Nick Shaxson ■ Bitcoin scandal: the role of Delaware secrecy
We have for many years been describing Delaware as an offshore secrecy jurisdiction (or tax haven) inside the United States. It is not so much tax, as secrecy and laissez-faire corporate governance (and ugly related matters) that are the tiny state’s core offerings, along with all that judicial experience that comes with being the ask-no-questions incorporation capital of the United States. Read more about Delaware and the U.S. as secrecy jurisdictions, here.
Now, from Reuters, we see this story about Bitcoin (hat tip: Clark Gascoigne). There are strong reasons for suspecting that the collapse of Mt. Gox, once the world’s largest Bitcoin exchange, was a gigantic fraud. The money seems to have disappeared, and Delaware’s ferocious secrecy facilities seem all over it.
“Mt Gox’s tangled web of shell corporations turns the spotlight back to an issue U.S. law enforcement authorities have perennially raised with Congress. Several states, including Delaware, where Karpeles had at least two registered corporations, let foreigners register new corporations without ever setting foot in the United States, relying instead on agents to act as conduits for the companies’ owners.
The agents send along documents like lawsuits and other business communications addressed to the companies but keep no records themselves. They do not keep track of who the company’s true beneficial owner may be. When investigators want to find out more about these companies’ activities, the only information they can get from the agents is contact information for whatever overseas entity has been designated to receive correspondence about the company.
Such is the structure of Mutum Sigillum, a company Karpeles registered in Delaware. He used it to interact with a U.S. bank through Dwolla, an online payment network. Real money passed through Mutum Sigillum (which means “worthless little symbol” in Latin) but it left almost no paper trail in the United States.”
Some U.S. lawmakers are determined to crack down on this dirty business in Delaware, Nevada and other places. But there are a lot of powerful opponents, of course.
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28 January 2021