January 5, 2015
The pace of regulation and enforcement actions relating to virtual currencies has continued to pick up during the fall of 2014. We discuss below the following recent developments: (1) updated guidance from the Financial Crimes Enforcement Network on the applicability of rules regarding licensed money transmitters; (2) proposed rules from the Consumer Financial Protection Bureau that could implicate bitcoin debit cards and other prepaid accounts; (3) the role of the Commodity Futures Trading Commission in regulating virtual currencies; (4) the potential consequences of Internal Revenue Service reporting requirements for foreign accounts; (5) the State of New York’s proposed "BitLicense" regulatory framework; (6) other initiatives at the state level, including the December 16, 2014 release of a draft regulatory framework for virtual currency activities from the Conference of State Bank Supervisors; and (7) recent enforcement actions involving bitcoin and bitcoin-related businesses.
Background on Virtual Currencies
Virtual currencies are digital representations of value that function as a medium of exchange and that can be transferred, stored and traded electronically. They do not have legal tender status (i.e., they are not a "fiat" currency), are not backed by any government and are not necessarily pegged to any fiat currency. Today, the most prominent virtual currency is Bitcoin, which first appeared in 2009. As with many virtual currencies, Bitcoin functions via a decentralized peer-to-peer payment system, meaning that there is not a need for third-party intermediaries to transfer it. Transactions are pseudonymous–identities are encrypted, and no personal information is exchanged, but public ledgers maintain full transaction records.
FinCEN Guidance Letters on Exchanges Platforms and Payment Processors
As we discussed in a previous Gibson Dunn client alert, in March 2013, the Financial Crimes Enforcement Network (FinCEN) issued guidance on what types of conduct by handlers of virtual currencies would cause such entities to qualify as money services businesses (MSBs) subject to FinCEN’s registration, reporting and recordkeeping regulations for MSBs. In October 2014, FinCEN issued two new guidance letters in response to requests from companies seeking advice on setting up virtual currency exchange platforms and payment processors.
According to FinCEN, virtual currency trading and booking platforms must be licensed as money transmitters even if they only match buyers and sellers on the platform. The guidance letter notes that "a person is an exchanger and a money transmitter if the person accepts convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency." The fact that customers are never identified to each other, even after the matching of the buyer and seller, does not affect this analysis.
Similarly, virtual currency payment processors that provide virtual currency-based payments to merchants wishing to receive payment for goods or services sold in a currency other than the legal tender of their jurisdiction are also money transmitters because "[they] engage as a business in accepting and converting the customer’s real currency into virtual currency for transmission to the merchant." FinCEN specifically clarifies that the fact that the processor uses its own cache of virtual currency to pay the merchant does not affect this classification.
FinCEN further stated that the exchange platform and payment processor at issue did not fall within any existing exemptions for certain payment processing activities or exemptions for transactions integral to the sale of other goods or services, because the company: (1) did not operate through clearing and settlement systems that only admit Bank Secrecy Act (BSA) regulated financial institutions as members; and (2) did not transmit money as a necessary part of another, non-money transmission service. An exemption also was not applicable for the exchange platform because no payment was transferred for the provision of non-money transmission related goods or services (FinCEN did not consider the exchange of virtual currency for real currency to be a non-money transmission-related service). FinCEN noted that its money transmitter classification applies even if a company is acting like a traditional securities exchange and does not transfer the virtual currency between itself and a counterparty, as "the method of funding the transaction is not relevant to the definition of money transmitter."
FinCEN’s classification of virtual currency exchange platforms and payment processors as money transmitters will very likely increase costs for operators in these spaces as money transmitter licenses are costly to obtain and maintain. In addition, virtual currency exchange platforms and payment processors characterized as MSBs will also likely be subject to additional reporting and compliance requirements pursuant to the Bank Secrecy Act.
