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🇺🇸 Bitcoin Jesus v. USA
Roger Ver ready to fight over $50M in BTC taxes
🧑‍⚖️ Unconstitutional
Bitcoin Jesus will not go quietly into the night…or pay $50 million in alleged unpaid taxes.
Roger Ver, who was arrested in Spain in April of this year, is arguing that the Department of Justice’s tax fraud charges are “unconstitutional.”
The DOJ filed a “defective indictment," Ver’s lawyers say, that misquotes communications between Ver and his legal teams and — stop me if you’ve heard this one before — “hangs on a semblance of regulatory clarity that never existed.”
Ver’s defense claims that Bitcoin Jesus tried to get ahead of the murky tax code in 2014 (which, to be fair, is still a bit unclear 10 years on) by hiring an unnamed law firm to consult on his decision to leave the US. As part of that, they conducted a hypothetical scenario where Ver sold all of his holdings, but the thing is, as Ver’s lawyers explained, he couldn’t sell his bitcoin back in 2014.
“On March 2, 2014, however, such a sale was likely impossible as a technological matter and catastrophic as a matter of market value. At the time, BTC was a thinly traded market with a limited number of active traders,” the filing said. And, unfortunately, the only marketplace to really sell off large amounts of bitcoin was Mt. Gox — which had just collapsed.
So Ver, along with multiple tax experts and attorneys, had basically tried to calculate unrealized gains and exit taxes with all that in mind. Per his lawyers, Ver was also exploring the cost if he was personally on the hook for bitcoin held by his companies.
From Ver’s motion to dismiss
Obviously, with this being a tax case, there’s a lot of back and forth about the unrealized gains, and Ver’s previous communications regarding his bitcoin sales and how he recorded his bitcoin holdings. But essentially, the motion to dismiss falls back on the fact that the current tax code — and by current, I also mean the framework that existed in 2014 — didn’t really account for crypto.
The indictment relies “on impermissibly vague laws that, at all relevant times, provided no basis for a person of reasonable intelligence to understand the proper application of tax laws to digital currencies; and they rely on the government’s persistent trampling on basic rights and notions of fair play,” his team argued.
The timing of this filing is what’s really interesting. Ver is set, as of right now, for a trial in lower Manhattan starting in early February of next year that could see him potentially extradited to the US. We’ve talked endlessly about the incoming administration and its seemingly favorable view of crypto and Manhattan prosecutors, to this point, are already reducing the amount of crypto cases they go after.
Whether or not Bitcoin Jesus can succeed in getting his case tossed is up to the judge at this point, but I bet his team feels there couldn’t have been a more perfect time for this filing.
— Katherine Ross
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TRX and BNB set new price records overnight, currently up 60% and 20% in the past day.
BTC dominance is below 55% this morning, the lowest since July after falling 7% in two weeks.
BTC open interest on CEXs is down over 8% from its Nov. 22 peak, sitting at $58.72 billion this morning.
The number of ETH staked has fallen 0.7% in the past month as prices rose by 50%. That’s the equivalent of almost 244,000 ETH ($906 million).
Weekly DEX volumes on Base are up 15.6% to $12.5 billion, while Solana and Ethereum have shed 26% and 10%, respectively.
💰 Not all treasure’s silver and gold
If crypto were an ocean, Terra was a whirlpool the size of a Maelstrom.
And by all accounts, when that Maelstrom collapsed in on itself, in May 2022, the chaos sucked the liquidity right out of crypto markets for a solid year.
Stablecoins were crypto’s primary liquidity machine at the time and massive chunks of the market simply pulled the plug.
Tether withstood a month-long $16 billion “bank run” on USDT, while Circle net burned over $30 billion USDC between June 2022 and November 2023.
At the same time, Paxos was winding down Binance stablecoin BUSD — redeeming about $20 billion worth of stablecoins over a 12 month period. A period that coincidentally ended just as bitcoin’s current run was heating up in late 2023.
Looking back, it’s clear that liquid staking and restaking tokens may have helped plug the leak as the rolling liquidations, bankruptcies, and fraud cases played out.
This chart plots the market cap of stablecoins (blue) alongside liquid staking (purple) and restaking (pink) tokens since Q1 2021.
Combining the three token classes forms what I’ve called crypto’s liquidity engine.
Notice that as tens of billions of dollars were being drained from crypto via stablecoin redemptions — starting with Terra and into the middle of the chart — liquid staking tokens expanded to mitigate those losses.
It kept crypto’s liquidity engine on an even keel for a solid 10 months, with liquid (re)staking tokens taking off at the first hint of a reversal of the stablecoin redemption trend.
Terra is now a blip in crypto market history. Stablecoin supplies have just set a new all-time high close to $194 billion (about $6 billion higher than just before Terra), while liquid staking and restaking tokens are also at a fresh combined peak of $92.5 billion.
That makes crypto’s liquidity engine nearly $300 billion deep — with apparently no Maelstrom in sight.
— David Canellis
The US government’s bitcoin stash is on the move as the US transfers $33 million BTC to multiple addresses, per Arkham.
DCG’s Foundry mining pool laid off 16% of its US workforce.
During a brief stint of martial law, South Korean crypto exchanges saw record volumes of $34 billion in the past 24 hours.
Grayscale filed paperwork with NYSE Arca to convert its Solana trust into a Solana ETF.
Celsius founder Alex Mashinsky could face up to 30 years in prison after pleading guilty in his fraud case.
Q: What impact do massive potential prison sentences have on crypto innovation?
When it’s for the right reasons (a la Sam Bankman-Fried or Alex Mashinsky), I think it’s positive for the space. Fraud can’t be tolerated, and in a world like crypto, those who want to screw others over should face penalties.
Instead of rehashing the past, which I think we’d all like to move on from, what I will say is that this isn’t just a crypto thing. Look at Enron for example: the sudden reemergence led to multiple discussions about the utility of resurrecting such an infamous company, and why it could be seen as tone-deaf.
We can move on from things like Terra, FTX, Celsius, etc, but they won’t be forgotten. Let’s just hope it also means they won’t be repeated.
— Katherine Ross
It’s not like Terra was the first attempt at an algorithmic stablecoin. And neither was Celsius the first centralized crypto lending startup.
To be clear: Fraud is bad and people should be punished for it. And that should, ideally, deter others from pulling similar stunts, just like Katherine said.
Still, had Kwon been deterred from attempting Terra — say by seeing another founder go to prison over a failed coin — would crypto have ever truly grokked that collateralizing an algorithmic stablecoin with a sister token is destined to implode?
I’d bet not. It’s a small silver lining, but it’s there.
— David Canellis