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July 23, 2013
Commentary by Bob Zwirb

The SEC has charged the founder and operator of Bitcoin Savings and Trust ("BTCST"), with defrauding investors in a Ponzi scheme involving bitcoin, a virtual currency traded on online exchanges for conventional currencies like the dollar or to purchase goods and online services. The SEC alleges that Shavers offered and sold bitcoin-denominated investments through the Internet, raising at least 700,000 bitcoin in BTCST investments amounting to more than $4.5 million in 2011 and 2012. Separately, the SEC has issued an investor alert warning investors of the threat of potential investment scams

August 07, 2013

A federal district court ruled that the SEC can continue its case against a firm in the business of selling interests in a Bitcoin enterprise.The Court ruled that the firm's offerings met the definition of "investment contract" and (thus) "securities" under the Securities Act of 1933 and the Securities Exchange Act of 1934. Lofchie Comment: The Bitcoins case raises interesting questions about regulatory jurisdiction (which the court does not address) - i.e., Bitcoins are a form of currency interest that should be regulated by the CFTC rather than the SEC. It will be interesting to see whether

October 21, 2013

NASAA expanded its annual listings of the financial products, practices and services, which it believes threaten to trap unsuspecting investors, including small business owners. Andrea Seidt, NASAA President and Ohio Securities Commissioner, expressed concern for NASAA members regarding the lifting of the 80-year-old ban on the advertising of private offerings mandated by the JOBS Act. Ms. Seidt stated that the new general solicitation rules could create opportunities for unregulated third parties to provide ancillary services. Persistent investor threats in 2013 include: private offerings

January 31, 2014

The Financial Crimes Enforcement Network ("FinCEN") published two administrative rulings, providing additional information on whether a person's conduct related to convertible virtual currency brings them within the Bank Secrecy Act's ("BSA") definition of a money transmitter. The first ruling concludes the following: to the extent a user creates or "mines" a convertible virtual currency solely for a user's own purposes, the user is not a money transmitter under the BSA. The second states: a company purchasing and selling convertible virtual currency as an investment exclusively for the

March 26, 2014

The IRS has announced that it will treat Bitcoin and other virtual currency that has an equivalent value in real currency or that acts as a substitute for real currency, as property for tax purposes and not foreign currency. As a result, the general principals applying to property transactions apply to virtual currency. Thus, taxpayers could claim capital gains and losses on Bitcoin that the taxpayer uses to acquire other property or to pay for services. In Notice 2014-21 (linked below) the IRS addressed 16 "frequently asked questions" on the taxation of virtual currency. For example, a