Proposed New CFPB Rules Might Be Applicable to Virtual Currency Products
On November 13, 2014, the Consumer Financial Protection Bureau (CFPB) proposed new rules to expand consumer protections in the prepaid card market, including rules regarding disclosure requirements and protections against overdraft fees. By expanding prepaid account protections to mobile, peer-to-peer, payroll and government benefit payment schemes, the CFPB noted the proposed rules could apply to virtual wallets and other virtual currency products. The CFPB further noted that its analysis of the applicability of existing regulations to such virtual products and services is ongoing. This move, in conjunction with a CFPB consumer advisory regarding virtual currencies promulgated in August 2014, demonstrates that this agency too looms as a regulatory presence in the virtual currency arena.
The Role of the CFTC
The Commodity Futures Trading Commission (CFTC) has been sharpening its focus on virtual currencies over the last several months. For many merchant businesses that accept bitcoin and other virtual currencies as payment, they are susceptible to fluctuations in the value of the virtual currency and accordingly have looked to the derivatives markets to hedge against such fluctuations. As the primary regulator of derivatives (i.e., futures, options and swaps), the CFTC has jurisdiction over all such virtual currency-linked derivatives, including the platforms that list them and the clearinghouses that clear them. As CFTC Chairman Timothy Massad explained in his testimony before the U.S. Senate Committee on Agriculture, Nutrition and Forestry on December 10, 2014, "[w]hile the CFTC does not have policies and procedures specific to virtual currencies like bitcoin, the agency’s authority extends to futures and swaps contracts in any commodity . . . . Derivative contracts based on virtual currency represent one area within our responsibility."
Over the last several months, the CFTC has seen one entity, TeraExchange, list a U.S. dollar to Bitcoin swap on its registered swap execution facility for which live trading began on October 8, 2014. Another entity, LedgerX, LLC, recently submitted applications to register a swap execution facility and a derivatives clearing organization that would list and clear, respectively, fully collateralized physically settled options on Bitcoin. In addition to its oversight over virtual currency derivatives, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) provided the CFTC with new tools to make it easier for the CFTC to bring enforcement actions on virtual currencies traded in the underlying cash markets, depending on the facts and circumstances. In particular, the Dodd-Frank Act and the CFTC’s implementing regulations make clear that the CFTC has authority over underlying commodity markets such that the agency may bring enforcement actions over fraud and manipulation (or attempted fraud or attempted manipulation) relating to contracts of sale of any commodity in interstate commerce. The definition of "commodity" in the Commodity Exchange Act is broad and would include virtual currencies such as bitcoin. The CFTC has yet to enforce its authority in this context; however, CFTC Commissioner Mark Wetjen recently explained that "[t]he definition of "commodity" under the CFTC’s authorizing statute could be read to include Bitcoin, in which case the CFTC would have authority to bring enforcement actions against anyone who attempts to manipulate the virtual currency." Accordingly, it is important to pay close attention to the CFTC’s role and actions in regulating and enforcing the trading of virtual currencies and derivatives on virtual currencies throughout 2015 and beyond.
Potential IRS Reporting Requirements for Virtual Currencies
As part of the enhanced review by the Internal Revenue Service (IRS) of offshore accounts, experts believe that the agency may soon require taxpayers to report virtual currency accounts held in foreign exchanges on the Report of Foreign Bank and Financial Accounts (FBAR). Eventually, it is even possible that foreign virtual currency exchanges may be considered foreign financial institutions that must report accounts to the IRS under the Foreign Account Tax Compliance Act (FATCA). Currently, the IRS treats virtual currency as a property rather than currency for tax purposes, and it has not yet taken any official stance about the applicability of the FBAR or FATCA to virtual currencies.
