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UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
June 2023 Grand Jury
UNITED STATES OF AMERICA,
Plaintiff,
v.
ROGER KEITH VER,
Defendant.
CR No.
I N D I C T M E N T
[18 U.S.C. § 1341: Mail Fraud; 26
U.S.C. § 7201: Attempt to Evade
and Defeat Tax; 26 U.S.C. §
7206(1): Subscription to a False
Tax Return]
The Grand Jury charges:
COUNTS ONE THROUGH THREE
[18 U.S.C. § 1341]
A. INTRODUCTORY ALLEGATIONS
At times relevant to this Indictment:
Defendant VER and His Companies
1. Defendant ROGER KEITH VER, who was born in San Jose,
California, resided in Tokyo, Japan, and Saint Kitts and Nevis (“St.
Kitts”). Defendant VER was in a long-term relationship with a
Japanese citizen (“partner”).
2. Defendant VER was the sole owner and Chief Executive
Officer (“CEO”) of MemoryDealers.com, Inc., and Agilestar.com, Inc.,
2:24-cr-00103-MWF
2/15/2024
CDO
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two businesses that were based in Santa Clara, California, and sold
computer and networking equipment. MemoryDealers and Agilestar were
small business corporations (“S-Corporations”) until March 3, 2014,
when by operation of law they were automatically converted to C-
Corporations.
Bitcoins
3. Bitcoins were a cryptocurrency circulated over the
internet. Bitcoins were not issued by any government, bank, or
company, but rather were controlled through computer software
operating via a decentralized, peer-to-peer network. Bitcoins were
sent to and received from bitcoin addresses, which were analogous to
bank account numbers and consisted of strings of case-sensitive
letters and numbers, each 26 or more characters long. Each bitcoin
address was controlled through the use of a private key that was the
equivalent of a password or PIN and was necessary to access the
bitcoins associated with the bitcoin address.
4. Bitcoin transactions were recorded on the bitcoin
blockchain. The bitcoin blockchain was a decentralized public ledger
on which were recorded all bitcoin transactions in which a bitcoin
address sent or received bitcoins. The bitcoin blockchain was updated
approximately six times per hour. All records on the bitcoin
blockchain were publicly available.
5. Generally, a bitcoin wallet was an application that allowed
bitcoin users to easily send and receive bitcoins and store their
private keys. Users typically acquired bitcoins by purchasing them
through a cryptocurrency exchange.
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Defendant VER’s and His Companies’ Acquisition of Bitcoins
6.
Defendant VER began acquiring bitcoins no later than April
2011. Defendant VER also avidly promoted bitcoins, even obtaining the
moniker “Bitcoin Jesus.”
7.
Defendant VER opened accounts on MemoryDealers’ behalf at
several cryptocurrency exchanges. He wired and caused to be wired
funds from MemoryDealers’ and Agilestar’s bank accounts to those
exchanges to purchase bitcoins for them. For example:
a. In April 2011, defendant VER opened an account in
MemoryDealers’ name at Mt. Gox, a cryptocurrency exchange, using his
own MemoryDealers’ e-mail address. Defendant VER repeatedly wired and
caused to be wired funds from MemoryDealers’ and Agilestar’s bank
accounts to the Mt. Gox account to purchase bitcoins. Defendant VER
transferred MemoryDealers’ and Agilestar’s bitcoins from Mt. Gox to
bitcoin wallets that defendant VER controlled on their behalf.
b. In June 2012, defendant VER also opened an account on
MemoryDealers’ behalf at Bitstamp, another cryptocurrency exchange.
When he opened the account, defendant VER provided MemoryDealers’
articles of incorporation and indicated he was MemoryDealers’ sole
owner. He also provided a copy of a recent MemoryDealers’ bank
statement. Defendant VER repeatedly wired and caused to be wired
funds from MemoryDealers’ bank account to Bitstamp to purchase
bitcoins. Defendant VER transferred MemoryDealers’ bitcoins from
Bitstamp to bitcoin wallets that defendant VER controlled on
MemoryDealers’ behalf.
8. Defendant VER also caused MemoryDealers to acquire bitcoins
by using MemoryDealers’ money to purchase them directly from sellers.
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9.
MemoryDealers used bitcoins to conduct its business.
Beginning in or around October 2011, and continuing until at least on
or about June 18, 2017, MemoryDealers paid certain vendors in
bitcoins. MemoryDealers received payments from customers in bitcoins
through September 2017. On or about November 1, 2012, MemoryDealers
launched Bitcoinstore.com. MemoryDealers, doing business as
Bitcoinstore.com, accepted payment in bitcoins for products it sold
on the internet. Bitcoinstore.com operated until approximately July
31, 2014.
10. Defendant VER also used his own funds to purchase bitcoins.
For example, on or about July 23, 2012, defendant VER opened an
account in his own name at Coinbase, another cryptocurrency exchange.
