Following the recent arrest of the former Celsius Network CEO Alex Mashinsky for criminal and civil infringements, the dangers of crypto investing were brought to the public eye. Investigating potential compensation for those who have suffered losses due to the case, Samuel Handwerger CPA and accountant at the University of Maryland’s Robert H. Smith School of Business laid out a cut-off period. Confirmed within the 2018 Tax Cut and Jobs Act, investors who had recalled money before the bankruptcy are now deemed covered only by a ‘Ponzi scheme loss exception’, unless once again indicated within the 2026 sunset provision.
Creating an easier path to settling, Handwerger defines a ‘safe harbor’ method which has been endorsed by the Internal Revenue Service (IRS). According to Handw arguments the exact deduction is affected by two main factors – whether the third party is being pursued and the liquidation of all other possible recourses. If the loss can be recognized when signing the safe harbor then the limis for snatching it in the same fiscal period amounts as 95%, whilst the maximum limitation becomes more streamlined if external measures aren’t taken, dropping to 75%.
Subsequent to receipt of the claimed funds, Handwerger advises that all payments remain taxable as factored income within the same taxation region, taking detailed notes of allowed deductions adjustments completely eradicated in the 2018 plans. Collectively, Handwerger’s main objective in underlining the safe harbor loss system is to enable a calmer route to a broader resolution, eventually settling the preexisting interpretation that public recouping of Ponzi scheme cases was slim.
