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Roger Ver Arrest May Have Followed Bad Advice, Top Crypto Lawyer Says

Last Updated May 3, 2024 12:58 PM
Teuta Franjkovic
Last Updated May 3, 2024 12:58 PM

Key Takeaways

  • Roger Ver failed to report all assets on a key tax form (Form 8854) after renouncing US citizenship.
  • Leading crypto lawyer David Lesperance says Ver may have received bad advice or ignored good advice on legal and financial matters.
  • He thinks Ver believed cryptocurrency anonymity shielded him from taxes, despite transactions being traceable.

Recently, CCN reported that American authorities arrested Roger Ver, former CEO of Bitcoin.com, on suspicion of mail fraud, tax evasion, and filing false tax returns. The arrest places him under the jurisdiction of the United States, a country whose citizenship he previously renounced. Ver, nicknamed “Bitcoin Jesus” on account of his work with BTC, could face as long as 30 years in prison if he is found guilty.

Meanwhile, top crypto lawyer David Lesperance says Ver could have had bad advice. He also said Ver may have believed crypto anonymity could have helped him not pay tazes

Roger Ver Faces Potential Tax Issues on Bitcoin Holdings

On April 30, the US Department of Justice announced  Ver had been arrested in Spain. He now faces extradition proceedings. If he is charged and found guilty, he would face a prison sentence of anything from two months to 30 years.

CCN recently spoke with crypto and extradition legal expert David Lesperance, about the case.

Ver renounced his American citizenship in 2014 and acquired citizenship through investment in Saint Kitts and Nevis . Lesperance explained the criteria for determining if someone is a “covered expatriate” includes having more than $2 million in worldwide assets or meeting specific federal tax obligations over the previous five years. Ver met the asset threshold, which meant he had to pay some American taxes.

He explained:

“When you expatriate, you look at determining whether you’re something called a covered expatriate. If  you are, you’re any one of three things. Number one is that you have more than $2 million in worldwide assets or you have a particular amount of federal tax paid in the previous five years.”

Specifically, Ver faced what’s known as a section 8877 exit tax , a tax rule that treats the expatriate’s assets as if they were sold for their fair market value on the day before the expatriation. This deemed disposition is crucial for assets like Bitcoin, where the market value can significantly fluctuate. Lesperance noted that there are opportunities to apply discounts to the deemed sale value in certain circumstances, such as for market makers or assets with lockups and liquidity issues.

Lesperance asserted:

“He’s a covered expatriate because he had more than $2 million in worldwide assets as of the day before he renounced. Therefore, he triggers something called a section 8877 exit tax. That’s a deemed disposition for capital gains purposes. So he would have acquired a bunch of Bitcoin at various cost basis, and he been deemed to sell them at whatever the market value was.

“There are opportunities to discount that with a block discount. For example, if you’re a market maker or if you’re not in crypto, but you got pre IPO shares and lack of liquidity and lockups and all those good things, so there would have been a discounting opportunity. Whatever the fair market was on the close of the day before he left, his acquisition costs, his cost basis would have been that.”

The core of Ver’s legal troubles stems from his alleged underreporting on form 8854 , suggesting that he may have evaded taxes. This underreporting could have serious implications. People like Roger Ver have to work through a complex web of regulations if they want to change residency or citizenship.

Roger Ver’s Bitcoin Gift and Tax Underreporting Raise Red Flags

Lesperance delved deeper into the complexities of gift tax regulations in the context of Roger Ver’s case. He discussed the “unified credit ,” a US tax exemption that allows an individual to gift a significant amount of assets tax-free over their lifetime. Currently, this exemption stands at $13.7 million, but at the time Ver renounced his citizenship, it was significantly lower, around $3 to $4 million.

Ver reportedly made a gift to his spouse, which is typically exempt from gift tax under the unlimited marital deduction. However, the validity of this exemption hinges on whether the recipient meets the IRS’s definition of a spouse, which in Ver’s case, raises questions about whether the gift was executed in compliance with IRS criteria.

Lesperance highlighted the potential for “fraudulent conveyance, ” where a gift is made that does not meet legal standards—for instance, if assets are temporarily transferred with the intention of being given back shortly thereafter, it does not qualify as a legitimate, complete gift.

He said:

“Back then, it would have been about three or four million. So number one is, and did you do a proper gift? There is not that – here, you hold it and then give it back to me the next day. That’s an incomplete gift. So that’s a fraudulent conveyance, et cetera, et cetera. So he underreported. The allegations are that he underreported his holdings as of the day before. He renounced.”

Furthermore, the allegations against Ver include underreporting his holdings on the eve of his expatriation. This could potentially involve disputes over the valuation of assets such as Bitcoin, where the market price can significantly affect reported value. Ver, a market maker, might have had the opportunity to claim a market maker’s discount on these valuations. This could legitimately reduce the taxable amount.

However, the core issue Lesperance pointed out was that Ver is accused of outright lying about his asset ownership. The authorities say he claimed certain assets were not his. That would, if true, represent direct tax evasion. This kind of deliberate misrepresentation complicates the legal situation and could lead to severe penalties.