New York Department of Financial Services "BitLicense"
On October 21, 2014, New York’s Department of Financial Services (DFS) closed an extended comment period for its proposed virtual currency regulatory framework, commonly known as the "BitLicense." The DFS received over 3,700 comments on the proposed regulations and has released those comments on its website. In response to comments, New York’s Superintendent of Financial Services, Benjamin Lawsky, clarified in a speech that: (1) the BitLicense is not intended to "regulate software as software or software development" or apply to individual users; (2) applicants that need multiple license types will be able to cross-satisfy requirements to streamline the process; (3) banks regulated by DFS will also have to comply with New York BitLicense regulations in order to provide virtual currency services; and (4) mining of virtual currencies will not be regulated.
Superintendent Lawsky also announced that his office is considering a "Transitional BitLicense" option that would entail a reduced regulatory burden and increased flexibility for small businesses and startups. The "Transitional BitLicense" would be a two-year license for those companies that cannot meet all of the requirements for a full BitLicense; however, consumer protection and anti-money-laundering protections would still apply. Superintendent Lawsky has also suggested that, to relieve the burden on smaller businesses, future iterations of the regulatory framework may include specialized examiners to assist small companies with their applications and may allow the use of outside vendors for compliance functions.
In a keynote address to the Bipartisan Policy Center on December 18, 2014, Superintendent Lawsky indicated that DFS’s revised regulation, which would incorporate many of the concerns raised during the public comment process, would be released "in the coming days." The major updates will include: (1) clarification about what entities are subject to licensing requirements–not included are software developers, gift cards/loyalty programs, virtual currency miners, individuals using virtual currency to make purchases or who hold virtual currency solely as an investment and merchants who accept virtual currencies as payment for goods and services but do not engage in any other virtual currency activity; (2) details on the transitional BitLicense for startups and small companies; (3) allowing licensees to apply for a determination that certain parties (e.g., angel investors) should not be deemed "control parties;" (4) a shortened recordkeeping period–from ten years to seven years; (5) allowing a broader range of financing, including virtual currencies, to satisfy capital requirements; and (6) elimination of the requirement that addresses and transaction data be obtained from all parties to a transaction–this information collection requirement will instead apply to a company’s own customers and, where possible, counterparties. The updated proposal will trigger a second public comment period of 30 days, and the final regulation is expected to be released in late January 2015. Superintendent Lawsky also indicated that the DFS would continue to "listen" as the industry develops so that the regulators can stay flexible in the face of continuing innovation.
Other State Attention to Regulation
Although the New York "BitLicense" continues to be the most prominent state regulatory effort directed at virtual currencies, other states have begun to consider the issue. Last year, Texas, Kansas and Washington released guidance on the regulatory treatment of virtual currencies. California, which in June of 2014 passed a bill legalizing virtual currencies, is deciding whether to regulate them. California’s Department of Business Oversight (DBO) has indicated it plans to hold a meeting in mid-December to look into "the extent to which our current law gives us the ability to regulate, what the potential approaches to regulation would be and the extent to which we want to regulate." This meeting is the latest in a series of discussions on the part of the DBO, which has been discussing virtual currencies since November 2013 and where a task force has been established to study the issue. A spokesman for the DBO told interviewers that the "consensus among the staff is that the department and commissioner could regulate virtual currency, to some extent, under current state law." California’s DBO has not yet determined the extent of potential regulations, but has stated that the primary emphasis will be on consumer protection while also addressing money laundering.
Conference of State Bank Supervisors’ Policy Statement Draft Framework
On December 16, 2014, the Conference of State Bank Supervisors ("CSBS"), a national advocate for the interests of state bank regulators to their respective state legislative and regulatory agencies, released a policy statement and a draft model regulatory framework on virtual currency activities. The policy statement, echoing themes present in the DFS BitLicense proposal, suggests state licensing and supervision requirements for the following entities: (1) businesses that exchange virtual currency for sovereign currency or other types of virtual currency; (2) businesses that transmit virtual currencies; and (3) businesses that facilitate the third-party exchange, storage, or transmission of virtual currencies (e.g., wallets, vaults, kiosks, merchant-acquirers and payment processors). The draft framework suggests eight specific areas for state regulations on virtual currency activities including implementing licensing requirements and systems, requiring compliance with the Bank Secrecy Act/Anti-Money Laundering regulations, requiring recordkeeping and access to records, requiring consumer protection policies, and providing authority for supervisory and enforcement actions. The public has until February 16, 2015 to comment on the guidance.
