California Bankruptcy Court To Decide Whether Bitcoin Is A Currency Or Commodity
While the debate about the status of bitcoin – legal/illegal or commodity/currency/property – continues, a California bankruptcy court is set to decide whether the digital currency should be considered as a currency.
The said decision is awaited owing to a hearing set for 19th February. The trustee of bankrupt bitcoin mining firm HashFast Michael Kasolas filed a suit against Marc Lowe, a former promoter for the service who operated under the handle 'CypherDoc', seeking to recover 3,000 bitcoins that had been paid by HashFast to Lowe for promoting the service, CoinDesk reported.
The trustee claims that Lowe received preferential treatment from the company pointing out the relatively higher compensation he received for his services as well as the awarding of a refund while others were awaiting theirs, prior to HashFast’s bankruptcy.
In a January 22 filing, Kasolas asked for a “partial summary judgment” against Lowe that requires
“(1) determining that for purposes of section 550(a) of the Bankruptcy Code the 3,000 bitcoin transferred to Defendant constitute a commodity, not currency, and (2) directing that if the subject transfers are avoided the estate is entitled to either the bitcoin or the value of the bitcoin as of the transfer date or time of recover, whichever is greater”.
This means the court would essentially require that Lowe returns the 3,000 BTC at current rate rather than the value, in dollar terms, when he received it in September 2013, CoinDesk noted.
To support the claim that bitcoin is a commodity, the trustee also cited two government entities, the CFTC and the IRS. The CFTC in September issued an order saying that bitcoin and other virtual currencies are commodities subject to regulation under the Commodities Exchange Act (CEA).
The filing further said, “Even if the court determines that bitcoin are currency, and not a commodity, the court should still award either the bitcoin or their value at the transfer date or time of recovery, whichever is greater”.
As expected Lowe denied the allegations in a 5th February court filing. He argued that during the time he was promoting HashFast’s products, the company was treating bitcoin as a type of currency. He also asked the court to reject the trustee’s claim that the bitcoin transfers were fraudulent in nature.
“The bitcoin Dr. Lowe received from HashFast should be treated as currency, not a commodity,” the filing states. “That was how HashFast intended bitcoin to be treated at the time it sent the bitcoin to Dr. Lowe, and that is how federal agencies, merchants, courts, the Debtor, and the Trustee himself have treated bitcoin. The Court should not grant the Trustee the undeserved windfall he is seeking.”
Kasolas is being represented by Duane Morris LLP, a San Francisco-based law firm, while Lowe is being represented by Brian Klein of Los Angeles-based law firm Baker Marquart LLP and David Poitras of Jeffer Mangels Butler & Mitchell LLP.