Barnes says ‘Bitcoin Jesus’ Roger Ver has ‘many defenses’ against IRS’s $48 million tax-evasion indictment

Roger Ver, a pioneering figure in the Bitcoin world and cofounder of Bitcoin.com, was arrested in Spain in late April on charges of mail fraud, tax evasion and filing false tax returns.

The U.S. Department of Justice will seek Ver’s extradition to stand trial in the United States for allegedly causing a loss to the IRS of at least $48 million. He could face 30 years in prison.

“Ver has many defenses available to him, including a good faith defense, a reliance defense, and the unconstitutionality of the exit tax and taxing Bitcoin ownership,” attorney Robert Barnes said.

Ver’s defense team could argue that Ver, in good faith, relied on the expertise of the lawyers, accountants and the appraisers that he hired to navigate the complex layers of regulations involved in cryptocurrency taxation and a change citizenship while retaining ownership of U.S. businesses.

The IRS says that Ver violated the “exit tax.” It levies a huge capital gains tax bill on wealthy Americans who renounce their citizenship.

Opponents of the exit tax question its constitutionality because it’s not shouldered equally by citizens of the 50 states in accordance with their population. The U.S. Supreme Court may rule the exit tax is unconstitutional in June or July in an upcoming decision in Moore v. United States.

The constitutionality of taxing Bitcoin ownership also has been challenged, including by the Crypto think tank Coin Center in a federal lawsuit filed against this year’s requirement for U.S. taxpayers who receive more than $10,000 in cryptocurrency to report the Social Security numbers and other personal information of the sender.  

“It is a clear overreach for the government to force citizens to spy on each other without a warrant,” Coin Center argues.

Ver bought low and sold high.

Bitcoin sold for less than $1 a coin in 2011, when, according to the IRS indictment, Ver began buying Bitcoin for himself and his companies, MemoryDealers.com Inc. and Agilestar.com Inc., which sold computer and networking equipment.

On Feb. 4, 2014, Ver got citizenship in St. Kitts and Nevis and shortly thereafter renounced his U.S. citizenship.

At that time, Ver and his companies allegedly owned approximately 131,000 bitcoins that traded on several large exchanges for around $871 each, or $114 million.

As a result of his expatriation, Ver was required under U.S. law to file tax returns that reported capital gains from the constructive sale of his worldwide assets, including his Bitcoin, and to report the fair market value of his assets.

He was also required to pay a tax – referred to as an “exit tax” – on those capital gains.

Ver hired a law firm to assist him with his expatriation and to prepare his expatriation-related tax returns. Ver also hired an appraiser to value his two companies.

The government alleges that Ver provided or caused to be provided false or misleading information to the law firm and appraiser that concealed the true number of bitcoins that he and his companies owned.

As a result, the law firm prepared and filed false tax returns that substantially undervalued the two companies and their 73,000 bitcoins, and did not report that Ver owned any Bitcoin, personally.

The indictment further alleges that by June 2017, Ver’s two companies continued to own approximately 70,000 bitcoins. Around that time, Ver allegedly took possession of those bitcoins and in November 2017 sold tens of thousands of them on cryptocurrency exchanges for approximately $240 million in cash.

Even though Ver was not then a U.S. citizen, the IRS says he was legally required to report pay tax on certain distributions such as dividends from MemoryDealers and Agilestar, which were U.S. corporations.

Ver allegedly concealed from his accountant that he had received and sold MemoryDealers’ and Agilestar’s bitcoins in 2017. As a result, Ver’s individual income tax return that year did not report any gain or pay any tax related to the distribution of MemoryDealers’ and Agilestar’s bitcoins to him.

The IRS Criminal Investigation's cybercrimes unit is investigating the case.