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What we learned from the IRS Cyber Crimes leaked training document

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Cyber Crime - IRS-Virtual currency-Leak

Page 3 of the leaked IRS training document titled “IRS Cyber Crimes, Virtual Currencies, by James Daniel” opens ceremoniously to state that virtual currencies are “money on the internet” that “does not have legal tender status in any jurisdiction”.
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This is wrong on two counts.  

One: there are countries that are issuing their own virtual currency (which for all intentions and purposes is still virtual currency) and two: these government issued virtual currencies as a legal tender. For instance, this Library of Congress issued report (page 116) states that Marshall Island is issuing its own virtual currency as legal tender.

To the credit of the training document, it does confide that virtual currency has “all the characteristics of traditional money.”

Surprisingly, the document does shed light on the benefits and issues of centralized vs. decentralized systems.

Page 6 did an excellent job on going over the birth of bitcoin.

There does seem to be a few pages missing from the leaked document that would have logically talked about Ethereum based on the sequence listed on the deck. 

Too much detail around certain projects and mining

Earlier pages of the 181 page document goes through the detail behind selective crypto projects with substantial market cap. 

The detail around smart contracts was detailed explaining how smart contracts could help the Government, Supply Chain, Automobile, Real Estate, Healthcare industries. 

Document then dives into ICO related fraud, risks and examples of ICO failures. Nothing ground shaking in these pages.

For a government training session, the amount of time spent on mining is mind-numbing without actual steps on using this information in identifying and catching people involved in mining.  There seemed a little point of the details presented in the pages on mining.

Forks, Exchanges, Kiosks and wallets? Yes, training got it covered

Investigate bitcoin cryptocurrencyAgain, there is way too much detail behind forks without actually providing any guidance on why it matters and what the IRS agents should be looking out for when people hold Bitcoins and their forked coins.

The document goes through various Digital Currency Exchanges (DCE), specifically, Coinbase, Binance, eToro and bunch of others, without any reference as to why that knowledge could be useful to the IRS agents or how to look for the ownership details in these exchanges.

An unnecessary amount of slides were spent on Kiosks with little to no information on those pages.

Wallets occupied a large amount of pages in this presentation without any apparent guidance to the agents, in our view. 

Bitcoin benefits?

Presentation goes through the benefits of using bitcoin and list of name brands that accept bitcoin. And in a surprising twist, document spends 7-8 pages on bitcoin tumbling/mixing, that is, masking the identity and covering the trail of transaction. What’s weirder is they used screenshots from the site that is no longer operational. 

Subpoena Google, Apple and Microsoft: Real meat starts on Page 95

privacyIt feels like a big hoax talking about stuff that most people in crypto place know. None of the information in the 94 slides that precede matches IRS’s consistency nor did it meet quality standards that you would expect from a Cyber Crimes agency, in our view. 

Moving on, page 95 is where the juicy stuff starts on which all the crypto media is drooling.

On page 95, this paragraph caught everyone’s attention “one method that should be considered is serving Grand Jury Subpoenas to a variety of companies. Issuance of a Grand Jury Subpoena should be considered for Apple, Google, and Microsoft for the Subject’s complete application download history.” 

Would IRS’s Cyber Crimes division be so blatant to propose Subpoena of these tech giants? IF so, do we believe that companies like Apple would grant access?

Remember, Apple denied access to the FBI in a matter of National security when it comes to its users privacy? 

How then does IRS expect to serve subpoena successfully to companies like Apple on a tax ground? 

It would be interesting to see what parts of this training actually passes as  law.

A call for blanket Subpoena

One of the most interesting aspects of this training material is to just learn about how far the IRS is ready to reach to dig up the details of bitcoin (and virtual currency) holdings.

Read this paragraph “A Grand Jury Subpoena should also be considered for (and may already have been obtained during the normal course of the investigation) the Subject’s financial accounts, including, but not limited to, the Subject’s bank, credit card, and PayPal records. In the Subject’s bank and credit card accounts, ACHs and wire transfers should be identified to see if any of them are related to bitcoin or other TPEs. Transfers to and from a Subject’s PayPal account should be analyzed in much the same way, verifying the parties involved with each transaction.”

IRS wants to go after bank, credit card, paypal records to sniff out the bitcoin and other crypto purchases.

It is scary, for those who were evading taxes and FinCEN disclosures

cryptocurrency taxAt CryptoTapas, we have urged our audience to never mess with the agency that brought Al Capone down.

