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‘Bitcoin Jesus’ fights IRS tax evasion case from Spanish island

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To his followers, Roger Ver is known as Bitcoin Jesus, a charismatic advocate of the cryptocurrency that is once again captivating investors with record-breaking gains. But to the Internal Revenue Service, Ver symbolizes a new target in the digital age: a crypto holder suspected of failing to pay taxes after selling tokens.

U.S. prosecutors charged Ver this year with evading more than $48 million in taxes for selling $240 million in tokens. It’s the most prominent case dealing solely with tax fraud and digital-asset sales, and marks a break from the tradition of prosecutors tacking tax charges onto crypto cases for crimes like money laundering, ransomware attacks and investor scams.

Ver, 45, is awaiting a Spanish judge’s decision on whether he must be extradited to America after his April arrest in Barcelona while attending a crypto conference. The U.S. expatriate spent a month in jail before getting out on bail and moving to Mallorca, where he’s received a steady stream of visitors. An outspoken critic of the U.S. government, he said he’s being persecuted by prosecutors.

Roger Ver speaking at a Coingeek conference
Roger Ver, a U.S. expatriate, awaits a Spanish judge’s decision over whether he will be extradited to America to face tax fraud charges.

Anthony Kwan/Photographer: Anthony Kwan/Bloom

“They don’t like me, and they don’t like my political views, and they just came at me every which way,” Ver told Bloomberg News in an exclusive interview in late October. 

Ver, a U.S. expatriate, awaits a Spanish judge’s decision over whether he will be extradited to America to face tax fraud charges.

Ver said the Justice Department has ignored evidence that helps his defense and refutes a central premise by prosecutors — that he intended to cheat the IRS. Rather, he said, he relied on professionals who advised him when IRS policy on taxing crypto sales was unsettled.

“I instructed all my tax attorneys and preparers, ‘We need to do everything perfectly because I don’t want any problem with the IRS at all,”‘ Ver said. “That was their instructions the whole time.”

A Justice Department representative declined to comment.

The seeds of Ver’s legal peril lay in his success as an early crypto investor — long before the latest Bitcoin rally fueled by Donald Trump’s U.S. presidential win. They center on his representations to the IRS and the agency’s reconstruction of his holdings.

Ver grew up in Silicon Valley, founding a computer company called MemoryDealers at the precocious age of 19. He also engaged in tax protests and ran for California’s legislature at 21 as a libertarian.

In 2001, he pleaded guilty to dealing explosives without a license. (Ver says he simply sold firecrackers on eBay.) He served 10 months in prison, which hardened his attitude toward the U.S. government. He left America in 2006, moving to Japan. He focused on building MemoryDealers and another firm, Agilestar, which sold optical transceivers.

Spreading the gospel

When crypto began, he embraced its promise for transferring wealth without government interference. He started buying Bitcoin in 2011 for less than $1, touting it at barbecues, parties and everywhere else. Intense and fast talking, he spread the vision of using crypto to buy a sandwich or even a car. When Bitcoin hit it big, Ver touted its potential from conference stages.  

He co-founded Blockchain.com, a crypto company once valued at $14 billion, and was an early investor in payment processor BitPay and digital-asset firm Ripple. When the Bitcoin network underwent a software upgrade he opposed in 2017, Ver broke with the community, switching to a split-off called Bitcoin Cash. He said his current holdings include Bitcoin, Bitcoin Cash, Ether and Zeno.

Despite his notoriety, Ver decided in 2014 to renounce his U.S. citizenship, later becoming a citizen of St. Kitts and Nevis. U.S. citizens who expatriate and are worth more than $2 million must report their worldwide assets to the IRS, and pay an exit tax based on their asset sales.

As he planned to expatriate, prosecutors allege, Ver hid the number and value of Bitcoin he owned and controlled personally and through MemoryDealers and Agilestar, his California-based companies.

The IRS used blockchain analysis to determine that by early 2014, Ver and his companies owned about 131,000 Bitcoin trading between $782 and $960, according to the indictment — more than he reported in tax filings. He’s accused of tax evasion, wire fraud, and filing a false tax return.

Ver worked with a law firm and appraisers on the exit tax, but gave them false or misleading information about his Bitcoin holdings, and an exit tax return filed in 2016 failed to report the Bitcoin he owned personally and underreported the value of his companies, prosecutors charge.

The indictment also alleges Ver “fraudulently misrepresented and concealed” from the IRS the crypto that his companies sold in 2017 for about $240 million. 

Ver disputes this characterization, but declined to discuss the indictment further or elaborate on his crypto holdings with Bloomberg.