Recent Enforcement Actions:
Department of Justice
On November 6, 2014, the United States Attorney for the Southern District of New York announced the unsealing of a criminal complaint against Trendon Shavers, the operator of Bitcoin Savings and Trust (BCS&T). BCS&T solicited investors in chat rooms and forums, offering up to seven percent weekly returns purported to be earned through "trading" bitcoin and dealing bitcoin at a premium to customers who would pay for anonymity. The complaint alleges securities fraud and wire fraud in relation to Shavers’ operation of BCS&T, alleging that Shavers operated BCS&T as a Ponzi scheme, collecting approximately $4.5 million in bitcoin payments from investors. The proceeding constitutes the first criminal securities fraud case directly involving bitcoin and follows a civil proceeding filed previously by the SEC (see below).
Securities and Exchange Commission
On September 18, 2014, the United States District Court for the Eastern District of Texas entered final judgment against Trendon Shavers and BCS&T in a civil case filed by the SEC. The final order required Shavers to pay in excess of $40 million in disgorgement, interest, and civil penalties. The case was notable for Magistrate Judge Mazzant’s determination that "bitcoin can be used as money" and that investment of bitcoin by BCS&T investors "provided an investment of money." On this basis, interests in BCS&T were held to be securities, and the Magistrate Judge found in favor of the SEC.
Joint Law Enforcement
In November 2014, law enforcement, including the Department of Justice, the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (FBI), Homeland Security Investigations, Drug Enforcement Administration, Internal Revenue Service, Bureau of Alcohol, Tobacco, Firearms and Explosives, Secret Service, U.S. Marshals Service, the Department of Treasury’s Office of Foreign Assets Control (OFAC) and law enforcement agencies of approximately 16 foreign nations took action against over 400 Tor sites–websites accessed via a protocol that allows for user anonymity. These sites included the prominent contraband-trading site Silk Road 2.0 as well as dozens of other "dark market" websites. The FBI estimated that, as of September 2014, Silk Road 2.0 generated sales of $8 million per month and had 150,000 active users. Blake Benthall–a 26-year-old computer programmer from San Francisco who is alleged to have been running Silk Road 2.0 when it was seized–was arrested on November 5, 2014 for his alleged role in operating the site.
On September 4, 2014, two defendants charged in relation to the original Silk Road website, Charles Shrem and Robert Faiella, entered guilty pleas. Mr. Shrem was accused of using his company, BitInstant, to exchange dollars into bitcoin which were in turn sold by Mr. Faiella to individuals who wanted to use the laundered funds to purchase drugs in "dark markets." Mr. Shrem pleaded guilty to one count of aiding and abetting the operation of an unlicensed money transmitting business, and Mr. Faiella pleaded guilty to operating an unlicensed money transmitting business. The District Court for the Southern District of New York had previously rejected Mr. Faiella’s contention that bitcoin was not "money" under the federal statute prohibiting the operation of unlicensed money transmitting businesses. The District Court observed that bitcoin "clearly qualifies as ‘money’ or ‘funds’" under plain meaning definitions and cited SEC v. Shavers for the same proposition.
On December 4, 2014, the U.S. Marshals Service conducted the second auction of bitcoins seized from the original Silk Road and its operators in a raid in October of 2013. The U.S. Marshals auctioned 50,000 bitcoins, which were worth about $18 million at the market price at the time of auction. The auction attracted 11 bidders, down from 45 bidders in the first such auction. SecondMarket, a virtual currency exchange, won 48,000 of the auctioned bitcoins, and the remaining 2,000 were won by venture capitalist Timothy Draper, the winner of the first auction. The U.S. Marshals Service still retains more than 94,000 bitcoins that were seized from the original Silk Road site in 2013.
