Expert Witness Profiler

Category: Cryptocurrency Expert Witness

  • Accounting Expert Witness’ Analysis of Costs and Markups Admitted

    Accounting Expert Witness’ Analysis of Costs and Markups Admitted

    The Trade Group’s (“TTG”) is a full-service event marketing and creative design firm well known for its award-winning designs and client-centered service mentality. BTC Media, LLC (“BTCM”), a Bitcoin and blockchain media company approached TTG about managing, planning, and producing Bitcoin 2021, the world’s largest bitcoin conference held in Miami, Florida.

    After a successful Bitcoin 2021, BTCM enlisted TTG’s services again in connection with Bitcoin 2022, but on a much larger scale. This case centers around a dispute between TTG and BTC over the financial ramifications of their business interactions, particularly surrounding the Bitcoin 2022 event. At the heart are disagreements over alleged overcharges and lost profits in planning and hosting Bitcoin 2022 in Miami.

    TTG sought to exclude the expert testimonies of BTC CEO David Bailey and CFO Didier Lewis as well as Dr. Kelly Semrad and Gary Durham for various reasons.

    Accounting Expert Witness' Analysis of Costs and Markups Admitted

    Accounting Expert Witness 

    Gary Durham has been assisting clients with economic damages calculations, valuation, forensic accounting, financial forecasting, and financial issues in bankruptcy since 1993. Durham’s considerable experience preparing expert witness testimony includes damage calculations and other valuation-related financial analysis.

    Want to know more about the challenges Gary Durham has faced? Get the full details with our Challenge Study report. 

    Tourism And Travel Industry Expert Witness

    Dr. Kelly Martinez Semrad, currently serves as a faculty member at the University of Central Florida (UCF) in the Rosen College of Hospitality Management. She is the former associate director for the University of Florida’s Eric Friedheim Tourism Institute. She has also helped provide policy for tax reform and economic structural adaptations as well legislation for social and environmental justice in the tourism and hospitality industry.

    Discover more cases with Kelly Semrad as an expert witness by ordering her comprehensive Expert Witness Profile report.

    Cryptocurrency Expert Witness

    David Bailey is an early bitcoin adopter, entrepreneur, and a prominent figure in the Bitcoin community. He is also the CEO of BTC Media, which includes Bitcoin Magazine and the Bitcoin conference, as well as UTXO. 

    Efficiently evaluate if investing further resources into vetting David Bailey is merited based on the findings in our Preliminary Screening Report.

    Finance Expert Witness

    Didier Lewis is the Finance Director of BTC Media, LLC (“BTC”). As Finance Director, he also has oversight of BTC’s finances, including its accounts receivable, accounts payable, and invoices payable to BTC’s vendors.

    Start your due diligence on Didier Lewis quickly and affordably by first reviewing key insights in our Preliminary Screening Report.

    Discussion by the Court

    A. Gary Durham

    TTG sought to exclude Durham’s testimony on the grounds that it was unreliable and irrelevant.

    According to TTG, Durham’s opinions were based on incomplete information given Durham’s role was to verify the costs TTG claims it incurred and to assess the reasonableness of those costs. Although Durham had multiple opportunities to review TTG’s documents, TTG argued that he failed to accurately compile the costs, thereby rendering his opinions unreliable.

    The Court found that while Durham’s methodology, like most, could have possessed flaws, it was sufficiently reliable for the purposes of expert testimony. Durham reviewed numerous documents and provided a detailed analysis of the costs and markups. His methodology involved a thorough examination of TTG’s invoices and other financial records, and he explained the basis for his conclusions. Any perceived deficiencies in his methodology went to the weight of his testimony, not its admissibility.

    The Court held that highlighting the potential disconnect between TTG’s Google Sheet entries and the underlying accounting documents was vital because it could suggest TTG’s billing practices may have been designed to obscure true charges. This made Durham’s testimony all the more reliable and relevant.

    B. Kelly Semrad

    TTG sought to exclude the testimony of Semrad on the grounds that it was unreliable and irrelevant. TTG argued that Semrad’s opinions were based on insufficient facts and data, and that she lacked the necessary expertise to opine on the reasonableness of TTG’s markups. Despite Semrad admitting that she did not have access to certain critical information, the Court held that her testimony was particularly relevant because it set a benchmark for evaluating TTG’s markups for Bitcoin 2022. 

    By comparing TTG’s charges with industry standards, Semrad provided a clear framework for the jury to assess whether TTG’s pricing was reasonable. Her testimony offered the jury a critical reference point for determining if TTG’s practices deviated from industry norms. 