Roger Ver’s Case: Tax Evasion, Not Crypto or Politics

David Lesperance continued to elaborate on the nature of tax evasion cases, drawing a parallel between Roger Ver’s situation and a notable precedent: the Department of Justice vs. Tinkov.  This case involved a Russian naturalized American who, after selling a bank for a couple of billion dollars, reported having less than $2 million in worldwide assets on his Form 8854, clearly underreporting his true financial status.

Lesperance said such cases, including Ver’s, are not primarily about cryptocurrency or political stances, despite public perceptions or Ver’s self-identification as a libertarian . He stressed that at its core, this is a straightforward case of tax evasion, unrelated to any beliefs or the involvement of crypto.

The discussion also touched on potential legal strategies given the ongoing legal proceedings against Ver. Considering the statute of limitations and, Ver has retained one of the top tax fraud attorneys in the United States. This move suggests that his defense may challenge various aspects of the case, including the timing of the alleged infractions related to his expatriation, which reportedly occurred in Bridgetown, Barbados.

Lesperance’s said that navigating these legal waters requires significant legal expertise and can hinge on intricate details of tax law and individual circumstances.

Expert Breaks Down Roger Ver’s Citizenship Renunciation Process

In discussing the legal process of renouncing U.S. citizenship, David Lesperance detailed how it typically unfolds. He explained that if Roger Ver renounced his citizenship, the process would involve ensuring that he had the capacity to make such a decision and that he wasn’t under any duress. After these checks, his case would be forwarded to the State Department in Washington, DC, where officials would review whether Ver had appropriately exercised his right to renounce. This would include completing the necessary paperwork and paying the associated fee, which was $400 at the time.

Upon satisfactory review, the State Department would then issue a Certificate of Loss of Nationality (CLN), formally recognizing that as of the day he renounced, Roger Ver was no longer an American citizen. It’s important to note the State Department’s role does not extend to issues related to covered expatriates. These are handled through IRS Form 8854.

Following the issuance of the CLN, it would be sent back to the appropriate  embassy or consulate,. Ver would then be notified to collect his CLN. At that point, he would also be eligible to apply for an American visa should he wish to travel to the United States.

He said:

“I read the DOJ indictment, they are taking the date of triggering, not as of the day before he renounced, but the day of the certificate of loss of nationality, which is incorrect. But that’s a relatively small thing, so that can be corrected. Not going to lose the case on it. It may just affect if there was a drop or an increase in the price between the two dates. The applicable date is the date before he renounced.”

Bad Advice, Crypto Misconceptions, and Statute of Limitations Battle

Lesperance went further in explaining Roger Ver’s case. He spoke about the potential missteps in legal and financial advice that may have contributed to his current predicaments. According to Lesperance, Ver either received poor advice or chose to ignore competent guidance. This, in turn, led to complications with obtaining his visa—something Lesperance has covered extensively in his blogs. Additionally, similar issues arose concerning his tax filings. It appears Ver might have misled or failed to follow the advice of two different law firms  and an appraiser when he filed his Form 8854. This filing allegedly understated his assets and exit tax obligations.

Another point of contention is why Ver chose to retain ownership of US companies after his expatriation, which complicated his tax situation. Lesperance speculated that Ver might have believed that cryptocurrency, due to its perceived anonymity, would provide a perfect tax haven. However, he pointed out the flaw in this thinking. He went on to say that cryptocurrency transactions are part of a public ledger. This, therefore, makes it possible to trace them back to an individual once authorities identify their wallet.

Lesperance also raised questions about the statute of limitations for tax evasion, which generally lasts six years. There’s a debate over whether this period should be longer because Ver was outside the US.

The discussion then shifted to the legal strategies Ver’s high-profile legal team was likely to employ. They might argue the statute of limitations expired in 2023, given that the relevant activities occurred in 2017. However, the Department of Justice might counter that the critical filing didn’t occur until December 2018. As a result, this would extend the statute of limitations to December 2024.

Crypto, Courtroom Demeanor, and Sentencing: Lessons from CZ Case

Lesperance provided insights into the nuances of US criminal sentencing. He explained that, while established sentencing guidelines were in place, the judge determines actual sentences. These guidelines offer a range, but the judge’s discretion plays a crucial role in the final decision. Lesperance highlighted the importance of the defendant’s demeanor and approach during the process. He went on to suggest that showing respect and humility in court could positively influence the outcome.

He contrasted this with potentially detrimental behaviors, such as antagonizing the judge or portraying oneself as a victim of a so-called “deep state”. This could have a negative impact on the judge’s perception and, consequently, the sentence. Lesperance emphasized the effectiveness of a more controlled and respectful approach. This exemplified by the likes of jailed Binance founder Changpeng “CZ” Zhao. Despite Zhao’s a strong personality, Lesperance said he was able to maintain a level of decorum that likely served him well in court.

The discussion shows the strategic considerations defendants must weigh in legal proceedings. This is particularly true in high-profile cases involving complex issues like cryptocurrency. It also reflects the broader challenges and strategies involved in navigating the US legal system.

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