A website, freerogernow.org, is linked to Ver’s personal website and encourages supporters to sign an open letter calling on the U.S. government to end his “unjust prosecution.” It adds some details about his investigation, including claims that IRS agents interrogated his tax lawyer in 2018 without a warrant and that litigation ensued about communications with his lawyers. 

In 2022, the U.S. Supreme Court took up a case that didn’t name the parties but matched Ver’s circumstances. The court dropped that case in 2023 without issuing a ruling. 

If he’s extradited, Ver’s case would be the first to go to trial on crypto-only tax charges. In February, a Texas man, Frank Ahlgren, was accused of underreporting capital gains from selling $3.7 million in Bitcoin. Ahlgren pleaded guilty in September.

Ver, who has more than 700,000 followers on X, spent years under IRS investigation as he traveled the world. In 2021, he posted a satirical video titled “Taxation is Theft.” 

Ver was indicted Feb. 15 under court seal but didn’t learn about it until weeks later, when he was at the Privacy Guardians conference in Barcelona. His book, Hijacking Bitcoin: The Hidden History of BTC, had just gone on sale. A police officer approached him in the lobby of the W Hotel, asked him to confirm his identity, and said he had an Interpol arrest warrant for him.

“The bottom kind of fell out of my stomach and I was like, ‘Oh, my God, the U.S. is going to do this to me again,”‘ Ver said.

Back to jail

With his arrest, Ver returned to prison, this time to a two-man cell in Spain. Some inmates incorrectly assumed he was an American spy or undercover cop, he said.

“I didn’t tell anybody in there who I was because I didn’t want to get extorted or have any sort of problems with anybody,” Ver said.

Spain has been a close ally of the U.S. in extradition cases. This year, Spain sent Douglas Edelman, a former defense contractor, to face U.S. charges that he evaded taxes on more than $350 million in income. He’s pleaded not guilty and denies the charges.

Ver said he’s spending his days in Mallorca talking to his lawyers on Zoom, practicing Brazilian jiujitsu and entertaining friends visiting from overseas. He’s attended Bitcoin meetups, where he said he was well received.

Ver appeared in an HBO documentary about the origins of Bitcoin. A sparring partner from jiujitsu said he’s seen him in the show.

“I said, ‘Please, if you don’t mind, don’t mention that to anybody else.’ He said, ‘Sure, no problem.’ But he had kind of a sly grin when he said that to me.”

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Accounting

Accountants shouldn’t drown in employee purchase reconciliations

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Among the challenges accountants face is accounting for purchases employees make to get their work done. While the expense report process attempts to address this, it often falls short in providing accurate accounting because it relies on non-accountants entering financial data. The result is typically a time-consuming process for accountants, who must review, reconcile and correct the accounting entries submitted by employees.

The emergence of virtual cards, especially when combined with AI-powered fintech apps, offers accountants a new approach to solving this long-standing challenge.

What is a virtual card?

As many may already know, virtual cards are a type of company-paid credit card that functions like a traditional, physical card with one key difference: There’s no physical card involved. This allows for the creation of an almost unlimited number of unique card numbers, highlighting the brilliance behind virtual cards: intended use.

The concept of “intended use” recognizes that employees have specific scenarios in mind when using a virtual card. This could be to cover the expenses involved in an upcoming business trip, purchasing construction materials for a job or covering necessary permits or fees for cell tower repairs.

Fintech apps can issue virtual cards to employees based on intended use. These apps leverage intended use to determine the appropriate accounting for purchases made with each virtual card. Utilizing virtual cards through a fintech app, the employee experience becomes streamlined, making the process user-friendly. Employees simply select an intended use from a list provided by their organization and enter the desired spending limit. Unlike expense reports, they do not need to enter accounting codes or other financial details. The fintech app automatically determines the correct accounting in the background, eliminating the need for employees to manage complex accounting information.

AI can help improve accuracy

While intended use allows fintech apps to predict the correct accounting, some intended uses allow for an amount of accuracy that isn’t adequate.

An example is the business trip intended use discussed above. The accounting accuracy depends on the chart of accounts for travel-related expenses. If the COA has only one account for travel, then the trip’s intended use will have the necessary accuracy.  If there are expenses for subaccounts such as airfare, lodging, ground transportation and so forth, the trip needs to involve more detail to have the necessary accuracy. This is where AI can help.  

Fintech apps can use AI to analyze purchases made with a given virtual card and its intended use to arrive at the precise accounting for each purchase. The AI involved analyzes large sets of purchases by employees, looking for patterns in accounting. AI is able to consider a wide range of parameters found in these purchases and consider a vast array of possibilities to arrive at the correct accounting.  AI is especially impressive for sophisticated, multidimensional COAs because of its ability to analyze complex patterns.

