Spidell's Tax Season Tribune

I’m not a CEO, I just play one on TV

Kathryn Zdan, EA

Editorial Director

Actor Stephen Harrison has issued an apology to the investors who lost an estimated $1.3 billion in the HyperVerse cryptocurrency Ponzi scheme.¹

Harrison was hired as a “corporate presenter,” which his agent explained to him was simply acting out a role to represent a business. He became suspicious after reading the scripts for the videos, but after doing some online searches he felt “everything seemed OK, so I rolled with it.”

During recording, he was asked to use the name Steven Reece Lewis. In the videos, Harrison talked about investment opportunities with HyperVerse. The final version of the videos referred to him as CEO, and also included his “credentials”: degrees from Leeds and Cambridge universities and more than 10 years of experience in the fintech industry. The problem was, neither university nor any fintech firms had ever heard of Steven Reece Lewis, which piqued the interest of the SEC.

As part of his apology, Harrison made it clear that he had not benefited in any way from the scheme itself; he was paid around $5,000 for his performance and given a free wool and cashmere suit, two business shirts, two ties, and a pair of shoes.

Crypto scheme losses

Generally, if a cryptocurrency drops in value and the investor experiences a loss, the investor can sell the poorly performing cryptocurrency and offset other gains, or if the losses exceed gains, take a deduction of up to $3,000 per year until the loss is used up.²

However, in order to take a capital loss, the investor must sell or exchange the asset.³ This is impossible when an exchange files for bankruptcy, shuts down, and all trades are halted.

Further, although the IRS has stated that cryptocurrency is property, federal law has still not addressed whether cryptocurrency is treated as a commodity or a security.⁴ This means that the deduction for worthless stock does not currently apply.⁵ Plus, bankruptcy doesn’t automatically mean the total debt is worthless, so any bad debt deduction would have to wait until the loss is certain.⁶

In order for the theft-loss Ponzi scheme rule to come into play, the investor would have to prove that the exchange had an intent to bilk the investors out of their money.⁷

Update: What happens when you take the money and run?

By Austin Lewis

Managing Editor

Two years ago, we brought you the story of Jens Haaning, the Danish artist who received the equivalent of $84,000 from the Kunsten Museum of Modern Art in Aalborg, Denmark. The museum was expecting Haaning to create artwork incorporating the money into the design. Instead, he submitted two blank canvases titled “Take the Money and Run” and pocketed the cash.

Haaning took the money, but was he able to run? That all depends on your perspective. The museum filed a civil suit against him, and in September 2023 the court ruled that he had to return the money — most of it, anyway. According to the BBC,¹ Haaning returned nearly $72,000, but was allowed to keep the balance to cover the cost of mounting the canvases and an “artist’s fee.” All in a day’s work (or not, as the case may be).

Other art oddities

Unusual art can be sold anywhere, of course. CBS News² brings us the following highlights:

London: A Banksy painting of a girl reaching for a balloon sold for $1.4 million at auction in 2018. The artwork shredded itself as soon as it was sold, and three years later those pieces sold for $25.4 million.
Miami: One of the works on display at a 2019 art convention was a banana duct-taped to a wall. It sold for $120,000 and was then eaten by David Datuna, a performance artist.

Bad tax joke of the week

What does the pessimistic accountant think? It’s accrual world.

We’re hoping you know better jokes than that one! We’ve been on the hunt for good tax jokes to share in the run up to April Fools’ Day, but so far we’ve come up empty. Reply to this e-mail to send us your favorites, and we’ll include them in a future Tribune issue.

A few fun facts about this week’s writers:

Kathryn Zdan, EA, spends her non-Spidell hours on photography and watching horror films (and then sleeping with the light on). She also enjoys hiking, biking, and watching foreign films.

Austin Lewis loves music and the outdoors, and if he’s not going to a concert you can probably find him on a hike somewhere. Recently, he traveled to Peru, where he spent seven days on the Salkantay Trek to Machu Picchu.

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