In September 2014, the Federal Trade Commission (FTC) filed a complaint and requested a temporary restraining order against Butterfly Labs, a manufacturer of bitcoin "mining" hardware. Bitcoin "mining" is how new bitcoin is created–powerful processing hardware solves equations in order to provide "proof of work." Manufacturers build and sell this processing hardware to consumers, who expect to generate bitcoin and make a profit. The FTC complaint alleged that consumers who ordered these machines either never received the product or only received the processors after a significant delay–effectively making the computers useless due to the rapid obsolescence of bitcoin mining hardware. On September 18, 2014, the District Court for the Western District of Missouri granted a temporary restraining order requiring Butterfly Labs to cease making misrepresentations about its products and services and freezing its assets. In October, Butterfly Labs and the FTC reached an interim agreement that allowed the company to reopen some of its business activities, and on November 24, 2014, a federal judge heard testimony on whether to grant the FTC’s motion for a preliminary injunction. Although other bitcoin-related companies have drawn lawsuits from customers in recent months, these allegations have not yet prompted FTC action.
As the use of virtual currencies increases, it has drawn heightened scrutiny from regulators, and this heightened scrutiny is expected to continue in 2015, with consumer protection and anti-money-laundering efforts continuing to be a primary focus. The spread of virtual currencies has prompted the application of existing laws to the new industry, but regulations tailored to virtual currencies themselves could follow if trail-breaking efforts–such as New York’s BitLicense and the draft framework by the CSBS–are successfully implemented. Companies operating or planning to operate in this sphere should remain vigilant about the developing regulatory regime and the increased pace of enforcement actions.
 U.S. Developments in Virtual Currencies: FinCEN Administrative Rulings and New York Department of Financial Services Hearings (Feb. 12, 2014), http://www.gibsondunn.com/publications/pages/US-Developments-in-Virtual-Currencies–FinCEN-Administrative-Rulings-and-New-York-Department-of-Financial-Services-Hearings.aspx.
 FinCEN Guidance, Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies, FIN-2013-G001 (Mar. 18, 2013), available at http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html.
 FinCEN Administrative Ruling, Application of FinCEN’s Regulations to Virtual Currency Trading Platform, FIN-2014-R011 (Oct. 27, 2014), available at http://www.fincen.gov/news_room/rp/rulings/pdf/FIN-2014-R011.pdf (hereinafter ‘FinCEN Trading Platform Guidance’); FinCEN Administrative Ruling, Application of FinCEN’s Regulations to Virtual Currency Payment System, FIN-2014-R012 (Oct. 27, 2014), available at http://www.fincen.gov/news_room/rp/rulings/pdf/FIN-2014-R012.pdf (hereinafter ‘FinCEN Payment System Guidance’).
 Consumer Fin. Prot. Bureau, Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z) (Nov. 13, 2014), available at http://files.consumerfinance.gov/f/201411_cfpb_regulations_prepaid-nprm.pdf (hereinafter ‘CFPB Prepaid Card Rules’); see also Michael J. Casey, BitBeat: New Consumer Protection Laws Might Cover Bitcoin Wallets, Wall St. J. Moneybeat Blog (Nov. 13, 2014, 7:23 PM), http://blogs.wsj.com/moneybeat/2014/11/13/bitbeat-new-consumer-protection-laws-might-cover-bitcoin-wallets/.
 Consumer Fin. Prot. Bureau, CFPB Warns Consumers about Bitcoin (Aug. 11, 2014), available at http://www.consumerfinance.gov/newsroom/cfpb-warns-consumers-about-bitcoin/.