AI ensures accurate accounting happens automatically, thus avoiding the need for accountants to review the accounting prior to booking purchases into the general ledger. Some fintech apps can automatically make these bookings by posting them to the GL, delivering accountants a completely automated process.

Reconciling credit card statements

In addition, some fintech apps, when combined with virtual card use, can automatically reconcile credit card statements, saving dozens of hours of month-end accounting work. These apps compare the transactions on a statement with purchases made using virtual cards and, because the accounting for these transactions is already confirmed, mark them as reconciled.

They also flag transactions paid with a physical card, instead of a virtual card; how these are handled depends on the fintech app. Some apps integrate with expense management services to verify if accounting data is available for these transactions. If so, the app uses this data and marks the transactions as reconciled.

For transactions without expense management data, AI-enabled apps can automatically predict the appropriate accounting. These apps then give accountants the choice to either use this predicted accounting as final or treat it as an accrual until the transactions appear in the expense management service. In both cases, the apps mark the transactions as reconciled, resulting in a fully reconciled credit card statement, ready for period close.

Streamlining the process

AI-powered fintech apps create a streamlined purchasing and accounting process for both employees and accountants. Before purchasing a good or service, employees simply request a virtual card and indicate its intended use, eliminating the need to input accounting data manually.

These apps can save accountants hours of work by automating the correct accounting for employee purchases and reconciling monthly statements from card issuers, ensuring a smoother, more accurate and efficient process.

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Accounting

Sotheby’s pays $6M to settle NY sales tax evasion probe

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Sotheby’s Inc. agreed to pay $6.25 million to settle a New York state lawsuit that accused it of advising wealthy clients they could avoid sales taxes by falsely claiming they were buying art for resale purposes.

New York Attorney General Letitia James announced the deal in a statement Thursday. She said Sotheby’s employees from 2010 to 2020 encouraged clients to make the false claims even though they knew the purchases were actually for private collections or intended as gifts.

“Sotheby’s intentionally broke the law to help its clients dodge millions of dollars in taxes, and now they are going to pay for it,” James said. “Every person and company in New York knows they are required to pay taxes, and when people break the rules, we all lose out.”

sothebys.jpg
Sotheby’s Auction House in New York

Robert Caplin/Bloomberg

James sued Sotheby’s in 2020, accusing the auction house of helping a shipping executive use a false resale certificate to dodge taxes. The state later expanded the case by including allegations involving seven additional collectors and numerous Sotheby’s employees from across the organization, including its tax department.

In a statement, Sotheby’s said that it admitted no wrongdoing in connection with the settlement and was committed to full compliance with the law.

“These allegations relate to activity from many years ago — in some cases over a decade — and Sotheby’s provided much of the evidence which the AG used to obtain a settlement with the taxpayer referenced in the complaint six years ago,” the auction house said in its statement.

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Accounting

Discover delays filing over accounting disagreement with SEC

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Discover Financial Services said it will miss a deadline to file its quarterly report with regulators, citing disagreements with the Securities and Exchange Commission over its accounting treatment of a credit-card misclassification blunder. 

The company said in a filing Wednesday that it was unable to file the 10-Q form for the three months through Sept. 30 by the required date after SEC staff disagreed with “certain aspects of the company’s accounting approach for the card product misclassification matter.”

Discover disclosed last year that it overcharged merchants after misclassifying certain credit-card accounts into its highest pricing tier, and the Chief Executive Officer stepped down as compliance woes mounted. The credit-card company said in July that it had reached an agreement to settle class-action litigation with the affected retailers, and that it expected the $1.2 billion it already set aside for related liabilities to be enough to resolve the issue. 

Discover credit card
Discover credit card

Angus Mordant/Bloomberg

Discover expects that when it files its 10-Q form, it will likely reflect re-allocations to prior periods of about $600 million of the charge to other expenses recorded in its quarterly report for the period ended March 31, it said. The firm said that because the reallocations would reverse a charge to other expenses recorded for the first quarter, “this would result in an increase in pre-tax income by the same amount in the three months ended March 31, 2024 and the nine months ended September 30.”

Capital One Financial Corp. is expected to buy Discover in one of the biggest mergers announced this year. The SEC was reviewing Discover’s financial statements in connection with the pending merger, according to the filing. 

A representative for Discover declined to comment beyond the filing. A representative for Capital One didn’t immediately respond to a request for comment.

A late financial statement can be considered a financial reporting red flag and large companies go to great lengths to avoid missing SEC deadlines. In the filing Wednesday, Riverwoods, Illinois-based Discover said it likely won’t file under the allotted extension period of five calendar days because it needs more time to address the issues. The company also hasn’t determined if it will have to redo, or restate, its prior financial statements to address any potential accounting errors, it said.

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