New York Subpoenas 22 Digital-Currency Companies and Investors Over Bitcoin

The New York State Department of Financial Services has subpoenaed a number of investors and digital-currency companies to better understand the Bitcoin (XBT) arena. Letters were sent to key players requesting information about consumer protections, money laundering controls, pitch books, source funding and investments strategies. Among the subpoenaed are Bitcoin exchanges and processors, major investors, and others, including ZipZap, Google Ventures, Winklevoss Capital Management, and Tribeca Venture Partners.

NYSDFS superintendent Benjamin Lawsky says that the financial regulator believes it is essential that there be proper regulatory standards for virtual currencies that will benefit the industry in the long run. The department wants to unearth illegal activities and ensure that the money of Bitcoin companies customers’ are safe. (Consumers have reportedly been complaining about the speed that virtual currency transactions are being processed.) When there is no other primary regulator NYSFDFS is allowed to establish regulation.

It is important to note that just because a subpoenaed was issued does not mean that any criminal activity occurred.

Bitcoin has been getting quite a bit of federal attention lately. The IRS has been urged to ensure that people pay taxes on Bitcoin, the Securities and Exchange Commission contends that Bitcoin is money and that those that use the virtual currency to run Ponzi scams should end up behind bars, the US Treasury Department has put out guidance for those that transmit Bitcoin money, and recently, a federal judge ruled that Bitcoin is actual money in a Commission case over an alleged Texas Ponzi scam purportedly involving 700,000 Bitcoin. Also, Federal Bureau of Investigation is aware that the currency is proving useful for illicit ventures. The agency and the US Senate Committee that supervises the Department of Homeland Security are both investigating the currency.

Meantime, letters were sent to a number of federal regulatory bodies, including the Commodities Futures Trading Commission, the Justice Department, Homeland Security, the Federal Reserve, the Treasury Department, the SEC, and the Office of Management and Budget over Bitcoin. The Washington Post says that Congress could play a key role in setting up federal rules that would preempt state laws, which would help Bitcoin startups know what rules they need to abide by. That said, policy makers at the state level also are looking more closely at this virtual currency.

This virtual currency lets users trade goods for online credits. There is no central bank that acts as issuer. Instead, Bitcoins can be generated online via a process referred to as mining.

At Shepherd Smith Edward and Kantas, LTD, LLP, our securities lawyers represent investors that have lost funds because of the negligence or misconduct of others. Contact our Bitcoin fraud lawyers today. Your first case assessment is free.

Every Important Person In Bitcoin Just Got Subpoenaed By New York’s Financial Regulator, Forbes, August 12, 2013

Bitcoin laws are coming: US Senate launches virty currency probe, The Register, August 14, 2013

Bitcoin gets the FBI, Homeland treatment, CNBC, August 15, 2013
The New York State Department of Financial Services

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