The Winklevoss twins’ capital fund can keep alive its suit against a Bitcoin purchaser who allegedly stole coins worth anywhere from $61,000 to $31 million, a federal judge said Jan. 7.
Winklevoss Capital Fund LLC, run by Cameron and Tyler Winklevoss, provided enough facts to suggest that Charles Shrem had used their money to buy around 5,000 Bitcoin but never handed over the currency, Judge Jed S. Rakoff said, rejecting a motion to dismiss.
The fund hired Shrem to procure Bitcoin in 2012 and sent him $750,000 for that purchase, according to the opinion. But the twins became suspicious that Shrem wasn’t turning over all the coins he purchased on the fund’s behalf. A fund-hired auditor determined that Shrem couldn’t account for about $61,000, which would have bought about 5,000 Bitcoin at the time, the opinion said.
Shrem argued that the court should throw the case out because the coins weren’t worth over $75,000, which is the minimum amount for a state law case that gets to federal court through diversity jurisdiction.
But the 5,000 Bitcoin were worth around $31 million when the Winklevosses filed suit in September 2018, the fund said.
It’s “unnecessary” for the court to decide whether Shrem or the fund is right about the Bitcoin value right now, according to the order. “Even if” the fund could only recover $61,000 for the alleged fraud, Shrem hasn’t shown that the fund’s claims for breach of fiduciary duty, constructive trust, and accounting wouldn’t put the total value over the $75,000 line, the judge said.
The case shouldn’t be dismissed for failure to state a claim, either, because the fund adequately pleaded all four of its claims, according to the opinion.
Rakoff sits on the U.S. District Court for the Southern District of New York.
The Meade Firm PC represented the fund. Baker Marquart LLP represented Shrem.
The case is Winklevoss Capital Fund LLC v. Shrem, S.D.N.Y., No. 18-cv-8250, 1/7/19.
To read more from Securities Law News pleaseOR Request Trial