11. On or about November 30, 2013, defendant VER donated 1,000
of his personally held bitcoins, valued at $1,065,145, to a charity
qualified under section 501(c)(3) of the Internal Revenue Code. On or
about November 6, 2014, defendant VER filed an Amended U.S.
Individual Income Tax Return (Form 1040X) for tax year 2013 on which
he claimed a deduction for this donation.
Defendant VER’s Expatriation
12. United States citizens could renounce their U.S.
citizenship, a process known as expatriation.
13. Under the Internal Revenue Code (“IRC”), expatriation from
the United States by a person who qualified as a “covered expatriate”
had tax implications. Specifically, all of a covered expatriate’s
property was treated as having been sold on the day before the
expatriation date for its fair market value—referred to as a
“constructive sale”—and any gain arising from that constructive sale
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was required to be taken into account for that taxable year and was
subject to tax, which was referred to as an “exit tax.”
14.
Under the IRC, covered expatriates were also required to
file an Initial and Annual Expatriation Statement (Form 8854) with
the Internal Revenue Service (“IRS”). Covered expatriates were
required to certify on their Forms 8854 that they had complied with
their tax obligations in the five years before expatriation and,
among other things, provide information about their net worth,
income, assets, and liabilities as of the date of their expatriation.
15. In August 2012, defendant VER hired Law Firm 1 to advise
him about expatriating and later hired Law Firm 1 to assist with his
expatriation and prepare his 2014 U.S. Nonresident Alien Income Tax
Return (Form 1040NR) and Initial and Annual Expatriation Statement
(Form 8854) (collectively the “expatriation-related tax returns”).
16. Law Firm 1 also advised defendant VER to hire an appraiser
to value MemoryDealers and Agilestar. As described below, defendant
VER hired two different appraisers to do so. Appraiser 1 was a large,
international accounting firm that defendant VER retained in 2012;
Appraiser 2 was a solo practitioner that defendant VER retained in
2015.
17. On February 4, 2014, defendant VER became a St. Kitts
citizen. On March 3, 2014, defendant VER furnished to the United
States Consulate in Barbados a signed Request for a Determination of
Possible Loss of Citizenship (Form DS-4079), which included in Part
II, a separately signed Statement of Voluntary Relinquishment of U.S.
Citizenship. The U.S. Department of State subsequently issued him a
Certificate of Loss of Nationality of the United States (Form DS-
4083) that said defendant VER expatriated as of February 4, 2014.
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18.
Under the IRC, however, a U.S. citizen is determined to
have expatriated for the purposes of computing the exit tax and
preparing the Form 8854 on the earliest of four events. The earliest
of those four events applicable to defendant VER was the furnishing
of his Statement of Voluntary Relinquishment of U.S. Citizenship to
the U.S. Consulate on March 3, 2014.
19. Defendant VER was a covered expatriate because his net
worth on that day was at least $2,000,000. As such, defendant VER was
required to prepare and file a Form 8854 and to pay an exit tax on
any gain from the constructive sale of his worldwide assets as of
March 2, 2014, and to report his worldwide assets on a Form 8854 as
of March 3, 2014.
20. However, Law Firm 1 erroneously advised him, based on the
date referenced in the U.S. Department of State’s Certificate of Loss
of Nationality, that he expatriated for tax purposes on February 4,
2014, and had to pay the exit tax based on the constructive sale of
his worldwide assets as of February 3, 2014.
21. Law Firm 1 prepared and defendant VER signed and filed his
expatriation-related tax returns incorrectly using February 4, 2014,
as the date of his expatriation.
Clustering Analysis
22. Clustering analysis, described below, combined with other
attribution evidence, establishes that on February 3, 2014, defendant
VER owned approximately 131,000 bitcoins either directly or through
his companies.
23. The clustering analysis used information from the
blockchain to group bitcoin addresses together into clusters based on
co-spending. Co-spending occurred when multiple bitcoin addresses
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sent bitcoins in a single transaction, indicating that a single owner
held the private keys for all those addresses. A cluster could be
labeled based on its root address, namely, the earliest existing
bitcoin address in the cluster.
24.
The clustering analysis establishes that the bitcoins
referenced in paragraph 22 above were contained within at least four
clusters of bitcoin addresses. These four clusters held bitcoins on
February 3, 2014, as follows:
Cluster Root Address Bitcoins on 2/3/2014
1 1E6mijNx2xKzRt6KXiqZncUmybgYN4cn2X
(“Cluster 1E6mij”)
110,000.0491
2 1JKPkpDFruDNjFKQ5upDkB2CbstbR3RtE7
(“Cluster 1JKPkp”)
2,000.9710
3 1LXrSb67EaH1LGc6d6kWHq8rgv4ZBQAcpU
(“Cluster 1LXrSb”)
4,037.8632
4 1LDWDufjU5ATbozDZY3uChb7oPAbDaiB7K
(“Cluster 1LDWDu”)
15,000.0005
25. Clustering analysis also establishes that on March 2, 2014,
defendant VER owned either directly or through his companies nearly
the same number of bitcoins contained in at least the same four
clusters.