 For example, a recent CFTC committee meeting held a panel in which it discussed Bitcoin and other virtual currencies. See CFTC’s Global Markets Advisory Committee Meeting (Oct. 9, 2014). Agenda is available at http://www.cftc.gov/About/CFTCCommittees/GlobalMarketsAdvisory/gmac_100914agenda. Webcast is available at https://www.youtube.com/watch?v=uwe-RQAPN9I&feature=youtube.
 Testimony of CFTC Chairman Timothy Massad before the United States Senate Committee on Agriculture, Nutrition and Forestry, The Commodity Futures Trading Commission: Effective Enforcement and the Future of Derivatives Regulation (Dec. 10, 2014), available at http://www.ag.senate.gov/download/?id=592c89ea-c2c5-4d8e-9746-3ccea068f020.
 TeraExchange, Inc.’s swap execution facility has self-certified and listed a U.S. dollar to Bitcoin non-deliverable forward transaction that is a bilateral, non-cleared transaction with a credit support annex that bases its price off a price index of widely utilized Bitcoin exchanges. See TeraExchange Self-Certification pursuant to CFTC Regulation 40.2(a) (Sept. 11, 2014), available at http://www.cftc.gov/filings/ptc/ptc091114teraexcsef001.pdf.
 On December 15, 2014, LedgerX, LLC (LedgerX) submitted applications to register a derivatives clearing organization and a swap execution facility with the CFTC. The CFTC is seeking public comment on the submissions from LedgerX until January 30, 2015. See Press Release, PR7078-14, CFTC Requests Public Comment on Related Applications submitted by LedgerX, LLC for Registration as a Derivatives Clearing Organization and Swap Execution Facility (Dec. 15, 2014), available at http://www.cftc.gov/PressRoom/PressReleases/pr7078-14. LedgerX’s application to register as a derivatives clearing organization are available at http://sirt.cftc.gov/sirt/sirt.aspx?Topic=ClearingOrganizationsAD&Key=30998 and the application to register as a swap execution facility are available at http://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=SwapExecutionFacilitiesAD&Key=30643.
 Internal Revenue Serv., Notice 2014-21, www.irs.gov/pub/irs-drop/n-14-21.pdf (last visited Dec. 30, 2014).
 N.Y. State DFS, Comments Regarding the Proposed Virtual Currency Regulatory Framework, http://www.dfs.ny.gov/legal/vcrf_comments.htm (last visited Dec. 30, 2014).
 N.Y. State DFS, Excerpts from Superintendent Lawsky’s Remarks on Virtual Currency and Bitcoin Regulation in New York City (Oct. 14, 2014), http://www.dfs.ny.gov/about/speeches_testimony/sp141014.htm.
 N.Y. State DFS, Excerpts from Superintendent Lawsky’s Remarks on Virtual Currency and Bitcoin Regulation at Money 20/20 (Nov. 3, 2014), http://www.dfs.ny.gov/about/speeches_testimony/sp1411031.htm.
 Benjamin Lawsky, Keynote Address, Payment Policy in the 21st Century: The Promise of Innovation and the Challenge of Regulation Event at the Bipartisan Policy Center (Dec. 18, 2014), available at http://bipartisanpolicy.org/events/payment-policy-in-the-21st-century-the-promise-of-innovation-and-the-challenge-of-regulation (video only).
 N.Y. State DFS, Excerpts from Superintendent Lawsky’s Remarks on Virtual Currency and Bitcoin Regulation at Money 20/20 (Nov. 3, 2014), http://www.dfs.ny.gov/about/speeches_testimony/sp1411031.htm.
 Tex. Dep’t of Banking, Supervisory Memorandum 1037, Regulatory Treatment of Virtual Currencies under the Texas Money Services Act, (Apr. 3, 2014), available at http://www.dob.texas.gov/public/uploads/files/consumer-information/sm1037.pdf.
