Feeds

US federal judge: Yes, Bitcoin IS MONEY

Texas Bitcoin trader must stand trial for securities fraud

Security for virtualized datacentres

A US federal judge has ruled that Bitcoin meets the criteria for "a form of money" under US law, paving the way for what could become a defining lawsuit for the virtual currency.

The US Securities and Exchange Commission has charged Texas resident Trendon Shavers with operating a Ponzi scheme under the name Bitcoin Savings and Trust (BTCST), in which he allegedly sold fraudulent investment securities in exchange for more than 700,000 Bitcoin during 2011 and 2012.

During that period, Shavers allegedly offered investors as much as 1 per cent interest per day "until either you withdraw the funds or my local dealings dry up and I can no longer be profitable."

In reality, the SEC alleges, the only interest payments Shavers' clients received came from funds deposited by new investors, and Shavers diverted what limited proceeds he received from his Bitcoin trading activities to his own accounts.

In his defense, Shavers argued that what he sold his clients cannot be considered securities because no actual money changed hands. Shavers dealt exclusively in Bitcoin, and neither accepted nor paid US funds to his would-be investors.

On Tuesday, US magistrate judge Amos Mazzant ruled that Shavers' argument before the court didn't hold water, because as far as money is concerned, Bitcoin passes the "duck test":

It is clear that Bitcoin can be used as money. It can be used to purchase goods and 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 willing to invest in BTCST provided an investment of money.

Mazzant went on to rule that Shavers and his investors were engaged in a "common enterprise," where the investors relied upon Shavers' own expertise in Bitcoin markets and were expecting a substantial return on their investments from Shavers' Bitcoin trading activities.

In light of these findings, Mazzant concluded that the investments offered by BTCST met the legal definition of investment securities, and that US district court in which Shavers has been charged has jurisdiction to try the case under federal securities laws.

The ruling is bad news for Shavers, who must now stand trial for defrauding would-be investors out of Bitcoin worth at least $4.5m at the time of the transactions and considerably more by today's exchange rates. But it could also have far-reaching implications for Bitcoin trading, which so far has lingered in a legal gray area where US finance laws are concerned.

A number of federal agencies have been questioning whether the virtual currency shouldn't fall under their legal jurisdiction, and this latest ruling is liable to give them fresh ammunition. ®

Protecting users from Firesheep and other Sidejacking attacks with SSL

More from The Register

next story
Hey, Scots. Microsoft's Bing thinks you'll vote NO to independence
World's top Google-finding website calls it for the UK
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Apple CEO Tim Cook: TV is TERRIBLE and stuck in the 1970s
The iKing thinks telly is far too fiddly and ugly – basically, iTunes
Huawei ditches new Windows Phone mobe plans, blames poor sales
Giganto mobe firm slams door shut on Microsoft. OH DEAR
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
OECD lashes out at tax avoiding globocorps' location-flipping antics
You hear that, Amazon, Google, Microsoft et al?
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Security and trust: The backbone of doing business over the internet
Explores the current state of website security and the contributions Symantec is making to help organizations protect critical data and build trust with customers.