B. THE SCHEME TO DEFRAUD
26. Beginning no later than in or about October 2012, and
continuing through at least in or about December 2018, in Los Angeles
County, within the Central District of California, and elsewhere,
defendant VER knowingly and with the intent to defraud, devised,
participated in, and executed a scheme to defraud the United States
Department of the Treasury as to material matters, and to obtain
money and property by means of materially false and fraudulent
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pretenses, representations, and promises, and the concealment of
material facts, regarding the number and value of bitcoins he owned
and controlled both personally and through his companies.
27.
The scheme to defraud operated, in substance, as follows:
a.
In August 2012, Defendant VER hired Law Firm 1 to
assist with his potential expatriation, including estimating any
potential exit tax. Law Firm 1 told defendant VER that to estimate
his exit tax, he should “pretend” to sell all of his assets on the
day before his anticipated expatriation and calculate a tax on any
gain from those pretend sales above $651,000.
b. After defendant VER was so advised, but before he was
able to expatriate in 2014, he concealed and provided false
information to his various advisors regarding the number and value of
bitcoins he owned and controlled both personally and through his
companies. For example:
i. In October 2012, defendant VER provided to Law
Firm 1 a purported list of his assets and proposed exit tax
calculation. The list of assets did not include any bitcoins.
ii. Defendant VER engaged Appraiser 1 in August 2012.
During the course of Appraiser 1’s engagement, Appraiser 1 prepared
multiple draft valuations of MemoryDealers and Agilestar. Appraiser 1
repeatedly advised defendant VER that the bitcoins listed as assets
on MemoryDealers’ and Agilestar’s financial records should be valued
at their current market price and asked defendant VER for the number
of bitcoins held by the companies.
iii. In response, defendant VER did not provide
Appraiser 1 with the total number of bitcoins the companies held and
instead purported to provide the total number of bitcoins in his
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possession. But the figures he provided were substantially lower than
the number of bitcoins attributable to him and his companies. For
example, on or about April 12, 2013, defendant VER told Appraiser 1
that he controlled 25,000 bitcoins, when approximately 117,000
bitcoins were attributable to him and his companies on that date,
with approximately 70,000 held by defendant VER’s companies.
iv. Appraiser 1 did not finalize its valuations
because on or about May 15, 2013, defendant VER informed Appraiser 1
that he was not going to be able to expatriate soon and requested
that Appraiser 1 indefinitely delay its work.
v. Throughout this time, Defendant VER sought advice
from Appraiser 1, Law Firm 1, and MemoryDealers’ and Agilestar’s
outside return preparers about whether the best way to minimize his
exit tax and post-expatriation tax liabilities would be to distribute
MemoryDealers’ and Agilestar’s bitcoins to himself.
vi. Also throughout this time, defendant VER
continued to acquire bitcoins for his companies and to invest
bitcoins in, or to loan bitcoins to, bitcoin-related startups.
c. After failing to obtain citizenship in several other
countries, in early December 2013, defendant VER told Law Firm 1 that
he believed he would be able to obtain citizenship from St. Kitts and
renounce his U.S. citizenship by the end of the year.
d. Law Firm 1 warned defendant VER that “doing so will
mean (tax-wise) that you are diving off the high dive into the pool
without checking how much water is in the pool. Meaning—when you
renounce you have committed yourself and whatever the tax results
are, they are. No adjustments are possible.”
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e.
After defendant VER retained Law Firm 1 in January
2014 to assist with his expatriation, including calculating his
estimated exit tax payment, and while Law Firm 1 prepared and filed
his expatriation-related tax returns, defendant VER continued to
conceal and provide false information to his advisors regarding the
number and value of bitcoins he owned and controlled both personally
and through his companies. For example:
i. On February 3, 2014, the day Law Firm 1 advised
defendant VER to use when calculating his exit tax, he had
approximately 131,000 bitcoins that could be attributed to him and
his companies. Based on an analysis of their financial records, about
73,000 of these bitcoins could be attributed to MemoryDealers and
Agilestar. Bitcoins traded on February 3, 2014, between $782 and $960
across several large bitcoin exchanges. From April 2011 to January 1,
2013, when defendant VER and his companies acquired most of their
bitcoins, bitcoins traded at no more than about $32.00 across several
large bitcoin exchanges.
ii. In or around April 2014, Law Firm 1 attempted to
estimate defendant VER’s exit tax so that defendant VER could make an
estimated tax payment for 2014. On or about April 5, 2014, Return
Preparer 1, an employee at Law Firm 1, sent defendant VER an
estimation of defendant VER’s exit tax of $3,990,000. A few days
later, Return Preparer 1 updated it, reducing the estimated exit tax
to $3,400,000. The spreadsheet Return Preparer 1 used to compute that
figure listed a total value of only $3,000,000 for “[b]itcoins held
in personal wallets,” listed defendant VER as the 100% owner of the
bitcoins, and noted that defendant VER had provided the estimate of
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the bitcoins’ value. The spreadsheet did not list how many bitcoins
defendant VER personally owned.
iii.
