A US judge has ruled that a Kentucky man must repay a loan he originally solicited in bitcoin.

Judge Frank Fletcher of the Breathitt County District Court, in an order signed 5th June, stated that Dennis Kerley must repay $67,591 on a loan he had received in bitcoin via the peer-to-peer (P2P) lending platform BTCJam.

The loan, dating back to December 2013, fell into default within a few months of receipt. The plaintiff in the case, Daniel Kaminski de Souza, loaned Kerley 11.95 BTC, worth just over $10,000 at the time it was solicited.

The case is perhaps suggestive of how US judges who lack a general understanding of bitcoin consider cases, even providing a degree of precedent for future cases involving P2P loans denominated in bitcoin, according to lawyer Kevin Palley, who represented de Souza in the case.

Palley told CoinDesk:

“The judge did not understand what bitcoin was, and this is a small county in rural Kentucky. So he asked anybody in the courtroom if they knew about it and one or two people raised their hands.”

Palley said that he went on to treat bitcoin as a kind of highly speculative foreign currency, a explanation that was ultimately accepted by the court.

Kerley, according to Palley, did make an appearance during the 5th June hearing, and though Kerley responded to the initial lawsuit, Palley successfully petitioned the court to deem that reply a non-response to the specific claims in the suit.

Kerley could not be reached for comment for this report.

Mining loan

In December 2013, Kerley sought funding to buy bitcoin mining equipment from Bitmine, a Swiss company that ultimately went bankrupt amid accusations of fraud.

Kerley said that he intended to buy a 1 TH/s bitcoin miner, as well as a 400 GH/s unit if enough funds were available. In the loan description, he wrote that he planned to generate as much as 0.76 BTC per day.

Kerley added that he was offering an interest rate of 20%, explaining:

“I realize there is some speculation and risk with this investment. But, as I am and have been actively mining bitcoins for more than a year, I believe this is a sound investment and worth the risk.”

Issues emerge

According to the user comments on to the BTCJam loan page, payment issues began shortly after solicitation was complete.

De Souza asked about the status of payment on 6th February of last year, and Kerley replied that the issue stemmed from shipping problems and damages to the miners he received.

“I have over half the payment ready to send and will have it all in a couple of days. I will then make the payment and bring my loan to current,” Kerley wrote. “From this point forward there will be not more late payments and I will actually be paying the loan of early.”

Two weeks later, when asked for an update, Kerley wrote:

“I have mined 2.3 BTC but can not make a partial payment on the loan dues to the BTCJam system design. I will soon have the coin to pay the late payment and will soon be at full capacity before the next payment is due.”

That message, dated 22nd February, was the last Kerley would post on that page.

Just over two months later, de Souza wrote that he had received notification that the loan would enter arbitration for nonpayment.

Relief sought

When borrowers agree to use BTCJam, they enter into an agreement that states: “The arbitrator’s decision shall be final and legally binding and judgment may be entered thereon.”

Arbitration services are provided to BTCJam users by a company called net-ARB. According to an arbitration award document provided to CoinDesk, de Souza was granted an award for 64.74381250 BTC following 91 days of nonpayment.

Following the arbitration award, de Souza told CoinDesk, he hired Palley, who subsequently reached out to Kerley to seek redress for the defaulted loan. In a response letter, Kerley requested information regarding the amount he allegedly owed, as well as verification of Palley’s credentials.

In March 2015, Palley formally filed suit against Kerley on behalf of de Souza, seeking either an enforcement of the arbitration agreement or relief for breach of contract.

The complaint read:

“Plaintiff has suffered damages due to Defendant’s failure to honor its contract and Plaintiff requests damages for breach of contract in the amount of $30,723.53 as of September 3, 2014, pre-judgment interest in the amount of $17.07 per day as of September 3, 2014, court costs, fees and post-judgment interest.”

Two months later, Judge Fletcher found in favor of de Souza.

Next steps

According to Palley, the next phase in the suit against Kerley involves seeking repayment on the loan, a process he suggested could pose additional challenges.