 Kan. Office of the State Bank Comm’r, Regulatory Treatment of Virtual Currencies under the Kansas Money Transmitter Act, (June 6, 2014), available at http://www.osbckansas.org/mt/guidance/mt2014_01_virtual_currency.pdf.
 Virtual Currency Regulation in Washington, Wash. State Dep’t of Fin. Inst., Bitcoin and Virtual Currency Regulation, http://www.dfi.wa.gov/cs/pdf/virtual-currency-regulation.pdf (last visited Dec. 30, 2014).
 Pete Rizzo, California to Debate Bitcoin Regulation at December Meeting, Coindesk (Dec. 5, 2014), http://www.coindesk.com/california-debate-bitcoin-regulation-december-meeting/ (quotation from interview with Tom Dresslar, spokesman for DBO).
 Michael B. Marois and Carter Dougherty, California Says State Law Grants Right to Oversee Bitcoin, Bloomberg (Dec. 4, 2014), http://www.bloomberg.com/news/2014-12-04/california-says-state-law-grants-right-to-oversee-bitcoin.html.
 Conference of State Bank Supervisors, CSBS Policy on State Virtual Currency Regulation (Dec. 16, 2014), available at http://www.csbs.org/regulatory/ep/Documents/CSBS%20Policy%20on%20State%20Virtual%20Currency%20Regulation%20–%20Dec.%2016%202014.pdf (hereinafter ‘CSBS Policy Statement‘); Conference of State Bank Supervisors, State Regulatory Requirement for Virtual Currency Activities: CSBS Draft Model Regulatory Framework and Request for Public Comment (December 16, 2014), available at http://www.csbs.org/regulatory/ep/Documents/CSBS%20Draft%20Model%20Regulatory%20Framework%20for%20Virtual%20Currency%20Proposal%20–%20Dec.%2016%202014.pdf (hereinafter ‘CSBS Draft Framework’).
 CSBS Policy Statement at 2. The policy statement also notes that it is not intended to be applicable "to merchants and consumers who use virtual currencies solely for the purchase or sale of goods or services" or to cover "activities that are not financial in nature but utilize technologies similar to those used by digital currency." Id. at 3.
 Press Release, United States Dep’t of Justice, Manhattan U.S. Attorney and FBI Assistant Director Announce Securities and Wire Fraud Charges Against Texas Man for Running Bitcoin Ponzi Scheme (Nov. 6, 2014), http://www.justice.gov/usao/nys/pressreleases/November14/TrendonShaversArrest.php.
 See Jay Adkisson, Bitcoin Savings & Trust Comes Up $40 Million Short on the Trust Part, Forbes.com (Sept. 9, 2014), http://www.forbes.com/sites/jayadkisson/2014/09/25/bitcoin-savings-trust-comes-up-40-million-short-on-the-trust-part/.
 See Press Release, Fed. Bureau of Investigation, Dozens of Online "Dark Markets" Seized Pursuant to Forfeiture Complaint Filed in Manhattan Federal Court in Conjunction with the Arrest of the Operator of Silk Road 2.0 (Nov. 7, 2014), http://www.fbi.gov/newyork/press-releases/2014/dozens-of-online-dark-markets-seized-pursuant-to-forfeiture-complaint-filed-in-manhattan-federal-court-in-conjunction-with-the-arrest-of-the-operator-of-silk-road-2.0.
 Press Release, Fed. Bureau of Investigation, Operator of Silk Road 2.0 Website Charged in Manhattan Federal Court (Nov. 6, 2014), http://www.fbi.gov/newyork/press-releases/2014/operator-of-silk-road-2.0-website-charged-in-manhattan-federal-court.
 Sydney Ember, Charles Shrem, Bitcoin Supporter, Pleads Guilty in Court, N.Y. Times Dealbook (Sept. 4, 2014, 7:41 PM), http://dealbook.nytimes.com/2014/09/04/charles-shrem-bitcoin-supporter-pleads-guilty-to-federal-charge/?_r=0.