Defendant VER did not make any estimated tax
payments for 2014.
iv.
A year later, when Law Firm 1 was preparing
defendant VER’s expatriation-related tax returns, Return Preparer 1
e-mailed defendant VER on or about April 10, 2015, requesting
additional information about defendant VER’s assets. Return Preparer
1 asked defendant VER how many bitcoins defendant VER owned and what
he had paid for them. When he responded a few days later, defendant
VER did not provide the requested information and instead discussed
various aspects of the bitcoin market.
v. On or about August 3, 2015, Return Preparer 1 e-
mailed defendant VER and proposed using an $800 per bitcoin value for
defendant VER’s personally held bitcoins. Defendant VER rejected
Return Preparer 1’s proposal as unreasonable, claiming that he had so
many bitcoins that if he had had to sell them all on a single day in
February 2014 it would have crashed the market. Defendant VER did not
specify how many bitcoins he had but suggested a value of his
personal bitcoin holdings of $9,200,000.
vi. A few weeks later, Return Preparer 1 told
defendant VER that Lawyer 1, another employee of Law Firm 1, had
determined that they had to use the $800 per bitcoin value and again
asked defendant VER how many bitcoins defendant VER personally held.
Defendant VER withheld the requested information once more, and
instead said that using the $800 per bitcoin value was “impossible
and unreasonable.” Lawyer 1 later told defendant VER that they were
legally required to use the $800 per bitcoin value.
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vii.
In August 2015, Lawyer 1 also asked defendant VER
about his personal bitcoin holdings, specifically about how he had
come to own bitcoins through bitcoinstore.com. Defendant VER
responded that MemoryDealers “kept as many of the bitcoins as
possible.” In response to Lawyer 1’s follow-up questions, defendant
VER remarked that bitcoin wallets “were not registered to any name or
associated with a tax id, and that no one, including the IRS, can
freeze ones [sic] bitcoin accounts or seize ones [sic] bitcoins.”
Defendant VER also asserted that all the bitcoins obtained from
“MemoryDealers / Bitcoinstore were held in bitcoin wallets that only
[he was] able to access.” Defendant VER stated that he believed a
“smart tax strategy would be for [the bitcoins] to have been
transferred to [his] personal ownership whenever it would have been
cheapest to have done so from a tax perspective.”
viii. While Law Firm 1 was preparing defendant
VER’s expatriation-related tax returns, it reminded defendant VER of
his need to obtain valuations of MemoryDealers and Agilestar. Instead
of returning to Appraiser 1, who had already prepared draft
valuations, in June 2015 defendant VER retained Appraiser 2 to start
the process anew.
ix. In August 2015, Appraiser 2 prepared valuations
of MemoryDealers and Agilestar based in large part on the companies’
financial records and tax returns using a valuation date of February
4, 2014.
x. On or about August 4, 2015, Appraiser 2 sent
draft valuations to Employee 1, a MemoryDealers’ employee. Appraiser
2 valued MemoryDealers at $2,250,000, which included bitcoins valued
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at $1,304,054, and valued Agilestar at $4,310,000, which included
bitcoins valued at $113,582.
xi.
Employee 1 forwarded the draft valuations to
Return Preparer 2, one of MemoryDealers’ and Agilestar’s outside
return preparers, and requested Return Preparer 2’s input. Return
Preparer 2 responded by e-mail, questioning the valuation of the
companies’ bitcoins, and told Employee 1 to ask Appraiser 2 “if the
Bitcoin values are market value on the dates of valuation.” Return
Preparer 2 explained that the “value should be: total Bitcoins x
Average Market Price on Date of Valuation (2/3/14). If the value
shown is that value, no problem; otherwise, an adjustment should be
made, up or down, to show [Fair Market Value] of Bitcoins on that
date.”
xii. Employee 1 forwarded Return Preparer 2’s e-mail
to defendant VER.
xiii. On or about August 13, 2015, Employee 1
confirmed with Appraiser 2 that the previously provided draft
valuations were the final versions. No adjustments had been made in
response to Return Preparer 2’s concern.