We at CryptoTapas have always been advocating the full disclosure of taxes to the IRS and disclosure of foreign financial accounts to the United States Treasury.  We have even written a free guide on FinCEN disclosure, published 5 best practices  and provided insights into the FinCEN 114 requirements even before Crypto space started talking about it.  

We are planning on updating based on 2019 guidance, later this year.

Be sure to subscribe to get the updated 2019 FinCEN 114 guide for FREE and to be the first to know when we release the summary of upcoming IRS guidance on Crypto currency taxation.

Why the presentation itself could be a hoax?

We cannot discount the overzealous nature of the crypto news space. We latch onto anything that promises sensation. While the overall document was elaborate, we cannot discount the possibility that the document itself is a hoax or to some degree doctored.  

There are specific phrases in the presentation that seem out of place in an IRS’s Cyber Crimes presentation…

Also, the amount of detail presented around the top 14 or so cryptocurrencies is skewed and doesn’t reek the consistency of an IRS training.

Sheer amount of decks bombarded with generic information and references made to otherwise non-authoritative sources is probably a tell-tell sign that this is not a real/entire presentation? 

Obviously there are some pages missing and some pages are repeated while the page numbers proceeded, what data are we missing?  What implications do those missing pages have?

Consider some specific examples on few pages: 

  • Page 10: References made to Investopedia’s article on Ripple, this just seems like lazy work for a government agency
  • Page 16: References made to “Where to Buy Stellar”, if this was required – why was this not presented for other assets?
  • Page 20: usage of “whatever” in this phrase seems odd for a government agency presentation “With smart contracts, you simply drop a bitcoin into the vending machine (i.e. ledger), and your escrow, driver’s license, or whatever drops into your account.” 
  • Page 21: This statement: No one has that much computing power, so it would need God to hack the system! 
  • Page 36: usage of stock photography. On page 36, the blockchain slide uses the picture that has been used way too many times and is freely available on Pixabay.com; IRS’s slides are usually monotone and don’t go into design aspects, much less picking pictures randomly from the internet, something stinks
  • Page 94: Taxman’s picture on the deck

If it turns out that IRS did prepare this slide deck, as Coindesk claims to have confirmed, may be our observations will help IRS avoid these aspects in future that take away the ‘genuine feel’ from a government deck, who knows.

Coindesk confirmation on IRS’s training

Coindesk ran an article stating that it confirmed that IRS did indeed use this slide-deck to train its agents. Even if IRS did train the agents using ‘a slide deck’, we are not certain and cannot be certain that it was this slide deck until we find a link or official copy released by the IRS.

First Trump and then the IRS, crackdown in sight

donald-trump-bitcoinLooking at the timing of Trump’s comment, Congressional crackdown on Libra and this alleged IRS training leak, they seem more than a coincidence.

A perfect FUD storm is brewing and people who are new to the space are sure to be rattled.

In the light of these events, we expect a lot of congressional activity, legal framework, IRS guidance on tax rules and more in the coming months.

It will be a lot of adjustment for the anarchists and moon-soon folks, but this is a much needed cleansing of Crypto space that will clear the way for bigger and better things to come.


What do you think will be the implications of this proposal for blanket subpoena?


Thank you for reading the article.
Subscriber-Banner-smallIMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

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About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new blockchain technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.”  Of course, that is just his opinion.

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All Roads Lead to $100K Bitcoin: Various Perspectives that Support $100K BTC

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Bitcoin to 100K

Bitcoin to 100K

There are a lot of theories in the crypto space that argue that Bitcoin will reach $100,000 before the next halving.  Some even argue that we could reach that price point before the end of 2021.

Here we have compiled a few perspectives that support a higher price point for Bitcoin.

IF we missed any, please let us know and we will be glad to add it for others to read.

Bitcoin’s ability to reward savers

If you saved $100,000 throughout 2017, today its value would have been $94,000, a total loss of 6% due to inflation. That is without considering the fees and hidden charges that institutes charge.

Even if you invested in the S&P 500 for 12 months at $8333 each month throughout 2017, your portfolio value today would have been $110,000.

If you saved $100,000 in Bitcoin throughout the 2017 (prices ranged from $920 through $14,000 during Jan 2017 through December 2017).  For the purposes of this comparison we are using the last week prices from each month as available on Coinmarketcap historical snapshots.

