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Last week the Federal Court recognized the Bitcoin to be real money. Case involving fraudulent offers and sales of securities by the accused Trendon Shavers was heard in the Eastern District Court of Texas. Securities and Exchange Commission filed a complaint against Mr. Trendon T. Shavers and his Bitcoin Savings and Trust “BTCST” claiming that he had been involved in fraudulent pyramid schemes.
From September 2011 to September 2012, Shavers offered and sold BTCST investments over the Internet, raising more than 700,000 Bitcoin in principal investments from BTCST investors, which was more than $4.5 million based on the daily average price of Bitcoin at the time of investor’s purchase.
Shavers falsely promised investors up to 7% interest weekly based on BTCST’s purported Bitcoin market arbitrage activity, including selling Bitcoin to individuals who wished to buy it “off the radar,” quickly, or in large quantities. In reality, the BTCST offering was a sham and a Ponzi scheme whereby Shavers used new BTCST investors’ assets to pay the promised returns on outstanding BTCST investments and misappropriated BTCST investors’ bitcoin for his personal use. Shavers “misappropriated” over 150,000 Bitcoin. SEC claimed that the money was used for “rent, car-related expenses, utilities, retail purchases, casinos, and meals”. His 66 investors from across the country lost a total of 263,104 BTCs, worth almost $3 million at the time Bitcoin Savings & Trust (which is almost $26 million today).
In his defense Mr.Shavers provided an argument that Bitcoin cannot be considered as a real money and the transactions were all the Bitcoin transactions hence no money had ever been exchanged.
The Court defined the Bitcoin as an electronic form of currency.
Although it is not regulated by a central bank or any other form of governmental authority it can be used to purchase items online, if the supplier allows this form of currency. Some on line shops and service suppliers have begun accepting Bitcoin in exchange for gift cards or other purchases.
Initially Bitcoin was designed to reduce transaction costs, and allows users to work together to validate transactions by creating a public record of the chain of custody of each Bitcoin.
Hence, the Court concluded that Bitcoin could be used as money. It is possible to purchase goods or services, pay for individual living expenses [as the accused Mr.Shaver did]. Bitcoin can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, etc. Furthermore, the investors wishing to invest in BTCST provided an investment of money. Therefore, Bitcoin is a real money and its use will be treated accordingly. Mr.Shavers is now facing a trial.