xiv. Employee 1 then forwarded the valuations to Law
Firm 1, which subsequently incorporated them into defendant VER’s
expatriation-related tax returns. At no time did defendant VER object
to the incorrect valuations prepared by Appraiser 2, which defendant
VER then knew would be incorporated into his expatriation-related tax
returns.
xv. As part of the return preparation process, on or
about October 14, 2015, Return Preparer 1 e-mailed defendant VER a
list of his bank and trading accounts of which Return Preparer 1 was
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aware. Return Preparer 1 requested defendant VER provide any
additional accounts not listed. Defendant VER responded, identifying
an additional trading account but failed to disclose his account at
Coinbase, which held some of defendant VER’s bitcoins on February 4,
2014. And a few weeks before this e-mail, defendant VER had sent
Lawyer 2, at Law Firm 2, who was also assisting defendant VER with
his expatriation, bitcoins from his Coinbase account. Defendant VER’s
Coinbase account had bitcoins on March 3, 2014, as well.
xvi. Also on or about October 14, 2015, Return
Preparer 1 e-mailed defendant VER and requested once again that he
provide the total number of bitcoins he owned on February 4, 2014.
Return Preparer 1 copied Lawyer 1 on the e-mail. Yet again, defendant
VER did not tell them how many bitcoins he had. He instead asked,
“[c]ompletely hypothetically speaking, what would the ramifications
be if I were to have had 200,000 [bitcoins] at the time of my
renunciation?”
xvii. Lawyer 1 replied and advised defendant VER
to obtain an appraisal of his personally held bitcoins from a “third
party who [had] no personal interest in the tax implications of the
appraisal.”
xviii. A week later, defendant VER asked Appraiser
2 if Appraiser 2 could provide a valuation for “an amount of Bitcoins
as of Feb 4th 2014 in an illiquid market?”
xix. In a follow-up e-mail, defendant VER asked if
Appraiser 2 could assist, stating “I actually have all the
information you need to make it super easy for you. I would just need
to explain it all, and then you would affix your name to it.”
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xx.
Approximately two weeks later, Appraiser 2
responded to defendant VER, indicating he would take a look at the
information. Appraiser 2 requested that defendant VER “state how many
bitcoins are subject to appraisal....”
xxi.
Instead of providing the requested information,
defendant VER responded by discussing the state of the bitcoin market
at the time of his expatriation. He also asked Appraiser 2 to opine
on how Appraiser 2 would hypothetically value someone’s bitcoins if
the number of bitcoins was substantially more than the total number
traded on that day.
xxii. Instead of addressing defendant VER’s
hypothetical, Appraiser 2 wrote back and only said “What was your
BitCoins [sic] holding as of February 4, 2014.” Despite having
previously said that he had all the information for Appraiser 2,
defendant VER responded and said that he was not sure how many
bitcoins he had and asked another hypothetical about how Appraiser 2
would approach valuing 20,000 bitcoins.
xxiii. In response to defendant VER’s hypothetical,
Appraiser 2 said that the value per bitcoin could be between $100 to
$800. Defendant VER then paid Appraiser 2 to prepare a valuation of
his personally held bitcoin.
xxiv. On or about November 24, 2015, Lawyer 1
responded to an email from defendant VER. Despite having final
appraisals of MemoryDealers and Agilestar for several months,
defendant VER had raised a concern with Lawyer 1 about “figuring out”
which bitcoins were his and which were MemoryDealers’. In response,
Lawyer 1 told defendant VER that the appraisal for MemoryDealers
included bitcoins valued at $1.3 million based on the company’s
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financial records but that Lawyer 1 did not know how many bitcoins
this corresponded to or how that value was calculated. Lawyer 1
advised defendant VER not to include MemoryDealers bitcoins as part
of the valuation of his personally held ones. Lawyer 1 also requested
that if defendant VER was uncertain about how the bitcoins were
allocated between himself and MemoryDealers to let Lawyer 1 know so
they could reevaluate. Over the next several weeks, Lawyer 1 followed
up with defendant VER on this issue, but defendant VER did not
respond.
xxv. On or about December 3, 2015, defendant VER
formally requested that Appraiser 2 prepare a valuation of 25,000
bitcoins and confirmed that he held those bitcoins personally. Around
the same time, defendant VER told Lawyer 1 that the issue of how many
bitcoins he personally owned had been taken care of and that he had
provided Appraiser 2 with his best estimate.
xxvi. After some back and forth between defendant
VER and Lawyer 1, and defendant VER and Appraiser 2 about whether the
bitcoins were held by defendant VER, his partner, or his company, on
or about December 7, 2015, defendant VER once again confirmed that
the 25,000 bitcoins were held by him personally “and [did] not
include any other bitcoins that [he] may have been holding
custodially for others.”
xxvii. On or about January 11, 2016, Appraiser 2
told defendant VER that it would make a significant difference in the
valuation if he owned the bitcoins personally or if a company owned
them.
xxviii. A few days later, defendant VER wrote in an
e-mail to Lawyer 1 and others that “reading between the lines of what
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[Appraiser 2] said, it [sounded] like the appraisal will be MUCH
lower if the bitcoins are owned by a corporate entity rather than
myself personally.” Defendant VER further stated, “[p]erhaps it will
be easier for tax reporting requirements if I gave all my bitcoins to
my partner (not legally married wife) in Japan?”
xxix.
