Someone gets a Blockfi loan for a mortgage, loses over $300K
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This is no different to lying to your bank that you got that new $10,000 deposit from selling ice cream (taxable income) instead of selling your car (stamp duty and capital gains) then having the loan made with that capital recalled.
The only difference is this involved crypto from a tumbler (to obfuscate the origin of the Bitcoin in this case).
It's more like buying $300,000 worth of <thing> but <thing> turned out to be used in money laundering. So when you used it for collateral, the bank decided to recall the loan.
In this case <thing> is BTC, but it could very well be dollars whose serial numbers were recorded by the FBI say. But the bank probably wouldn't negate a loan in that case, since you may not have had knowledge you were dealing with a criminal. Multiple transactions with a criminal than, yes, you probably deserve whatever the bank does to you.
It's subtle because it means that if you accept BTC as payment for legitimate services you've offered (e.g. Tesla), you may not be able to use it for the purposes you intended.
This also comes up with gifts, where the lender needs a signed statement from the giver that it is a gift, not a loan. E.G. to prevent exactly what the person in this story was trying to do.
I suspect there is also an anti money laundering component to this requirement as well.
I will say, afaik, the anti money laundering implications are not in play here and are what I was initially thinking about. The bank will report the large deposit to the government. If you're money laundering that's between you and t he government (as long as the bank reports the activity)
This is much clearer than the post I originally responded to which talked about stamp taxes and capital gains.
Q1: What is your job?
Q2: What is your income/year?
Q3: Where is your proof of income? (pay slips, bank statements, financial records)
And that if you lie about any of these it has no effect whatsoever?
When the bank subsequently learned the bitcoins were tainted from a BTC tumbler, they recalled the loan.
He took the loan at when BTC was $65k. They recalled the loan at $37k.
1) Person took out a $300k margin loan with a margin ratio of 50%. Under current regulations, 50% is the most aggressive you are allowed to go when taking out a margin loan. [0] This margin loan was taken out against a volatile collateral, which means that one should be much more conservative in how much margin is taken. As a result of this, the person was forced to put up additional collateral due to market fluctuations.
Thus far, the story is simply "idiot plays with margin", which is a tale far older than cryptocurrency.
2) Person took out a $300k loan in order to convince a bank that they should qualify for a mortgage.
This is either fraud, or not understanding how the underwriting process works. I suspect the latter, since I don't see how the fraud is supposed to work. Any competent underwriter will ask where the $300k came from. The person needs either a convincing lie or to disclose that the $300k came from a margin loan against an asset that the bank does not consider; and which would be promptly converted back into said asset as soon as the bank stops looking.
Lieing might work if you are convincing, but that is simply fraud. The truth is legal, but probably makes you even less attractive to the lender than you started out as.
3) The person took out a margin loan with a non-standard condition that allowed the lender to close the position for <crypto-specific gobbledy-gook>. Since this happened to occur when the market of the collateral was down, this had the same effect as the person being unable to make a margin call: their assets were sold at a low price.
On the plus side, apart from the tax implications, that $300k USD is now simply cash in the persons bank account, so he shouldn't have any problems getting the underwriter to look at it as an asset now. Although, to the extant that the underwriter gets to use human judgement, this probably looks worse than simply selling $300k USD worth of BTC in the first place
EDIT: Person was given the opportunity to pay back the loan in USD [1], but choose not to due to the pending mortgage. Depending on where he was in the process, backing out of the mortgage and home purchase wouldn't be cheap, but it would be far under $300k. The real cost of this situation should be measured by the cost of backing out of the home purchase; and this person made the decision that that was more expensive than loosing the BTC.
[1] https://www.reddit.com/r/CryptoCurrency/comments/skxpr7/bloc...