“The hard part is going to be the collecting,” he explained. “So what I’ll have to do is do an asset search and see if there’s anything to collect. Getting a judgement is easier than collecting, and [de Souza] understands it could be some time.”

De Souza said one current issue is identifying financial institutions used by Kerley in Kentucky, a process he claimed has been hindered by a lack of information from BTCJam.

“A measure [Palley] will have to take now is to send a garnishment letter to every bank in the Breathitt county because we don’t know in which bank and agency the debtor has an account,” he said.

When reached for comment, BTCJam told CoinDesk that it was supportive of the outcome of the suit, calling it a successful example of the settlement process it has in place.

The company noted that it was bound by the law to provide sensitive information only through legal processes, but would be happy to do so through the courts if requested.

Kentucky legislature image via Shutterstock

The full order on motion for summary judgment can be found below:

De Souza v Kerley Judgment

Judges hitting wooden gavel image via Shutterstock

Correction: An earlier version of this report incorrectly stated that Kerley did not respond to the lawsuit. While an initial response was tendered, the plaintiff successfully petitioned the court to consider that reply a non-response to the specific claims in the suit.

This report has been updated for clarity.

  • BlackRock Strategist: Cryptocurrency Market Charts Look ‘Pretty Scary’
  • Linux / Unix vi / vim: Open and Switch Between Multiple Files
  • $10K Again for Bitcoin, But Other Cryptos Outperform
  • Study: Illicit Goods Use, Age and Politics Predict Bitcoin Holdings
  • ‘Gold Is Superior to Bitcoin,’ Say People Who Sell Gold
  • Install Percona MySQL Server 8.0 on Ubuntu 18.04 / Debian 10
  • Central Bank of Malaysia Plans Cryptocurrency Reporting Rules
  • Crypto Exchange Bits Of Gold Wins Supreme Court Battle Over Bank Block
  • Over 20,000 Students Receive Bitcoin in Coinbase Giveaway
  • Bitfury Hires a CEO for Its Blockchain-Sleuthing Service
  • Mt. Gox Celebrates its Millionth Customer with 25% Holiday Discount
  • Big names’ big bitcoin bet, bugs bite bright idea, and forgetful fjord fellow finds fame
  • Judge Backs FTC Asset Freeze in Crypto Fraud Case
  • Sibos Highlights Swift’s Complicated Relationship With Blockchain
  • Turn on telnet server on Debian Linux
  • SXI LLC Company
    SXI.IO is a global Blockchain software company, specialized in developing white label crypto exchange platforms , Wallet platforms, ICO platforms, Token Erc20 .....
    Fully Managed VPS Fully Managed VPS Fully Managed VPS

    You Might Also Enjoy NewS Post

    Best Free Web Hosting 2020

    Free Hosting 1GB $0.00 USD/mo Disk space 1GB Traffic 10GB/Month Domains 2 Plesk Cpanel Databases 10 Free 12 Month https://my.sxi.io/cart.php?a=add&pid=196

    02/05/2020 READ MORE

    Download Windows Templates for Virtualizor KVM

    Download any of client OS template to the location in Node ( /var/virtualizor/Xen or KVM according to the virtualization). http://mirror.softaculous.com/virtualizor/templates/windows-2003-x86.img.gz http://mirror.softaculous.com/virtualizor/templates/windows_2003R264.img.gz http://mirror.softaculous.com/virtualizor/templates/windows-2008r2.img.gz http://mirror.softaculous.com/virtualizor/templates/windows-2012server.img.gz http://mirror.softaculous.com/virtualizor/templates/windows-2003-x86.img.gz http://mirror.softaculous.com/virtualizor/templates/windows_2003R264.img.gz http://mirror.softaculous.com/virtualizor/templates/windows-2008r2.img.gz http://mirror.softaculous.com/virtualizor/templates/windows-2012server.img.gz http://mirror.softaculous.com/virtualizor/templates/windows-2012r2.img.gz http://mirror.softaculous.com/virtualizor/templates/windows-2016.img.gz For...

    23/04/2020 READ MORE