Defendant VER caused Law Firm 1 to prepare
and mail on or about April 28, 2016, a United States Gift (and
Generation-Skipping Transfer) Tax Return (Form 709), falsely claiming
that defendant VER had gifted 25,000 bitcoins to his partner on
November 15, 2011. Defendant VER signed the Form 709 under penalties
of perjury on or about April 15, 2016. The IRS received the Form 709
on or about May 4, 2016.
f. Defendant VER caused Law Firm 1 to prepare and mail on
or about May 4, 2016, defendant VER’s 2014 U.S. Nonresident Alien
Income Tax Return (Form 1040NR). This Form 1040NR failed to report
any gain from the constructive sale of any bitcoins that defendant
VER personally owned and substantially underreported gains from the
constructive sales of MemoryDealers and Agilestar, which were based
on Appraiser 2’s August 2015 valuations discussed in paragraph 27(e),
above. The return listed a total tax due of $1,032,845. Defendant VER
signed the Form 1040NR under penalties of perjury on or about April
15, 2016. The IRS received the Form 1040NR on or about May 10, 2016.
g. Defendant VER also caused Law Firm 1 to prepare and
mail on or about May 4, 2016, defendant VER’s 2014 Initial and Annual
Expatriation Statement (Form 8854) that failed to report personally
owned bitcoins and underreported the fair market values of
MemoryDealers and Agilestar. Defendant VER signed the Form 8854 under
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penalties of perjury on or about April 15, 2016. The IRS received the
Form 8854 on or about May 10, 2016.
h.
On or about July 13, 2016, Return Preparer 1 was
erroneously informed that the IRS had not received the 2014 Form
1040NR and Form 8854 that were mailed on or about May 4, 2016. On or
about July 14, 2016, defendant VER re-signed those returns, and on or
about July 19, 2016, Law Firm 1 mailed them to the IRS. The IRS
received these returns on or about July 22, 2016.
i. As further part of his scheme, defendant VER also
fraudulently misrepresented and concealed income he received in 2017
from the distributions of MemoryDealers’ and Agilestar’s bitcoins to
him. For example:
i. On or about March 17, 2016, defendant VER learned
from Return Preparer 3, another one of MemoryDealers’ and Agilestar’s
outside return preparers, that upon his expatriation when
MemoryDealers and Agilestar became C-Corporations, all of
MemoryDealers’ and Agilestar’s assets “rolled into” them.
ii. After defendant VER expatriated and continuing
through June 2017, MemoryDealers continued to acquire and/or spend
bitcoins, and Agilestar continued to own bitcoins.
iii. By 2017, defendant VER had opened personal
accounts at several other cryptocurrency exchanges such as Kraken,
Bitfinex, Bittrex, and Poloniex.
iv. On or about June 19, 2017, after paying an
invoice issued to MemoryDealers with bitcoins, defendant VER
instructed Employee 1 to “close out” the bitcoin balance, which
resulted in the removal of all bitcoins as assets from the financial
records of MemoryDealers and Agilestar. On that date, MemoryDealers’
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financial records showed that it had approximately 58,000 bitcoins;
Agilestar’s financial records showed it had approximately 12,000.
v.
In the two weeks before defendant VER instructed
Employee 1 to remove the bitcoins from MemoryDealers’ financial
records, defendant VER had transferred nearly 3,000 bitcoins—worth
over $7 million—from Cluster 1JKPkp to defendant VER’s personal
account at Poloniex.
vi. In November 2017, defendant VER transferred tens
of thousands of bitcoins from Cluster 1E6mij and Cluster 1LDWDu to
exchange accounts in his name and then sold them for United States
dollars. He then transferred approximately $240 million from those
exchange accounts to bank accounts either in his name or under his
control in the Bahamas.
vii. Defendant VER retained Law Firm 1 to prepare his
2017 Form 1040NR. On or about July 26, 2018, Return Preparer 1 asked
defendant VER if he had received any income or distributions from
MemoryDealers or Agilestar during 2017. Defendant VER said that he
had not. Defendant VER also did not tell Return Preparer 1 that he
had received hundreds of millions of dollars from the sale of
bitcoins in 2017.
viii. As a result of defendant VER’s concealment
of the distributions of MemoryDealers’ and Agilestar’s bitcoins to
him in 2017, the 2017 Form 1040NR that defendant VER caused Return
Preparer 1 to prepare and mail on or about December 15, 2018, did not
report any gain or pay any tax related to those distributions.
j. The false and fraudulent statements and
representations and material omissions on the 2014 Form 1040NR, 2014
Form 8854, and the 2017 Form 1040NR that defendant VER caused to be
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prepared and mailed to the IRS collectively deprived the IRS of taxes
rightfully due in the amount of approximately $48 million.
