LexisNexis® Legal Newsroom
SEC Alleges Texas Man Ran $4.5 Million Bitcoin Ponzi Scheme

The Securities and Exchange Commission has filed civil fraud charges against a Texas man, accusing him of masterminding a Ponzi scheme using the virtual currency known as Bitcoin that promised annual returns exceeding 300%. Trendon T. Shavers, 30, was charged with violations of federal securities laws...

Missing: Nearly $500 Million Worth of Bitcoins

Mt. Gox, the bitcoin trading site, has reported that it is missing over $470 million worth of bitcoins and has sought bankruptcy protection. At a news conference in a Tokyo courthouse, Mt. Gox Chief Executive Officer Mark Karpelès stated, “There was some weakness in the system, and the...

MtGox Chapter 15 Case Brings Japanese Insolvency Proceeding and Bitcoin Drama to Dallas Bankruptcy Court

Bankruptcy sometimes provides a window into unfamiliar worlds. The recent chapter 15 filing by MtGox Co., Ltd. contains an interesting explanation of the bitcoin phenomenon as well as Japanese involvency proceedures. In re MtGox Co., Ltd ., No. 14-31229 (Bankr. N.D. Tx.). Here are a few nuggets that...

Bitcoins in Bankruptcy: Trouble Ahead for Investors and Bankruptcy Professionals?

It is hard to ignore the media attention surrounding Bitcoin these days. Within the last few months, the virtual currency has surged to new highs, was the focus of a Congressional hearing, and was the subject of comments by former Federal Reserve Chairman Ben Bernanke, who stated that it and other such...

Bankruptcy Judge: Bitcoin CEO Must Come to the United States to Be Deposed

DALLAS — (Mealey’s) The federal bankruptcy judge presiding over the Chapter 11 case of bitcoin exchange operator MtGox Co. Ltd. today ordered the company’s CEO to fly to the United States from Japan to be deposed, a source told the LexisNexis Bankruptcy Report ( In Re: MtGox Co. Ltd...

Regulators Try to Get a Handle on Bitcoin

by Korey Clark Although cryptocurrencies, most notably bitcoin, have been around for a few years, they've been of interest mainly to tech-savvy libertarians and investors with low aversion to risk. Few state lawmakers have devoted much attention to them. But that isn't likely to last with...

Bitcoin Is Property, Not Currency, IRS Says – Notice Leaves Many Open Questions About Convertible Virtual Currencies

by Joseph H. Langhirt , David Plewa , and Michael Greenberg The Internal Revenue Service has joined several other jurisdictions in publishing guidance regarding the income tax consequences of certain convertible virtual currency transactions.[ 1 ] IRS Notice 2014-21[ 2 ] clarifies that existing general...

Elusive Bitcoin: Regulation of Bitcoin in the U.S. Part I

The phenomenon of Bitcoin (and virtual currency in general) presents an interesting legal conundrum. It is still not clear for many where does Bitcoin fit within our legal system, and whether and how to regulate it. Today, I would like to take a closer look at the Bitcoin network, the recent legal developments...

Elusive Bitcoin: Regulation of Bitcoin in the U.S. Part II

Today, I am going to summarize FinCEN’s regulations relating to Bitcoin. The Financial Crimes Enforcement Network ( FinCEN ) is an agency within the US Treasure Department. Its mission is to safeguard the financial system from illicit use, combat money laundering and promote national security....

Alt-Currency: What Bitcoin Means for Banking

Cosmologists argue that we live in a multiverse. Granted, it’s only a theory, but it’s a plausible one that’s strengthened by new evidence supporting decades-old scientific reasoning. Even though we may never be certain if ours is just one of many or even countless parallel universes...

Elusive Bitcoin: Regulation of Bitcoin in the U.S. Part III

In this third chapter of my blog about Bitcoin regulation, I am going to focus on regulation of Bitcoin by the CFTC and the SEC. The U.S. Commodity Futures Trading Commission (the "CFTC") is an independent federal agency that regulates derivative products tied to interest rates and commodities...

