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Author Topic: Trading history lost on dead exchanges  (Read 168 times)
pereira4 (OP)
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December 31, 2017, 06:59:14 PM
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What would the legal situation be if you want to cash out some BTC that you withdrew from an exchange that is now dead? This im sure it's the case of a lot of people.

Imagine that you sent some BTC to Cryptsy, or any other now dead exchange. You sold your BTC for LTC. LTC then went x4, and you sold it back to BTC. You made a x4 BTC gain, and you withdraw it back to your wallet.

If you tried to sell this BTC to buy a house or something, you couldn't be able to prove your gains due the exchange being dead, and most likely you weren't able to save your trading history because these things happen randomly, exchanges just disappear from nowhere. AND even IF you were able to save your trading history... so what? what proves that you didn't made up your trading history? if the exchange is dead there's no way to verify that your trades and addresses belong to Cryptsy.

Honestly this is a big mess. This is another reason why im so scared to buy BTC. They could come up with endless reasons to try to steal all of your BTC from you, even if you did nothing wrong. At the minimum opportunity where you can't proven something (such as being unlucky and losing trading history on a dead exchange) they im sure will not make it easy for you, but as worse as possible.

Any thoughts and solutions to this situation?
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pawel7777
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January 01, 2018, 12:23:18 PM
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Just do what you reasonably can do, save trading history regularly + screenshots of your balance. Do the same for every deposit and withdrawal: screenshots + transaction numbers + keep control of priv keys of addresses used + archive every email from them.
You can determine your profit/loss for specific period just by knowing your opening and closing balance and all deposit/withdrawal history made during that time.

Cryptsy was a registered business, it's possible that all the trading history of every user is saved and secured somewhere. If not, I don't see how IRS or others could blame users for Cryptsy's shitty management and record-keeping. So just do your part and hope it'll suffice.


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January 01, 2018, 03:01:52 PM
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You can require excel files to the support of the exchange, bittrex works like that
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January 01, 2018, 07:09:59 PM
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What would the legal situation be if you want to cash out some BTC that you withdrew from an exchange that is now dead? This im sure it's the case of a lot of people.

Imagine that you sent some BTC to Cryptsy, or any other now dead exchange. You sold your BTC for LTC. LTC then went x4, and you sold it back to BTC. You made a x4 BTC gain, and you withdraw it back to your wallet.

If you tried to sell this BTC to buy a house or something, you couldn't be able to prove your gains due the exchange being dead, and most likely you weren't able to save your trading history because these things happen randomly, exchanges just disappear from nowhere. AND even IF you were able to save your trading history... so what? what proves that you didn't made up your trading history? if the exchange is dead there's no way to verify that your trades and addresses belong to Cryptsy.

Cryptsy went down almost two years ago. None of that trade history should matter for the 2017 tax year (or any future years). The recent IRS comments on like-kind exchanges were just clarification of the existing law. All trading done on Crypsty incurred tax liabilities during the year trades were closed (2013-2016). Typically, a trader would export their trading history at the end of the year for their tax return. It makes sense to regularly export your trading history in case the site disappears (as so many have). As for proving the addresses belonged to Cryptsy, that should be obvious enough from blockchain analysis if anyone really wanted to investigate.

Honestly this is a big mess. This is another reason why im so scared to buy BTC. They could come up with endless reasons to try to steal all of your BTC from you, even if you did nothing wrong. At the minimum opportunity where you can't proven something (such as being unlucky and losing trading history on a dead exchange) they im sure will not make it easy for you, but as worse as possible.

Any thoughts and solutions to this situation?

No exchanges send 1099s (or equivalent tax forms) to their customers at this point. So technically, exported trading history is all anyone (you or the exchange or the IRS) has to go off. Nobody can prove otherwise. As long as your taxes paid appear to have been made in good faith, I wouldn't worry too much.

jseverson
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January 02, 2018, 05:13:14 AM
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Honestly this is a big mess. This is another reason why im so scared to buy BTC. They could come up with endless reasons to try to steal all of your BTC from you, even if you did nothing wrong. At the minimum opportunity where you can't proven something (such as being unlucky and losing trading history on a dead exchange) they im sure will not make it easy for you, but as worse as possible.

Doesn't the burden of proof lie on the accuser? File your taxes as you would normally, and if they feel that you're not completely truthful, then they'll subject you to an audit and would have to prove that your numbers are fraudulent. You don't have to prove that your records are true. They will have to prove that it's false. Everything is recorded on the blockchain, so you have nothing to worry about for as long as you don't have anything to hide.

It is quite a scary prospect, but since we're speaking in theoreticals and you're saying that you're scared to buy Bitcoins, I assume you only want to be prepared should you experience this scenario. Just record all your transactions and support it with transaction IDs. They won't be able to say anything then.

Samarkand
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January 03, 2018, 06:30:07 PM
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....
Doesn't the burden of proof lie on the accuser? File your taxes as you would normally, and if they feel that you're not completely truthful, then they'll subject you to an audit and would have to prove that your numbers are fraudulent. You don't have to prove that your records are true. They will have to prove that it's false. ...

The tax laws are different in every country. In most countries you are right, the authorities would
have to prove that you cheated on your taxes. However, some countries have started a shift
in the burden of proof, which leads to the absurd situation where you have to prove that you did
nothing illegal.

This is obviously very difficult when we are talking about trading histories of "dead exchanges". I
assume that the tax authorities would just use an estimate of your profits and hit you with a tax bill
if you really can´t prove your innocence.
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