C.
USE OF THE MAILS
28.
On or about the dates set forth below, in Los Angeles
County, within the Central District of California, and elsewhere,
defendant VER, for the purpose of executing the above-described
scheme to defraud, knowingly caused the following items to be placed
in a post office and authorized depository for mail matter to be sent
and delivered by the United States Postal Service according to the
directions thereon:
COUNT DATE ADDRESS MAIL MATTER
ONE May 4, 2016 Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
Defendant VER’s
false 2014 Forms
1040NR and 8854
TWO July 19,
2016
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
Defendant VER’s
false 2014 Forms
1040NR and 8854
THREE December 15,
2018
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
Defendant VER’s
false 2017 Form
1040NR
COUNT FOUR
[26 U.S.C. § 7201]
29. The Grand Jury realleges paragraphs 1 through 25 and 27 of
this Indictment here.
30. Beginning no later than on or about January 1, 2014, and
continuing through on or about December 18, 2018, in Los Angeles
County, within the Central District of California, and elsewhere,
defendant VER willfully attempted to evade and defeat income tax due
and owing by him to the United States of America, for the calendar
year 2014, by committing the following affirmative acts, among
others, on or about the following dates:
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a.
preparing and causing to be prepared, signing and
causing to be signed, and filing and causing to be filed with the IRS
on May 10, 2016, a false 2014 U.S. Nonresident Alien Income Tax
Return (Form 1040NR) that failed to report gain from the constructive
sale of personally owned bitcoins and substantially underreported
gains from the constructive sales of MemoryDealers and Agilestar;
b. preparing and causing to be prepared, signing and
causing to be signed, and filing and causing to be filed with the IRS
on May 10, 2016, a false 2014 Initial and Annual Expatriation
Statement (Form 8854) that failed to report personally owned bitcoins
and underreported the fair market values of MemoryDealers and
Agilestar;
c. preparing and causing to be prepared, signing and
causing to be signed, and filing and causing to be filed with the IRS
on July 22, 2016, a false 2014 U.S. Nonresident Alien Income Tax
Return (Form 1040NR) that failed to report gain from the constructive
sale of personally owned bitcoins and substantially underreported
gains from the constructive sales of MemoryDealers and Agilestar;
d. preparing and causing to be prepared, signing and
causing to be signed, and filing and causing to be filed with the IRS
on May 4, 2016, a false 2011 United States Gift (and Generation-
Skipping Transfer) Tax Return (Form 709) that falsely claimed
defendant VER had gifted 25,000 bitcoins on November 15, 2011, to his
partner;
e. on June 19, 2017, instructing Employee 1 to “close
out” the bitcoin balance, which resulted in the removal of all
bitcoins as assets from the financial records of MemoryDealers and
Agilestar; and
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f.
preparing and causing to be prepared, signing and
causing to be signed, and filing and causing to be filed with the IRS
on December 18, 2018, a false 2017 U.S. Nonresident Alien Income Tax
Return (Form 1040NR) that failed to report income from the
distributions of bitcoins to defendant VER from MemoryDealers and
Agilestar.
COUNT FIVE
[26 U.S.C. § 7201]
31. The Grand Jury realleges paragraphs 1 through 25 and 27 of
this Indictment here.
32. From on or about January 1, 2017, through on or about
December 18, 2018, in Los Angeles County, within the Central District
of California, and elsewhere, defendant VER willfully attempted to
evade and defeat income tax due and owing by him to the United States
of America, for the calendar year 2017, by committing the following
affirmative acts, among others, on or about the following dates:
a. on June 19, 2017, instructing Employee 1 to “close
out” the bitcoin balance, which resulted in the removal of all
bitcoins as assets from the financial records of MemoryDealers and
Agilestar;
b. on July 26, 2018, falsely stating to Return Preparer 1
that he did not receive any distributions or other payments from
MemoryDealers in 2017;
c. on July 26, 2018, falsely stating to Return Preparer 1
that he did not receive any distributions or other payments from
Agilestar in 2017; and
d. preparing and causing to be prepared, signing and
causing to be signed, and filing and causing to be filed with the IRS
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on December 18, 2018, a false 2017 U.S. Nonresident Alien Income Tax
Return (Form 1040NR) that failed to report income from the
distributions of bitcoins to defendant VER from MemoryDealers and
Agilestar.
