The Winklevoss brothers lost a round in a court against the disgraced former head of a New York cryptocurrency exchange.
Tyler and Cameron Winklevoss sued ex-BitInstant CEO Charles Shrem, claiming he took part of their $750,000 investment in his exchange in 2012 and used it to buy 5,000 Bitcoins, then valued at $61,000. A judge froze Shrem’s assets last month before Shrem found out about the suit, but lifted that order Thursday after a court hearing.
Shrem, who spent a year in prison for helping people use Bitcoins to buy drugs through the Silk Road marketplace, also asked U.S. District Judge Jed Rakoff to dismiss the case. He said he never owned the Bitcoins, which he argued are the property of a prominent Bitcoin industry member whom he didn’t name. The parties had already agreed that Shrem may spend as much as $50,000 a month on living expenses.
Tyler Meade, an attorney for the Winklevoss brothers, argued in court that the freeze should continue, noting Shrem recently purchased a $2 million home in Florida and has claimed to have about $12 million in real estate holdings, cryptocurrency and other investments. Meade said the twins’ lawyers have requested information from 30 institutions but identified a mere $10 in assets so far.
“We do not have to show that he is actually hiding assets, although we believe he is,” said Meade. 5,000 Bitcoins are valued at more than $32 million today..
Shrem’s lawyer, Brian Klein, said most of his client’s holdings are in real estate and the value of his cryptocurrency investments has “shrunk dramatically” since he made those statements about his assets. He said the lawsuit is a dispute over $61,000, which he agreed to place in escrow should his client lose the case.
Klein called Thursday’s ruling an important first step toward Shrem’s “complete vindication.”
A trial is scheduled for June 17.