Winklevoss Brothers Sue Charlie Shrem for 5,000 Bitcoins in BitInstant Business Deal Gone Bad
Charlie Shrem was one of the earliest investors for Bitcoin, but he has had his share of issues with the cryptocurrency. Perhaps, most famously, he is known for his 2015 arrest, when he pled guilty for using his investment knowledge to make it possible for consumers to buy drugs online. At just 28 years old, he has two Maserati’s, two powerboats, a house with a $2 million value, and multiple scattered real estate properties.
In spite of all of these possessions, the former chief executive for BitInstant insists that he went to prison with very little funds at his disposal. If that is true, then some people may question how it is possible for him to own such expensive items as those above. In fact, Cameron and Tyler Winklevoss seem to have the most curiosity about that question, leading them to sue Shrem for the Bitcoin that they believe he owes them from a former deal.
The New York Times published an article on Thursday, explaining that Shrem had been a part of the Winklevoss twins’ investments in Bitcoin in 2012. However, as the brothers used their fortune, they believed that Shrem was holding out on them. According to the lawsuit, and the current price of Bitcoin, Shrem would owe them $32 million.
In the lawsuit, the attorney for the Winklevoss brother states, “Either Shrem has been incredibly lucky and successful since leaving prison, or — more likely — he ‘acquired’ his six properties, two Maserati’s, two powerboats and other holdings with the appreciated value of the 5,000 Bitcoin he stole” from the two investors.
The actual course of events is simple, but the wrongdoing seems to be in the eye of the beholder. At the time, the twins had requested help in their investments with Bitcoin, supplying a $750,000 budget to purchase the tokens. After a few months, they discovered they were missing funds. Though they contributed $250,000 in September 2012, they only received back $189,000 worth of Bitcoin at the price of that time.
These missing Bitcoins became a big problem between the two parties, as the Winklevoss twins requested to have some sort of accounting or documentation to show the Bitcoin he bought with the funds. Court documents show that they ended up hiring an accountant that documented the missing coins. In an email to Shrem, Cameron Winklevoss simply said,
“I have been patient and at this point, it’s getting a bit absurd. I don’t take this lightly.”
The only reason that the brothers seem to be going after Shrem now is due to the recently publicized purchases he has made, leading them to believe that he has had the 5,000 missing Bitcoin all along. Cameron Winklevoss was quoted by the New York Times, saying, “When he purchased $4 million in real estate, two Maserati’s, and two power boats, we decided it was time to get to the bottom of it.”
After an investigation took place, which was initiated by the Winklevoss’, they learned that the Bitcoins where transferred onto Xapo and Coinbase, with Shrem’s digital wallet address. Upon learning this information, Judge Jed S. Rakoff of the Southern District of New York decided that some of the financial assets of Shrem needed to be frozen at the earliest stages of the trial. However, this could just be the beginning of a much larger issue, considering that the affidavit also alleges that Shrem has not fulfilled the $950,000 restitution that he was assigned to pay in the case that ultimately sent him to prison.
Brian Klein, the lawyer representing Shrem, believes that the Winklevoss brothers have no basis for their demands. Klein added that, despite being “erroneously” accused of the theft, “nothing could be further from the truth. He added, “Charlie plans to vigorously defend himself and quickly clear his name.”
In the last year, since his prison release, Shrem has not had much success in the cryptocurrency world. He led two projects so far, an initial coin offering and a cryptocurrency credit card. Unfortunately, he had to return the funds to investors after he was unable to deliver what he promised. However, as the New York Times puts it, these failures are “mere headaches compared to what he could face in a confrontation with the Winklevoss twins.”
Shrem has remained unphased. During an interview with Breaker last month, he said, “My personal life goes through bull and bear markets, too. So, the key is how to deal with it when you’re in the bear markets.”