Feeds

US federal judge: Yes, Bitcoin IS MONEY

Texas Bitcoin trader must stand trial for securities fraud

High performance access to file storage

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. ®

High performance access to file storage

More from The Register

next story
Android engineer: We DIDN'T copy Apple OR follow Samsung's orders
Veep testifies for Samsung during Apple patent trial
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
One year on: diplomatic fail as Chinese APT gangs get back to work
Mandiant says past 12 months shows Beijing won't call off its hackers
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
EFF: Feds plan to put 52 MILLION FACES into recognition database
System would identify faces as part of biometrics collection
Big Content goes after Kim Dotcom
Six studios sling sueballs at dead download destination
Alphadex fires back at British Gas with overcharging allegation
Brit colo outfit says it paid for 347KVA, has been charged for 1940KVA
Jack the RIPA: Blighty cops ignore law, retain innocents' comms data
Prime minister: Nothing to see here, go about your business
Singapore decides 'three strikes' laws are too intrusive
When even a prurient island nation thinks an idea is dodgy it has problems
Banks slap Olympus with £160 MEEELLION lawsuit
Scandal hit camera maker just can't shake off its past
prev story

Whitepapers

Mainstay ROI - Does application security pay?
In this whitepaper learn how you and your enterprise might benefit from better software security.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.