Roger Ver’s arrest by U.S. authorities on tax evasion charges could signal a turning point in the digital asset sector’s history as ‘crypto’ crooks turn on each other to save their own skins.
On April 30, the digital asset sector was surprised by the news that the U.S. Department of Justice (DOJ) had charged Ver with mail fraud, tax evasion and filing false tax returns that allegedly cheated Uncle Sam out of “at least” $48 million. Ver was arrested over the weekend in Spain and is now awaiting extradition proceedings.
The investigation into Ver was conducted with the assistance of the Internal Revenue Service’s Criminal Investigation (IRS-CI) cybercrimes unit. In November 2022, the IRS-CI announced that nearly half of all digital asset investigations now involved tax fraud. One year later, the IRS-CI said it was seeing an increasing number of cases “where the taxpayer fails to disclose ownership of cryptocurrency in an attempt to shield holdings.”
Ver’s alleged crimes involved efforts to mask his ownership of around 131,000 BTC tokens when he surrendered his U.S. citizenship in 2014, in the hope of minimizing his ‘expatriation’ tax bill. Sadly for Ver, the DOJ and IRS obtained private communications between Ver, his attorneys, his tax preparers and others with knowledge of Ver’s true holdings as well as his active efforts to disguise this reality.
In other words, Ver appears to have little to no chance of successfully defending himself against the charges. Worse, Ver has a criminal history that won’t play well in front of a judge or jury. In 2002, Ver was sentenced to 10 months in federal prison for selling explosive materials on eBay. (More recently, he’s developed a reputation for not paying eight-figure debts.)
Ver is also an avowed anarchist who has criticized the U.S. government at every opportunity and viewed digital assets as a means of thwarting oversight or even bringing about the end of governments entirely.
In short, Ver is screwed. Tax evasion measured in the tens of millions is a serious charge, particularly since Ver’s emails contain sufficient aggravating circumstances to leave him vulnerable to a sentence of six years or more.
Unless, of course, Ver offers to make a deal in which he provides the feds with information on other suspected digital asset cheats/frauds who’ve so far evaded justice. The DOJ/IRS have made it clear that ‘crypto’ crime is high on their to-do list, and Ver’s lengthy history in this sector means he knows where to find the closets with the most skeletons.
The only question now: whose bony scalp will Ver offer up?
Did Blockstream target Ver?
Ver was in Spain to promote his recently released book, Hijacking Bitcoin: The Hidden History of BTC. The book is Ver’s account of the Bitcoin Civil War in which the BTC Core developers imposed dictatorial control over Bitcoin, resulting in the BTC token (erroneously viewed at Bitcoin by the general public), as well as Ver’s BCH fork and, ultimately, the restoration of the original Bitcoin in the form of BSV.
One of that war’s less savory characters was Greg Maxwell, co-founder of Blockstream, supporter of small blocks and ruthless manipulator of his own online echo chamber of sock puppets. Maxwell has no love for Ver, whom Maxwell views as a traitor for switching his allegiance from BTC to BCH all those years ago.
A four-year-old Reddit post that Maxwell made attacking Ver has resurfaced in the wake of the latter’s arrest and may offer a clue as to how/why the feds latched onto Ver’s trail. In the post, Maxwell first quotes Ver saying: “Taxation is theft. I hope everyone escapes all taxes.” Maxwell then wonders if Ver paid all his required expatriation taxes when he renounced his citizenship, saying:
Surely you didn’t conceal your assets… that would have been extraordinarily unwise considering how widely you have bragged about your holdings, especially considering that the IRS will pay whistleblowers up to 30% of the underpayment when the total under-paid is at least $2m.
Ver is also no fan of Blockstream CEO Adam Back, the most fervent public promoter of the Lightning Network (the ‘layer 2’ solution to the small-block-constrained BTC’s inability to fulfill Satoshi Nakamoto’s vision of peer-to-peer electronic cash).