IRS Notice Provides Bitcoin Transaction Tax Guidance

In March, the IRS issued Notice 2014-21, 2014 IRB LEXIS 238 (March 25, 2014) , providing guidance, in the form of FAQs, on the application of general tax principles to transactions involving virtual currency, such as bitcoins. Q&A 1 of the notice provides the general rule that for federal taxation...

SEC, Bitcoin and Unregistered Offerings

Bitcoin has been a much discussed item recently. The virtual currency is a digital representation of value that is traded and can serve as a medium of exchange. There are websites that use it. At one time there was a stock exchange called the Global Bitcoin Stock Exchange which apparently listed shares...

Bitcoin Regulation - Addressing Compliance & Risk Issues for Financial Institutions [WEBINAR]

In 2009, a talented programmer (or group of programmers) released the first virtual currency protocol, known as Bitcoin. The Bitcoin protocol, essentially a robust P2P payment system , has now spun several other virtual currencies (Litecoin, Dogecoin, etc..) and has the potential to transform existing...

Virtual Currency Regulatory Developments

By Prof. William H. Byrnes IV and Dr. Robert J. Munro * Editor's Note : The following is an excerpt from the e-book only title Money Laundering, Asset Forfeiture, and Recovery and Compliance - A Global Guide , by William Byrnes and Robert Munro. Chapter contributors : Emmanuel Rayes is a May 2014...

CFPB Issues Advisory Concerning the Risks Associated With the Use of Virtual Currencies

by Zachary Q. Hoard On August 11, 2014, the Consumer Financial Protection Bureau (CFPB) issued a consumer advisory warning consumers about the risks of virtual currencies, also referred to as “digital currencies,” such as Bitcoin. The potential risks include the threat of hacking and scams...

Judge Fines Texas Man $40 Million For Bitcoin Ponzi Scheme

A federal judge has ordered a Texas man and his company to pay more than $40 million in disgorgement and civil penalties for operating a Ponzi scheme using the virtual currency Bitcoin. U.S. Magistrate Judge Amos L. Mazzant handed down the order against Trendon T. Shavers and his company, Bitcoin Savings...

Texas Man Arrested For $4.5 Million Bitcoin Ponzi Scheme

A Texas man has been arrested on wire fraud and securities fraud charges for his operation of what authorities allege was a Bitcoin-related Ponzi scheme that raised millions of dollars through a purported online digital hedge fund. Trendon Shavers, known in Bitcoin forums as "Pirateat40," was...

The SEC Increases Focus on Digital Currencies

It is clear that the SEC has been focusing on securities fraud involving digital currencies. In July 2013 , the SEC charged Trendon T. Shavers, the founder and operator of Bitcoin Savings and Trust, with defrauding investors in a Ponzi scheme involving Bitcoin. In June 2014 , the SEC charged a Bitcoin...

Hong Kong Bitcoin Exchange Suspected of $387 Million Ponzi Scheme

A Hong Kong Bitcoin exchange that promised sky-high returns by purportedly engaging in bitcoin trading has reportedly closed its doors, leading to rampant speculation that the company may have been operating a massive Ponzi and/or pyramid scheme. Bitcoin exchange MyCoin, which had earlier claimed it...

BitLicense Regulations and the August 8, 2015 Deadline

by Adam Ettinger As you know, the New York “BitLicense” regulations became effective on June 24, 2015, and businesses that are engaged in “Virtual Currency Business Activity” involving New York or a “New York Resident” must apply for a license. The deadline for...

Is Bitcoin a Commodity?

As reported by Bloomberg , the Commodity Futures Trading Commission has now ruled that bitcoin, the peer-to-peer digital currency, is a commodity. This means the CFTC can regulate it and punish evildoers. Several in the bitcoin industry intend to challenge the CFTC’s jurisdiction. They say it’s...

Mining for Virtual Currencies – The SEC Charges Fraud

Virtual currencies such as bitcoin have grown in popularity. With that popularity it may well have been inevitable that the SEC would bring enforcement actions centered on the new phenomenon, alleging fraud. A new variation of those actions is the predicate for the Commission’s most recent enforcement...