Hard Lessons from the Bitcoin Case Law show that we must remain vigilant

There are many low-profile scams that go unnoticed by mainstream media. There are many other ripoffs that go unnoticed by mainstream media. Houston Attorney Andrew J. Cobos, of the Cobos Law Firm, includes Bitcoin-related legal disputes within his litigation practice. Cobos spoke to Cobos about a case involving an elderly woman who was approached by a young pastor from her church and encouraged her to invest with his help. The man and the woman made an oral agreement in which he would transfer $80,000 to her and that he would use the money to purchase bitcoin and store it safely for her. The plaintiff in the case, an elderly woman, claims that the man stole her bitcoin using her private keys and knowledge. The trial in this case, case number 2021-51487), is scheduled for Spring 2023 in Harris County in Texas. The lawsuit claims that the pastor bought and held the bitcoin for the woman until July 2020. The woman then requested that the bitcoin be returned. The pastor ordered the creation of a Trezor wallet with 7.742 bitcoin and gave the woman the Trezor device and a “seed card” that he had prepared. The woman found out that all her bitcoin had been taken from the Trezor device when she opened it a few days later. Cobos claims that the pastor had a copy the seed phrase card and created a wallet after giving the Trezor to the woman. He then transferred all the bitcoin to another wallet that he owned. The pastor was contacted by the elderly woman to inquire about the missing assets. He said that his system had been “hacked.” The elderly woman sought help from a trial lawyer and the courts as she was unable to access law-enforcement. Cobos says that this type of malfeasance is on the rise due to Bitcoin’s growing adoption. This is because newbies to the space are being exploited and extorted by street-level fraudsters. Although this is a new case law, it is not new to Bitcoin. This type of litigation has been involved even in the cases of some of the most sophisticated investors. In 2012, Charlie Shrem and the Winklevoss twins arranged to purchase $750,000 in bitcoin. At that time, it was only $18.81. WCF (the Winklevoss fund) claimed that Shrem couldn’t account for $61,000 of the money that they transferred to him and that he had bought 5,000 bitcoin for his own use. WCF claimed that the stolen bitcoin was worth $26 millions at the time of filing. According to the case text, WCF hired an accountant in February 2013 for an audit. The auditor determined that Shrem couldn’t account for $61,000 that was sent to him. This was approximately 5,000 bitcoin at the time, based on an average price of $12.15 per cryptocurrency. Shrem denied this, but did not provide any additional information. WCF hired another company to verify that Shrem received 5,000 Bitcoin on December 31, 2012. This was almost exactly the amount of the shortfall as identified by WCF’s accountant. “The case was settled in court in April 2019, without any public disclosure of the terms. Contrary to the filings by the twins’ attorneys stating that “…WCF or Shrem will each pay their own attorneys’ costs and fees,” Shrem stated in a statement to Coindesk, that the Winklevosses were required to pay Shrem’s attorneys’ fees. These stories are similar, and I believe the most important lesson is that Bitcoiners should keep repeating the old maxim “Don’t Trust, Verify!” Although Charlie had not been around for a while, the Winklevoss family trusted him because he was more knowledgeable about Bitcoin than they were back in 2012. He was one of the few well-known OGs at the time. The elderly lady who was a churchgoer also learned the hard way. Although the young pastor was supposed to be a good member of her church, she trusted too much in his expertise and waited three years to confirm that she still owned the 7.742 Bitcoins. Bitcoin experts who call themselves “Bitcoiners”, can also practice deceitful art. The Bitcoin protocol is almost perfect and incorruptible. But human beings, even Bitcoiners, are not (big shock gasp). There are many people who can be considered career parasites, doves, and vultures in any space that has great wealth at stake. Let us resolve as eagles to defend the nest eggs of others and our own. Let us continue to educate ourselves and our orange-pillees, while being vigilant to expose and expose the “Scam Bankster Frauds” as well as other wolves wearing sheeps’ clothes around the world at all levels. This guest post is by Phil Snyder. These opinions are not necessarily those of BTC Inc.

 

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