Ever since we traded the tape deck and CD player for digital music, the concept of digital assets and property owned digitally has been widely debated.
Similarly, as cryptocurrency continues to develop, how this new currency is regulated by the countries it is used in, has also started to gather momentum.
It was only on December 19th 2018, that the UK government released the policy paper on Cryptoassets, specifying how the government view this type of currency and how it will tax the owner on their gains.
When the value of cryptoassets continues to fluctuate so wildly, it seems that this currency offers an unknown and unpredictable outcome for its investors, with many drawn to the extreme increases that lucky investors could enjoy.
Craig Wright, one of many people that have claimed to be Satoshi Nakamoto, the inventor of Bitcoin, has been embroiled in a lawsuit that alleges that he has fraudulently plundered over 300,000 bitcoins from his deceased business partner’s estate, worth billions of dollars.
Following Dave Kleiman’s death in 2013, his brother, Ira Kleiman, has sued Wright for a return of the 1.1 million bitcoins mined by Dave Kleiman and Craig Wright; if the coins cannot be returned, the estate demands a ‘fair market value’ figure be applied and paid by the defendant.
The lawsuit is also looking to regain some of the intellectual property associated with the bitcoin technology that Iva Kleiman claims was invented by his brother.
Despite Wright’s attempt to dismiss all claims made against him, a large majority have been upheld by the court.
Amongst the claims that Wright will have to face is the fact that the mined bitcoins, belonging to Kleiman’s estate, have been taken by Wright. Although the exact amount is unknown, it has been argued that at least 300,000 along with any forked assets from these bitcoins were taken from the estate without the consent of executors or beneficiaries.
The United States District Court Southern District of Florida Case, states: “Here, the Court finds that Plaintiffs have sufficiently alleged a claim for conversion. The Amended Complaint alleges that Defendant converted at least 300,000 bitcoins upon Dave’s death and transferred them to various international trusts, which was an unauthorized act that deprived the Plaintiffs of the bitcoins therein. Accordingly, Plaintiffs’ claim for conversion (Count I) survives Defendant’s Motion to Dismiss.”
Whilst so little regulation was in place when the lawsuit was filed that may have made things difficult in establishing ownership of cyrytoassets, it is hoped that cases like this will provide a clear reference point regarding ownership issues with intangible assets.
As this new currency emerges from the Wild West and becomes more stringently regulated, estate planning professionals will need to understand the implications of passing on cryptoassets following the death of the investor and the tax implications they could have on the estate.
Have you dealt with estates that involve new and emerging currencies like bitcoin?