 For Sale 50,000 bitcoins, U.S. Marshals Serv. Asset Forfeiture, http://www.usmarshals.gov/assets/2014/dpr-bitcoins/ (last visited Dec. 30, 2014).
 Olga Kharif, Bitcoins Seized from Silk Road Offered in Second Auction, Bloomberg (Dec. 4, 2014), http://www.bloomberg.com/news/2014-12-04/bitcoins-seized-from-silk-road-offered-in-second-auction.html.
 Id. Venture capitalist Timothy Draper won all of the nearly 30,000 bitcoins, worth about $19 million at the then-current market price, from the first U.S. Marshals auction. Mr. Draper did not reveal how much he paid for his winning bid. Okga Kharif, VC Tim Draper Wins Entire Cache in Bitcoin Auction, Bloomberg (July 2, 2014), http://www.bloomberg.com/news/2014-07-01/bitcoin-auction-ends-single-bidder-wins-entire-cache.html.
 Sydney Ember, SecondMarket Nearly Sweeps Latest Bitcoin Auction, N.Y. Times Dealbook, (Dec. 9, 2014, 10:24 AM), http://dealbook.nytimes.com/2014/12/09/secondmarket-nearly-sweeps-latest-bitcoin-auction/?emc=edit_dlbkpm_20141209&nl=business&nlid=66614404&_r=0.
 See Press Release, Fed. Trade Comm’n, At FTC’s Request, Court Halts Bogus Bitcoin Mining Operation, (Sept. 23, 2014), http://www.ftc.gov/news-events/press-releases/2014/09/ftcs-request-court-halts-bogus-bitcoin-mining-operation.
 Brianne Pfannenstiel, Butterfly Labs Reaches Agreement with FTC to Reopen, Kan. City Bus. J., (Oct. 2, 2014), http://www.bizjournals.com/kansascity/news/2014/10/02/butterfly-labs-reaches-agreement-with-ftc-to.html?page=all.
 Brianne Pfannenstiel, Judge Hears Butterfly Labs, FTC Debate Bitcoin Company’s Future, Kan. City Bus. J., (Nov. 24, 2014), http://www.bizjournals.com/kansascity/news/2014/11/24/judge-hears-butterfly-labs-ftc-debate-itcoin.html.
 See Meissner v. BF Labs, 2014 U.S. Dist. LEXIS 77135, 1 (D. Kan. June 6, 2014); Stan Higgins, CoinTerra Seeks Out-of-Court Settlement to Class Action Lawsuit, CoinDesk (June 24, 2014), http://www.coindesk.com/cointerra-mediation-class-action-lawsuit/; Law Office of Charlotte C. Lin, Law Office of Charlotte C. Lin Announces Investigations against KnCMiner’s Potential Class Action Lawsuit, http://kncclassaction.com/ (last visited Dec. 30, 2014); Press Release, Silver Law Group, Silver Law Group Files Lawsuits against Cryptocurrency Exchanges Bitcoin Savings & Trust and Cryptsy (Oct. 23, 2014), http://globenewswire.com/news-release/2014/10/23/675973/10104195/en/Silver-Law-Group-Files-Lawsuits-Against-Cryptocurrency-Exchanges-Bitcoin-Savings-Trust-and-Cryptsy.html.
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Peter Alexiadis – Brussels (+32 2 554 72 00, firstname.lastname@example.org)
Attila Borsos – Brussels (+32 2 554 72 10, email@example.com)
Patrick Doris – London (+44 (0)207 071 4276, firstname.lastname@example.org)
Penny Madden – London (+44 (0)20 7071 4226, email@example.com)
Mark Handley – London (+44 (0)207 071 4277, firstname.lastname@example.org)
* Ms. Gosnell Handler and Mr. Lorber are not yet admitted to practice in the District of Columbia, and currently practice under the supervision of the Principals of the Firm.
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