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I have around 25 BTC from back when Bitcoin was around 10$ or lower. At the time, a friend sent them to me and I never thought they would ever be worth much. Since that time, I've moved them around and don't think I still have any original wallet from that time. I'm worried that if I tried to cash them out and withdraw to my bank account, I will lose all (USD 200K+ at current price) or worse.

From what I understand, if the government decides to investigate the transaction, they could seize it and put me in jail? The burden of proof is on me right? What's the best/worse case scenario? Any suggestion on how to approach this?

A general answer would be nice but to be specific, I'd be withdrawing to either my USA or Canadian bank account.

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    If you acquired the bitcoin legitimately, why are you concerned that exchanging it for traditional currency would get you into trouble? – Lawrence Aug 24 at 10:05
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    That is my question... I might have misunderstood but my understanding is that I could be charged with money laundering, have my money seized and go to jail if I am unable to prove that I acquired the bitcoin legitimately. – maxklein Aug 24 at 10:47
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    You mention US or Canadian bank, but where do you live, and are you a US citizen? – mhoran_psprep Aug 24 at 12:08
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    The financial aspect is simple: sell the coins, take the money. It's the legal aspect (is the asset mine to sell?) that is troubling you, so law.stackexchange.com may be a better site to ask. – chepner Aug 24 at 14:17
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    Aside: don't forget to include the income on your tax return. – Chris W. Rea Aug 24 at 17:07
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Congratulations on surviving the countless catastrophes! I also had a comparable amount, but lost it to theft. :(

To my knowledge you cannot go to a bank and cash out your bitcoins like a check. You have to find someone willing to buy them from you for money. The most straightforward way is a private sale through something like LocalBitcoins. In this case the government will never know about your BTC transaction, but of course they will want to know about where the $250k came from and whether you plan to pay tax on it. Not being cheated or otherwise harmed by the buyer is also your problem.

You can also make an exchange account and sell them through there. You will end up with the dollars in your exchange account. Then you can have those deposited to your US bank account. The government will likewise want to know about the source of this money, but it will be slightly easier to explain that it came from trading bitcoins. Verifying that the process of withdrawing dollars from the exchange is easy and inexpensive is your problem.

If you are extra worried, don't sell the whole 25 BTC at once, but start with a small amount. If you learn the hard way that there is an issue, at least you will retain the rest of your bitcoins. However, do not try to circumvent regulators by spreading an illicit transaction into small amounts - they are smart enough to detect this and you will arouse even more suspicion.

  • Thanks for the reply but I already knew all of that :( I sold small amounts of Bitcoin before and cashed out (<10K$). I guess I should really ask my question in a law StackExchange since my main worry is having to prove the source of the money and being unable to do that. – maxklein Aug 25 at 5:25
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    @maxklein Lots of people bought bitcoin at very low prices and have been selling it over the past year or two. It's very unlikely that the government will have any interest unless you fail to report the capital gain. – David Schwartz Oct 8 at 21:23

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