As Bitcoin reaches prices not seen since November 2021, individuals and entities will undoubtedly consider selling – sometimes called “taking profit” on – Bitcoin and other digital assets to capture previously unrealized gains. But crypto market participants should be aware of the U.S. tax implications of realizing gains on the sale of digital assets – more importantly, properly reporting such gains to the Internal Revenue Service (“IRS”). As a recent U.S. Department of Justice (“DOJ”) Indictment makes clear, the willful failure to report such gains to the IRS may lead to potential criminal charges.Continue Reading DOJ’s First “Pure” Criminal Tax Charges in Bitcoin Case Signals Heightened Focus On Tax Reporting of Digital Asset Gains
Digital Assets
The Storm Continues: Federal Court Upholds Tornado Cash Sanctions and DOJ Files Criminal Charges Against Two Tornado Cash Cofounders
On August 17, 2023, the U.S. District Court for the Western District of Texas granted summary judgment to the U.S. Department of the Treasury (Treasury) on all of the plaintiffs’ claims in the lawsuit challenging the Department’s Treasury’s Office of Foreign Assets Control’s (OFAC) designation of Tornado Cash, a purportedly decentralized cryptocurrency mixer that runs…
ISDA publishes whitepaper on digital asset custody
The International Swaps and Derivatives Association, Inc. (“ISDA”) continues to press forward with its digital asset working group, following the publication[1] in January this year of (i) the Digital Asset Derivatives Definitions (the “Definitions”) and (ii) the whitepaper on netting and collateral enforceability.
On May 3, 2023, ISDA published…
Bittrex: Regulatory Enforcement and Macroeconomic Headwinds Lead to Another Crypto Bankruptcy
Bankruptcy filings in the digital asset space continue, as cryptocurrency exchange Bittrex filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on Monday, May 8, 2023. The Bankruptcy Docket can be found here. Desolation Holdings LLC and its affiliated debtors, Bittrex, Inc., Bittrex Malta Holdings Ltd., and Bittrex Mala Ltd., as debtors and debtors in possession (“Bittrex US”) filed their chapter 11 petitions alongside a plan of liquidation. Unlike other exchanges that have sought to reorganize in fits and starts, Bittrex US heads directly to liquidation. Activities outside of the US, including Bittrex Global, shall continue uninterrupted by the filing.Continue Reading Bittrex: Regulatory Enforcement and Macroeconomic Headwinds Lead to Another Crypto Bankruptcy
First Insider Trading Conviction Against NFT Insider
On May 3, 2023, Nathaniel Chastain, the former product manager of the NFT marketplace OpenSea, was convicted by a federal jury in the Southern District of New York for what is being called the first insider trading conviction in the digital asset space. Continue Reading First Insider Trading Conviction Against NFT Insider
NFTs as Securities?
Many of those active in the non-fungible token (NFT) market have been nervously anticipating action from the U.S. Securities and Exchange Commission (SEC) regarding whether or not they will categorize NFTs as securities and further regulate them. U.S. regulators have not yet definitely opined on whether NFTs in general are securities. However, a recent ruling, Friel v. Dapper Labs Inc et al, U.S. District Court, Southern District of New York, No. 21-05837, may have set the stage for some much-needed clarity with respect to the legal characterization of NFTs.Continue Reading NFTs as Securities?
ISDA Digital Asset Definitions
Following many months of discussion and review by a working group of traditional finance institutions and crypto-native exchanges and platforms led by the International Swaps and Derivatives Association, Inc. (“ISDA”), ISDA published the Digital Asset Derivatives Definitions (the “Definitions”) on January 26, 2023 for use with Bitcoin (BTC) and Ether (ETH)…