A Bitcoin Lawyer May Be Able to Help You in New York City

If you have lost your cryptocurrency investments, a bitcoin cryptocurrency litigation lawyer may be able to help you. Bitcoin, the original and largest cryptocurrency, lost around 70% of its value from an all-time high of $68,000 to between $19,000 to $21,000 by end-June 2022. FTX Collapsed. Bitcoin’s huge drop in value has been largely driven by the collapse of many cryptocurrencies and crypto-exchanges in the past months, such as Luna, Terra, and EthereumMax. Investor confidence in cryptocurrency has been flailing, with government adopting increased legislation to regulate cryptocurrency and protect investors.

SEC denied Grayscale’s application to make its Bitcoin Trust into an exchange traded fund. The Federal Reserve has likewise unacted on the application of Bitcoin bank, Custodia, for a master account that would allow them to bring new products and options to users of financial services. New York has just recently passed legislation imposing a two-year moratorium on mining of digital cryptocurrencies, such as Bitcoin, using former power plants and manufacturing sites.

Still, many are bullish with Bitcoin, which is considered a stable cryptocurrency. El Salvador has even adopted Bitcoin as legal tender, being the first country to do so. On the other hand, many have lost their investments, most of which are life savings, in the current collapse of the cryptocurrency market.

Many companies, such as Tesla, now accept Bitcoin as payment. More and more virtual transactions are also conducted with Bitcoin. This makes Bitcoin-related income taxable. However, Bitcoin income is difficult to track because it is not regulated. It is easier to transfer large amounts of funds using Bitcoin with little to no transaction fees because you are conducting business in a currency that is not subject to any regulation in any country. Because of this anonymity, many have used Bitcoin to launder money.

At this time, class lawsuits have been filed against celebrities and influencers who have promoted cryptocurrencies that have collapsed. Crypto-exchanges have also been sued for selling cryptocurrencies when they have not registered as a broker or dealer with the SEC. Cryptocurrency founders have also been sued for selling coins without registering them as securities with the SEC. These class lawsuits have been field in the hopes of recouping losses in the cryptocurrency market.

Common Bitcoin Disputes

The legal disputes that bring clients to a Bitcoin lawyer fall into several recognizable patterns. Bitcoin-specific issues include:

• Lost or stolen private keys. Whether through hacking, lost hardware wallets, fraudulent seed phrase exposure, or compromised exchange accounts. Recovery depends on the facts and the platform involved.
• Exchange insolvencies. Customers of FTX, BlockFi, Celsius, Voyager, and other failed platforms have spent years recovering portions of their balances through bankruptcy proceedings.
• SIM-swap attacks. Hackers who hijack a victim's phone number, defeat SMS-based two-factor authentication, and drain crypto accounts. Some carriers have settled cases when negligent porting practices were established.
• Pig-butchering and romance-investment scams. Long-running scams in which the perpetrator builds a personal relationship with the victim before steering them to a fake crypto platform.
• Rug pulls and exit scams. Tokens promoted aggressively and then abandoned by their creators with investor funds.
• Smart contract exploits. Bugs in decentralized finance protocols that allow attackers to drain funds. Some of these are resolved through hacker negotiations or whitehat returns; others are litigated.
• Wallet provider failures. Custodial wallet providers that fail to safeguard customer funds or that freeze access for extended periods.
• Disputes between business partners. Crypto businesses with multiple founders frequently fall out over ownership of tokens, treasury management, and intellectual property.

Tracing Bitcoin Through the Blockchain

One of the most important practical tools in Bitcoin litigation is blockchain analysis. Every Bitcoin transaction is recorded permanently on a public ledger. Specialized firms (Chainalysis, TRM Labs, CipherTrace, Elliptic) can trace funds across wallets, identify cluster patterns, and link addresses to known exchanges, mixers, and other services. While Bitcoin is often described as "anonymous," it is more accurately described as pseudonymous — the blockchain reveals the flow of value, and skilled analysts can often identify the parties at each end. When a victim's funds end up at a regulated exchange, that exchange can be served with a subpoena and may freeze and return the assets.

SEC Position on Bitcoin Specifically

The Securities and Exchange Commission has historically treated Bitcoin and Ether as commodities rather than securities, but the agency's position has continued to evolve and is the subject of ongoing litigation against various platforms. The approval of spot Bitcoin ETFs in January 2024 marked a major regulatory milestone. The same approval was extended to Ethereum spot ETFs later in 2024. Whether other tokens are securities depends on their specific facts and the application of the Howey test for investment contracts.

