don’t invest your money with a self-termed “pirate.”
In defending himself against the SEC suit, Shavers argued that Bitcoin isn’t actually money and that the SEC shouldn’t be able to prosecute him. “Shavers argues that the BTCST investments are not securities because Bitcoin is not money, and is not part of anything regulated by the United States,” writes Magistrate Judge Amos Mazzant of the Eastern District of Texas. “Shavers also contends that his transactions were all Bitcoin transactions and that no money ever exchanged hands.”
So Shavers essentially tried to say that Bitcoin is a bauble and that he was taking in digital points and giving out digital points that had no real world value. The prosecutors at the SEC disagree, arguing that Bitcoins “are both investment contracts and notes, and, thus, are securities.” (That bodes well for the Winklevoss twins who are currently trying to get the SEC to approve their Bitcoin exchange traded fund so that institutional investors can get their hands in the digital currency.)
Like Tinkerbell the blue fairy turning Pinocchio into a real boy, the judge sided with the SEC, giving Bitcoin his stamp of approval as real world money.
“It is clear that Bitcoin can be used as money,” writes Judge Mazzant in a ruling on Tuesday. “It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses.”
Yup.
“The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan,” writes Mazzant. “Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money.”
Bad news for Shavers, but good news for Tyler and Cameron Winklevoss and their proposed Bitcoin ETF — which will hopefully be better run than Bitcoin Savings & Trust.
Interesting times ahead!
EDIT: Relevant section of the "MEMORANDUM OPINION REGARDING THE COURT’S SUBJECT MATTER JURISDICTION" :
MEMORANDUM OPINION REGARDING THE COURT’S SUBJECT MATTER JURISDICTION
The term “security” is defined as “any note, stock, treasury stock, security future, security-based swap, bond...[or] investment contract...” 15 U.S.C. § 77b. An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party.
SEC v. W.J. Howey & Co., 328 U.S. 293, 298-99 (1946); Long v. Shultz Cattle Co, 881 F.2d 129, 132 (1989).
First, the Court must determine whether the BTCST investments constitute an investment of money. It is clear that Bitcoin can be used as money. It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money.
Libertas
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Thank you for sharing this!
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Great share. Extremely interesting to say the least.
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Flawless defense plea there Trendon Shavers... "It's okay to rip people off, as long as it's digital money."
Have fun getting butt-fucked; we assure those penises are going to be real!
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Interesting indeed.
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This is a huge case for BTC. To my knowledge it is the first court case ruling based on the FinCEN guidelines created this march.
What I find ironic is that he didn't spend any of that money on getting the hell out of dodge.
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This is a huge case for BTC. To my knowledge it is the first court case ruling based on the FinCEN guidelines created this march.
What I find ironic is that he didn't spend any of that money on getting the hell out of dodge.
I laughed when I saw "gambling" listed as one of his expenses. What a fucking douche bag..
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Did anyone else read the article in Forbes the other day about Bitcoin as a tax evasion method? It spoke about the growing Federal eye towards our beloved Bitcoin.
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Did anyone else read the article in Forbes the other day about Bitcoin as a tax evasion method? It spoke about the growing Federal eye towards our beloved Bitcoin.
No, but I imagine it was another of Matonis' articles? Luckily they're going after exchanges and not individuals currently. I imagine they will continue to try and stifle cashout methods as that is easiest, most effective target for money laundering/tax evasion.