COUNT SIX
[26 U.S.C. § 7206(1)]
33. The Grand Jury realleges paragraphs 1 through 25 and 27 of
this Indictment here.
34. On or about May 10, 2016, in Los Angeles County, within the
Central District of California, and elsewhere, defendant VER
willfully made and subscribed, and filed and caused to be filed with
the IRS, a false 2014 U.S. Nonresident Alien Income Tax Return (Form
1040NR), which was verified by a written declaration that it was made
under penalties of perjury and which defendant VER did not believe to
be true and correct as to every material matter. The Form 1040NR was
not true and correct as follows:
a. on the Sales and Other Dispositions of Capital Assets
(Form 8849), included with the Form 1040NR, defendant VER:
i. failed to report gain from the constructive sale
of personally owned bitcoins, whereas defendant VER then knew he
personally owned bitcoins and was required to report gain from their
constructive sales;
ii. falsely reported proceeds of $2,250,000 and gain
of $2,064,268 from the constructive sale of MemoryDealers, whereas
defendant VER then knew the proceeds and gain from the constructive
sale of this company were substantially greater than the amounts he
reported; and
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iii.
falsely reported proceeds of $4,310,000 and gain
of $3,954,220 from the constructive sale of Agilestar, whereas
defendant VER then knew the proceeds and gain from the constructive
sale of this company were substantially greater than the amounts he
reported;
b.
on Line 14, Cap Gain or (Loss), defendant VER falsely
reported capital gain of $6,085,116, whereas defendant VER then knew
the amount of capital gain he was required to report was
substantially greater than this amount; and
c. on Line 75, Amount you owe, defendant VER falsely
reported $1,034,357, whereas defendant VER then knew that he owed
substantially more than this amount.
COUNT SEVEN
[26 U.S.C. § 7206(1)]
35. The Grand Jury realleges paragraphs 1 through 25 and 27 of
this Indictment here.
36. On or about May 10, 2016, in Los Angeles County, within the
Central District of California, and elsewhere, defendant VER
willfully made and subscribed, and filed and caused to be filed with
the IRS, a false 2014 Initial and Annual Expatriation Statement (Form
8854), which was verified by a written declaration that it was made
under penalties of perjury and which defendant VER did not believe to
be true and correct as to every material matter. The Form 8854 was
not true and correct as follows:
a. defendant VER falsely reported on Part IV, Section A,
Line 2 that his net worth was $18,669,174.42, whereas he then knew
his net worth was substantially greater than this amount;
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b.
defendant VER failed to report on Part IV, Section B,
Line 8 and attachment that he personally owned any bitcoins, whereas
he then knew he personally owned bitcoins;
c.
defendant VER failed to report on Part IV, Section B,
Line 8 and attachment that he had an account at Coinbase that held
bitcoins, whereas he then knew he had an account at Coinbase that
held bitcoins;
d. defendant VER falsely reported on Part IV, Section B,
Line 8 and attachment the fair market value of MemoryDealers as
$2,250,000, whereas he then knew the fair market value of the company
was substantially greater than this amount; and
e. defendant VER falsely reported on Part IV, Section B,
Line 8 and attachment the fair market value of Agilestar as
$4,310,000, whereas he then knew the fair market value of the company
was substantially greater than this amount.
COUNT EIGHT
[26 U.S.C. § 7206(1)]
37. The Grand Jury realleges paragraphs 1 through 25 and 27 of
this Indictment here.
38. On or about December 18, 2018, in Los Angeles County,
within the Central District of California, and elsewhere, defendant
VER willfully made and subscribed, and filed and caused to be filed
with the IRS, a false 2017 U.S. Nonresident Alien Income Tax Return
(Form 1040NR), which was verified by a written declaration that it
was made under penalties of perjury and which defendant VER did not
believe to be true and correct as to every material matter. The Form
1040NR was not true and correct as follows:
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a.
on Line 61, total tax, defendant VER falsely reported
$583,281, whereas he then knew that his total tax was substantially
more than this amount because it did not include any tax from the
distributions of bitcoins from MemoryDealers and Agilestar he
received that year; and
b.
on Line 75, Amount you owe, defendant VER falsely
reported $333,025, whereas defendant VER then knew that he owed
substantially more than this amount.
A TRUE BILL
/s/
Foreperson
E. MARTIN ESTRADA
United States Attorney
MACK E. JENKINS
Assistant United States Attorney
Chief, Criminal Division
RANEE A. KATZENSTEIN
Assistant United States Attorney
Chief, Major Frauds Section
MATTHEW J. KLUGE
Assistant Chief, Tax Division
United States Department of Justice
PETER J. ANTHONY
Trial Attorney, Tax Division
United States Department of Justice
JAMES C. HUGHES
Assistant United States Attorney
Ma
j
or Frauds Section
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