IRS Treatment of Bitcoin Transactions

The IRS treats Bitcoin and other cryptocurrencies as property for federal tax purposes. Every disposition of Bitcoin — whether sale, exchange, purchase of goods or services, or transfer in payment for services — is a taxable event. Gains are reported on Form 8949 and Schedule D, and ordinary income from mining, staking, or compensation is reported on Schedule 1 or Schedule C. Failure to report crypto transactions is an enforcement priority for the IRS, and the agency has obtained extensive customer records from major exchanges through John Doe summonses. We work with tax counsel on voluntary disclosure programs for taxpayers who have not reported crypto activity in prior years.

Bitcoin in Estate Planning

Bitcoin presents special problems for estate planning. Unlike traditional financial assets, Bitcoin is accessible only by knowing the private key. A holder who dies without a clear succession plan for their private keys can effectively destroy the asset; the family inherits nothing recoverable. Estate plans for Bitcoin holders typically include a memorandum identifying the location of private keys, multi-signature arrangements that can be unlocked by trustees or executors, instructions for accessing custodial accounts, and provisions for valuation in the gross estate. We coordinate with estate planners on Bitcoin succession.

Bitcoin in Divorce

Bitcoin holdings have become a recurring issue in matrimonial litigation. Discovery in divorce cases now includes specific demands for crypto exchange records, wallet addresses, and tax returns reporting crypto income. A spouse who tries to hide Bitcoin can be exposed through blockchain analysis, bank records showing transfers to exchanges, and forensic computer examinations. Equitable distribution of Bitcoin requires valuation at a specific date and consideration of any restrictions on transferability. Volatility makes timing of valuation particularly important.

Money Laundering and AML Concerns

Bitcoin's reputation has been shaped in part by its early use in dark-web marketplaces and ransomware payments. Today, most Bitcoin activity is legitimate, but regulators continue to scrutinize transactions that involve mixers, privacy coins, or sanctioned jurisdictions. The U.S. Treasury's OFAC has sanctioned several mixer services, and businesses that knowingly transact with sanctioned entities face significant penalties. AML compliance is a key consideration for any business operating in the Bitcoin space.

Legal Disputes Around Bitcoin Mining

Bitcoin mining itself has produced its own family of legal disputes. Mining operators have sued utilities over electricity contracts, host-state regulators over moratoriums, and equipment vendors over defective hardware. Hosting agreements between miners and data centers, equipment sale contracts with rapidly depreciating ASIC hardware, and joint ventures between investors and operators are all areas where careful drafting and dispute resolution matter.

Reporting a Bitcoin Theft

If your Bitcoin has been stolen, the path forward usually includes several parallel tracks: filing a report with the FBI through the Internet Crime Complaint Center (IC3.gov), engaging blockchain forensics to trace the stolen funds, notifying any exchanges where the funds were deposited so they can freeze the assets if possible, and preparing civil legal claims against any identifiable defendants. Recoveries are not guaranteed, but they are more frequent than people often realize, particularly when the funds end up at a regulated exchange.

Realistic Expectations

Bitcoin cases are unpredictable. Some result in substantial recoveries; many result in partial recoveries; some result in no recovery at all because the perpetrators are judgment-proof, hidden behind anonymity that even forensic analysis cannot pierce, or located in jurisdictions that do not cooperate with U.S. authorities. We are candid about the realistic prospects of every matter and we do not take cases simply for the fee.

Choosing Counsel for a Bitcoin Matter

Bitcoin and crypto law sit at the intersection of securities, banking, tax, criminal, and commercial law. There is no single specialty that covers every angle. A good Bitcoin lawyer brings together knowledge of blockchain technology, understanding of the relevant regulatory frameworks, civil litigation experience, and the ability to coordinate with tax counsel, criminal counsel, and bankruptcy counsel as the case requires. We work with a network of specialists when a matter calls for skills beyond our core practice.

Call Our Office

If you have lost your cryptocurrency investments, a bitcoin cryptocurrency litigation lawyer may be able to help you. A bitcoin litigation lawyer can evaluate your case to see if you can still recover your losses. We at the Law Offices of Albert Goodwin, are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].