Following the release of Ver’s book, he and Back began sniping at each other over X/Twitter, with Back saying “the density of lies and conspiracy nonsense, fiction, tabloid grade made up inferences [in Ver’s book] was insane.” Ver responded by saying Back “wants to prevent people from discovering how he and his company hijacked Bitcoin.”
While Ver might not be on Blockstream’s Christmas card list, this sector is still small enough that everyone tends to know what everyone else is up to, even more so in those heady early days when regulators weren’t paying close attention. So Ver might have enough dirt on Maxwell, Back & Co. within the statute of limitations to buy some DOJ favors.
Meanwhile, if nothing else, Ver’s arrest will probably boost sales of his book, and thus the dishonest dealings of the BTC crew will become more widely known among the general public. Guess every cloud has its silVer lining. (Sorry.)
With friends like these…
Ver could also turn on the principals behind a number of digital asset exchanges. Like Erik Voorhees, founder of the ShapeShift exchange, in which Ver was an early investor and thus might know where Voorhees’ pressure points lie.
Like Ver, Voorhees is an anarchy-inclined libertarian whose views on financial regulations may not quite reach Ver’s “money laundering is not a crime” level—at least, not publicly—but Voorhees has said he doesn’t believe people “should have their identity recorded to catch an occasional criminal.”
Voorhees has also publicly bragged about taking millions of dollars in Covid-era Paycheck Protection Program loans for which ShapeShift might not have been eligible. Voorhees said he took the loans based on his view that he was clawing back some of the taxes the government “has stolen … from me,” which suggests a similarly entitled tax-avoidance mindset to Ver’s.
Then there’s Jesse Powell, co-founder of the Kraken exchange and like Ver another archarchist with little love for governments. Here too, Ver was an early investor, befitting his high school friendship with Powell and their shared love of Magic: The Gathering. Who knows what secrets these two anarchic amigos have shared over the years?
Both Kraken and ShapeShift have had costly dustups with the SEC in recent years, but they were also part of the anti-competitive delisting of the BSV token from exchanges. Binance’s Changpeng ‘CZ’ Zhao —who got his first ‘crypto’ job after bumping into Ver on a trip to Japan—was first out of this delist gate in April 2019, and he might know the extent to which Ver helped coordinate this sham. Then again, CZ has just had his day in court, so strike him off Ver’s potential hit-list.
A turning point
Given his extensive criminal history, CZ’s absurdly light sentence of four months behind bars may prove the model for Ver to follow. During Tuesday’s sentencing hearing, CZ’s attorneys twice referred to some “compelling factor” detailed in sealed documents that apparently justified the judge going easy on CZ. It doesn’t seem a stretch to think CZ may have given the feds something juicy.
As for who CZ might have ratted out, our money’s on either (a) his former acolyte Justin Sun, who has taken his ‘crypto Bond villain’ schtick to absurd levels, or (b) the Tether (USDT) stablecoin, which Binance once embraced but the partners-in-crime appear to have had a major falling out in July 2023, after which Binance focused on a new stablecoin over which it appears to exercise greater control.
Should Tether be next to face criminal charges—and should those charges prove serious enough to inspire its leadership to stare deeply into the abyss—it will have a profound impact on the entire digital asset sector, which relies on Tether’s money-printer to artificially inflate the value of tokens like BTC.
A shift away from a tunnel-vision focus on ‘number go up’ would complete what in retrospect will prove a major makeover of this overall digital asset sector. As CZ himself tweeted on the day he was sentenced: “Our industry has entered a new phase. Compliance is super important.” You don’t say.
There will be one other major casualty of Ver’s legal woes, and that’s the BCH chain he supports. Since his 2018 split with the camp that maintained its loyalty to the original Bitcoin (BSV), he has been the sole factor behind BCH’s ongoing existence (which likely explains its ‘crime coin’ reputation).
With Ver now looking at a lengthy stint behind bars, BCH’s reputation may actually be enhanced among its current users. But anyone not looking for a new striped wardrobe will have even more reason to give BCH a wide berth.
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