The Brazilian exchange was sued for $13 million and the CEO was exposed to 25,000 BTC

A tax return from the CEO of the Brazilian cryptocurrency company Grupo Bitcoin Banco (GBB) shows that it holds 25,000 bitcoins, which was worth $210 million at the time of publication . However, he said that his company was unable to repay the client's funds due to hacking.


The tax document was shared with Cointelegraph by a person close to the Brazilian tax authority, the Federal Tax Administration (RFB), who requested anonymity for security reasons. According to this document, Claudio Oliveira, CEO of the exchange, stated in a document submitted to RFB in 2018 that he owned an encryption asset. Although the document is true, since the tax declaration in Brazil is spontaneous, it is impossible to know whether the reported number is accurate or up to date.

Although Oliveira is reporting personal assets, legal experts say Brazilian law may require CEOs to use personal assets to repay corporate debt. As the company’s representative said, if Oliveira’s company was found to be involved in fraudulent activities rather than victims of hacking, then his bitcoin is more likely to be confiscated.

GBB claims to be stolen $13 million

Oliviera’s personal property was also thrown out during the company’s recent legal disputes and ongoing police investigations into its activities.

According to Cointelegraph Brasil, in May of this year, GBB claimed that it was involved in a security breach, and some customers' account balances were inexplicably doubled, and the money was taken away. The loss of this "hacking" may reach R$ 50 million (about 13 million US dollars).

Although GBB has always insisted that it is a victim of hacking, the company has not provided any evidence to support this claim. It was sued by clients for this attack. On June 6, a judge from Paraná ordered the company to provide evidence of hacking, but GBB never provided relevant information to the court. On July 2, the company reached a settlement with the former customer and the settlement amount was not disclosed.

Since May of this year, all customers of the GBB trading platform have been frozen funds, unable to withdraw funds and transactions. At the time, the company became the subject of several lawsuits and legal actions.

In June of this year, a judge in the São Paulo State Court froze the account associated with the company because the exchange’s clients complained that they were unable to withdraw funds and accused the exchange of “abuse of funds”. These customers claim that they have a total of 726,630 reais (about $174,000) on this platform and urge the judges to confiscate these funds.

As of mid-August, more than 20,000 customers were affected, and GBB faced about 200 lawsuits ranging from $3,000 to $3 million. After investigating the company's bank account, the court could not find funds to repay the customer. But the court did not know about Oliviera's personal bitcoin holdings.

On August 20th, the armed police raided the headquarters of GBB and seized an unknown amount of bitcoin. The operation used 10 uniformed police officers and 4 police cars. A legal representative of GBB stated that the authorities used excessive force.

The huge assets declared by Oliveira

In the 2018 annual adjustment report submitted by Oliveira to the RFB this year, 25,000 bitcoins were listed in the declared goods and tax payables column.

The document shows that Oliveira initially claimed to have 20,000 bitcoins, but later changed it to 25,000 bitcoins.

However, Oliveira did not submit the relevant Bitcoin wallet address, so it was not possible to verify the existence of this part of Bitcoin and to verify the relevant transaction.

The balance on the tax return is shown to be private and not related to GBB.

According to this document, Oliveira traded 1,447 bitcoins with different companies and individuals, including BWA Brasil Tecnologia Digital, a São Paulo-based telecommunications company, and Negociecoins, a trading platform.

José de Araujo Novaes Neto, partner of the Novaes e Roselli Advogados law firm, said after reading the tax documents of Oliveira:

“Bitcoin, like regular assets, must be reported to the RFB along with your property and other assets. Although there are no clear regulatory rules, Bitcoin is no different from other assets. If he (Oliveira) sells without filing For some bitcoins, he will have to explain the source of this portion of the currency. Therefore, according to the annual tax return rules, if he has bitcoin, he must declare it."

The report also included several cars that were searched and seized earlier this year, including a BMW, two Land Rover, a Maserati and a Mercedes.

The document also mentions Oliveira's stocks, bonds, savings and properties in 14 different companies across Brazil.

What should I do next? The lawyer has something to say

GBB argues that Oliveira's private bitcoin holdings are not related to GBB's bitcoin holdings or its debt to customers.

However, local legal experts say that in theory Brazilian law can require Oliveira's personal assets, the most valuable of which is the bitcoin he holds, to cover GBB's debt. There have been precedents for the confiscation of private assets in Brazil, the most famous of which was the freezing of assets by former President Luiz Inacio Lula da Silva in a large-scale corruption investigation.

Novaes Neto, a partner at the law firm, said that in the event of abuse of legal personality, misuse of assets, confusion of personal and company assets, personal assets held by a company’s legal person would be confiscated.

In addition, in the case of criminal fraud design, the company's debt can be transferred to the company owner or management.

Given that Oliveira's personal bitcoin holdings have been made public, it remains to be seen whether he will be forced to use these funds to repay the debt of GBB. It all depends on whether the judges are sure that the GBB has actually been hacked, or that it is always a fraud.