$100,000 invested in equal amounts throughout 2017 would look something like this.

Bitcoin to 100K

Since 2017, Bitcoin price has crashed and rebounded.  At the lowest point of the crash of $3000 per bitcoin, your portfolio value would have been $144,000.

In today’s average price of $16000 per bitcoin, your $100,000 savings would have been worth $770,000.

Due to its increasing demand and reducing supply, Bitcoin is expected to reach $100,000 in the next 4 years. Some models show that bitcoin will be worth $1 Million by 2030.

Only time will tell us whether bitcoin reaches these prices or not, but point being, no other asset of any class has crazy growth predictions like Bitcoin has.

Stock-to-flow ratio

According to Plan B, Gold had the highest stock-to-flow (SF) ratio of 62.  That is, it will take 62 years to produce the gold that is currently in the market.  In other words, you cannot willy-nilly inflate the supply in a year or two due to how scarce gold is and how difficult it is to find and mine it.

Current SF for Bitcoin is 25, however, by the end of 2020 or 2021, this could jump to 50.  By the next halving in 2024, Bitcoin could surpass the SF of gold.

According to Plan B, “The predicted market value for bitcoin after May 2020 halving is $1trn, which translates in a bitcoin price of $55,000. That is quite spectacular. I guess time will tell and we will probably know one or two years after the halving, in 2020 or 2021. A great out of sample test of this hypothesis and model.”

However, following the trajectory of Plan B’s SF analysis, Bitcoin could easily reach $1 Million dollars by 2030, according to some commenters.

Stimulus and unlimited printing of fiat

COVID has exposed another flaw in the fiat system.  It is that governments can print as much money as they wish whenever they wish to do so.

Whenever governments resort to simply print money without having a basis in asset value or growth in GDP, it erodes the value of the fiat in circulation.

This is what happened to Argentina, Venezuela, Zimbabwe and more.  

The US dollar has lost over 99.97% value since 1900.  For instance, whatever you could buy with $1 in 1900 will need $31 today.

COVID has added salt to the wound for fiat.  It exposed the blatant fact that governments can and will print money to their whim without regard to the inflation and impact on savers.

This increased supply in fiat helps stock market and market liquidity which in itself helps people who are invested in the stock market and other vehicles which is generally the wealthier part of the society.

Other factors strengthening the crazy Bitcoin price predictions

  • Institutional FOMO, for instance, Square, PayPal, Grayscale, etc., entering the market
  • Easier onboarding of new retail investors
  • Greater technologies and DApps being built on Bitcoin 
  • Great DeFi services to lend and borrow money
  • Globally accepted single denomination that does not need to be converted in the future (with enough places accepting bitcoin)

What other factors do you think will contribute to Bitcoin’s shooting past the $100,000 barrier?

Let the FOMO begin…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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Crypto Roundup: All Your YouTube Influencers in One Place

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Crypto Roundup

Visit our Crypto Roundup section daily for a dose of all your favorite Crypto YouTube influencers in one place.    

Worried about missing updates from your favorite YouTube crypto influencers?  

Welcome to the Crypto Roundup.  

On this page, we will post a quick summary of the videos from some of the most popular YouTube crypto influencers.

Ivan on Tech  Altcoin Daily

Crypto Zombie Box Mining

Ellio Trades Lark Davis

Data Dash Bitboy Crypto

MMCrypto Chico Crypto

Altcoin Daily

Video title: Bitcoin Will Be OVER $20,000 By Christmas 2020! BIGGEST WEALTH SHIFT OF OUR LIFETIME! Cryptocurrency

Date: 19-Nov-20

  • World’s biggest wealth shift of our lifetime is happening right now and no mainstream media is talking about it, except CNBC.

  • Preston Pysh predicted on August 26th that: “Bitcoin should be reaching its all time high by Christmas.”

  • If you are looking to buy a dip, there may not be one.
  • Ricardo Salinas Pliego, a mexican billionaire, has just revealed that 10% of his liquid assets are into bitcoin.

Lark Davis

Video Title: STOCKS HIT NEW HIGHS! WILL COVID VACCINES LEAD TO MEGA PUMP IN 2021? [Are You Ready?]

Date: 19-Nov-2020

  • Stock markets and bitcoin pumps higher on the news of the second successful covid vaccine.
  • There could be more chances for the new stimulus. Means more inflation, more debt and simultaneously pumps stocks, gold and bitcoin.

