DALLAS, TX--(Marketwired - Aug 15, 2013) - The once overlooked anonymous online currency, bitcoins, have been targeted by the federal government. Prominent Dallas-based attorney Joe B. Garza emphasizes that using bitcoins to hide assets is against federal law and amounts to tax evasion, adding that there exists plenty of other legal, ulterior methods of protecting one's assets and reducing tax liability.
The first landmark instance of scrutiny surfaced from a Texas federal judge's recent ruling. The case, which involved a Ponzi scheme that used bitcoins, has Trendon Shavers facing criminal charges from the SEC. Magistrate Judge Amos Mazzant of the Eastern District of Texas allowed the SEC to press charges, ruling that the online currency is in fact a security -- as they are both investment contracts and notes, and represent real-world money.
Shortly thereafter, New York's financial regulator, the New York State Department of Financial Services, subpoenaed 22 of the top names in bitcoin, requesting financials to gain a better understanding of the submarket.
Frank Stafford, lead business writer at the online news blog TheCapitalPress.com, offered some insight into the mounting scandal. "Bitcoins have a rather dubious origin," he explained. "They were designed to be an anonymous online currency, and were adopted very early on by online drug trafficking sites."
While they can be used by unscrupulous sources, Stafford does admit that bitcoins are an interesting anomaly in the financial market.
"They are an interesting study in economics; as they gained value as the currency of choice for people purchasing drugs online, and an entire sub-economy formed around the currency," he said. "If you have enough bitcoins in your wallet right now, you can go online and retain the services of an established attorney, enroll in online tutoring, buy a new car or even a jet."
Stafford doesn't exaggerate. There are nearly 1,000 online merchants that currently accept bitcoins.
The success of this newfangled currency hasn't gone unnoticed by real-world entrepreneurs. The infamous Winklevoss brothers, startup golden boys Marc Andreessen and Ben Horowitz, as well as Google's venture fund, all have vested interest in the currency. The Winklevosses scored an understated win earlier this week from the Texas Judge's ruling -- as they are attempting to gain SEC approval for their bitcoin exchange fund, which is being held up by the SEC, while the financial regulation, compliance and enforcement entity decides whether the currency represents any "real-world value."
Bitcoins are quickly becoming a tax haven for individuals that retain a high net worth, and who are looking to save as much money as possible on their income taxes. Converting U.S. dollars to bitcoins is much easier than opening a Swiss bank account, thus making them lucrative.
Dallas asset protection, tax planning and estate attorney Joe B Garza warns against attempting to hide money from the IRS.
"In my decades of experience, moving money into offshore accounts has never been advisable. Bitcoins are just the most modern method for hiding money; the IRS will eventually uncover the hidden assets," he warned. "There are plenty of perfectly legal ways to keep a very large portion of money that would typically go to the government from taxes. It just requires knowledgeable insight into an individual's finances, coupled with qualified legal counsel from a practicing tax professional."
Attorney Joe B. Garza has been practicing law in Dallas, Texas for more than 30 years. He is considered to be a leading asset protection, estate planning and complex business tax expert. Garza heads the prominent and nationally recognized law firm, Garza & Harris, LTD.