In the recent Securities and Exchange Commission V Trendon T. Shavers And Bitcoin Savings And Trust, the United States District Court, Eastern District Of Texas, Sherman Division, has held that Bitcoin is a currency and declared that its investment funds and transactions fall under the jurisdiction of US securities law and consequently the subject is under the jurisdiction of the federal justice system.
Earlier, the Securities and Exchange Commission or SEC brought the case against Trendon T. Shavers, founder and operator Bitcoin Savings and Trust who was running Ponzi scheme and allegedly defrauded the investors.
The judge observed that the SEC’s assertion that Shavers made a number of misrepresentations to investors regarding the nature of the investments and that he defrauded investors is actually a question whether the BTCST investments in this case are securities as defined by Federal Securities Laws.
BTCST Investments are Security
On the other hand, Shaver contended that as Bitcoin is not money, the BTCST investments are not securities and for that reason it cannot be regulated by the United States. The question in front of the judge was, 1) Whether Bitcoin is currency like the USD, 2) Whether investments in Bitcoin are a security. Once, the two questions are answered in yes; the case will fall under the US jurisdiction.
The judge observed that 15 U.S.C. § 77b defines the term “security” as “any note, stock, treasury stock, security future, security-based swap, bond…[or] investment contract..He further observed that an investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party. However, it was vital for it to prove that Bitcoin was currency.
The judge cited the cases of SEC v. W.J. Howey & Co., 328 U.S. 293, 298-99 (1946) and Long v. Shultz Cattle Co, 881 F.2d 129, 132 (1989) in the case. The judge also observed that the BTCST investments constituted an investment of money as he held that Bitcoin is being used as money as it can be used to purchase goods or services, despite its limitations. Also, it can be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan.
Now, with the judgment, several things are clear; first, the law accepts that Bitcoin is currency; the second, anyone investing in Bitcoin will get protection from the law of the land.
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