Crypto Zombie

Video Title: BITCOIN $18.5k TOP!!?! DON’T BE FOOLED!! HODL FOMO BEGINS!!! $TRILLIONS FLOOD!!

Date: 18-Nov-2020

  • Overall sentiment of Bitcoin has changed drastically from ICO craze in 2017 to a time where people are FOMOing to own more bitcoin.

Ivan on tech 

Video Title: BIG WARNING TO ALL HODLERS!!!!!!!!! DO NOT GET REKT!!! BITCOIN $18,500 REJECTED – NOW WHAT?

Date: 18-Nov-2020

  • Ivan expects bitcoin to shoot past $20K resistance before end of this year, giving it 85% probability

Chico Crypto

Video Title: World’s Most Powerful Turn BULLISH on BITCOIN

Date: 19-Nov-2020

  • All those who hold big bags of Bitcoin will come out of the shadows to talk up the Bitcoin rally, a $20K bitcoin could be on the cards before the end of this year
  • Ethereum mining could act as a big catalyst for Ethereum’s price
  • Big companies like google could play a bigger role in mass adoption of crypto

Let the FOMO begin…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Lessons from the Veteran HODLERS to the Newbies!

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Lessons in Crypto

For all those who entered the crypto market after the 2017 bull run – here are few lessons from the HODLERS from the last bull run(s).

This is our attempt at making all you newbies aware of the mistakes veteran cryptoers did.

Let’s get started…

Don’t FOMO in to all the hype

FomoIt’s hard not to FOMO in crypto.  The trick is to make sure you don’t lose your shirt in crazy bets.  Always limit your bets to what you are comfortable losing.

The common ways you can become victim of FOMO are:

  • Following your favorite YouTuber without actually doing your own research on the project.
  • Investing into projects at the top.
  • Believing in promises of 100x or 1000x without any substance behind those claims.

HODLing far too long

Remember why you are into crypto – to make the money.

Never fall in love with your crypto, and HODL the tokens even when they are 10x and more.

Have a strategy to take your capital out before you become a HODLer.  

If you believe the project really has what it takes to go beyond 100x and more, just sell in instalments so as to not miss the ride.

One of the best ways to HODL is to take your capital in full and profit in tranches.

This rekt story will give you a right perspective of what it looks like, it’s one of many:

Don’t put all your eggs in one basket

Never go all in on one project. No matter how strong the project may look, even the projects with strong fundamentals don’t do well sometimes. 

And, you will be kicking yourself watching other projects go up and your portfolio just doesn’t seem to make a move.

And don’t over do it and have a portfolio with over 100 projects either. It is very difficult not to have invested in more than 15 projects but anything less than 20 is a good way to go, in our opinion. 

Put aside the share of Profits for Taxes.

One way you can get a good night’s sleep is by paying taxes. 

Always keep a habit of putting aside a % of your profits in USDT or other stable coins, as a reserve to take advantage of market volatility and also to meet your tax obligations. 

Exchanges are more evil during bull run

Foreign ExchangesDon’t trust exchanges. Yes we already know that, but they play more games during bullrun, some intentional and some technical. 

Many exchanges tend to go under maintenance when the prices shoot up too high too soon (Coinbase?), and you can’t sell. 

And the shady exchanges scam out before you know.

Regulators seem interested when the market cap of these projects goes through the roof, which then adds FUD around the project crashing the prices.  

Exchange may freeze funds pending investigations when such issues arise.

Take for example OKEx. Users are unable to withdraw their assets from the exchange for almost a month now, not certain if they ever will, and all that started with the legal dispute.

Never fall for Arbitrage gains

Arbitrage is when you buy in one exchange at a lower rate and sell on the other for a higher rate to take some profits. 

Some shady exchanges show a lot higher prices than the other genuine exchanges and when you deposit your assets to sell at those prices there won’t be actual volume to execute the trade. You may be stuck with either a high fee for withdrawal or other funky rules to take your own money out. 

Remember, there is no free Giveaway

Free CryptoScammers rise with the rising market.  

When the crypto market buzzes with all time highs – scammers cash in big time on newbies.

The most lucrative scam in crypto is ‘Free Giveaway’. Whether it be through YouYube ads or discussion groups and wherever they can get your attention.  Read this article on various sophisticated scams that are being deployed.

We hope these lessons help you through your trades and crypto life.  Stay safe and always DYOR.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

Continue Reading

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