    The Court found that her analysis was based on sufficient data and reliable principles, aligning with the requirements of Rule 702. 

    C. David Bailey and Didier Lewis

    TTG sought to exclude the expert testimony of BTC’s CEO, David Bailey, and CFO, Didier Lewis, on the grounds that Bailey and Lewis were untimely disclosed.

    Appealing to Federal Rule of Civil Procedure 37(c)(1), TTG argued that BTC’s failure to timely disclose these expert witnesses was neither substantially justified nor harmless, warranting exclusion of their testimony.

    Further, TTG opined that BTC made multiple representations to the Court that they did not seek to designate experts for their counterclaims, the absence of a request to extend the Initial Designation deadline was prejudicial to TTG given their late disclosure.

    However, BTC has consistently maintained that Bailey and Lewis will offer lay opinions under Federal Rule of Evidence 701, which allows business owners or officers to testify about the value or projected profits of their business based on personal knowledge. Both Bailey and Lewis have extensive firsthand knowledge of BTC’s financial operations and can provide valuable insights into the company’s lost profits.

    TTG did not dispute Bailey and Lewis’ knowledge of the company’s finances but contended that their testimony constituted expert opinion requiring timely disclosure under Rule 26(a)(2). However, BTC supplemented their disclosures to include Bailey and Lewis as expert witnesses under Rule 702, likely anticipating potential objections from TTG.

    The Court held that any prejudice to TTG was minimal, given their extensive personal knowledge and the supplemental disclosures.

    Held

    The Court denied that The Trade Group’s three motions to exclude the testimony of BTC CEO David Bailey and CFO Didier Lewis as well as Dr. Kelly Semrad and Gary Durham.

    Key Takeaways:

    • The Court found Durham’s methodology sufficiently reliable because he reviewed numerous documents and provided a detailed analysis of the costs and markups.
    • Semrad’s testimony offered the jury a critical reference point for determining if TTG’s practices deviated from industry norms. The Court held that her testimony met the requirements of Rule 702.
    • The Court held that both Bailey and Lewis’ extensive firsthand knowledge of BTC’s financial operations will assist the jury in understanding the financial impact of the alleged damages and are therefore admissible.

    Case Details:

    Case Caption: The Trade Group, Inc. V. Btc Media, Llc
    Docket Number: 4:23cv555
    Court Name: United States District Court, Texas Northern
    Date: June 5, 2024

  • California Court Denies Motion to Exclude Expert Witness Testimony in Cryptocurrency Case

    California Court Denies Motion to Exclude Expert Witness Testimony in Cryptocurrency Case

    In a recent (ongoing) case in California, a senior couple, Robin Denker and Jerry Klein  sued Michael Ricchio, the ex-husband of Denker’s daughter, claiming elder financial abuse, unjust enrichment, negligence and breach of contract. 

    Denker and Klein (Plaintiffs) invested $13,000 into an initial coin offering for ICN (Iconomi) at Ricchio’s suggestion. Ricchio purchased the cryptocurrency and held it in accounts under his name. Plaintiffs were unable to access these accounts or their cryptocurrency without Ricchio’s assistance. Eventually, when Plaintiffs asked Ricchio to return access to their cryptocurrency holdings, Richhio not only refused to do so, but also informed them that he had sold the cryptocurrencies long ago and offered to return $40,000. The Plaintiffs did not believe him and sued, bringing nine causes of action and sought up to $2 million in damages, along with double and treble damages and punitive damages. 

    The Plaintiffs retained Dorothy Haraminac, a forensic accountant and the founder of Greenvets LLC, as their expert witness while the Defendant retained Harry G. Lee Jr., a blockchain expert who did a blockchain analysis on the investments made by the Plaintiffs through the Defendant. Both parties moved to exclude the other’s expert. 

    Harry G. Lee Jr. (Defendant’s blockchain expert witness)

    Issue 1: Untimely disclosure

    Denker sought an order to exclude the testimony of expert Lee on procedural grounds of untimely disclosure. Lee’s report was disclosed two weeks after the date for initial expert disclosures. The court held that Lee was deposed, and Denker had full opportunity to examine the witness. Assuming that the report should have been disclosed as an initial report, the two-week delay was harmless. 

    Issue 2: Failure to disclose basis for opinion

    Denker alleged that Lee failed to disclose the basis for his opinions. A schedule of assets upon which Lee relied was never produced. The Court noted that Denker’s expert Dorothy Haraminac used the same schedule in her work, so the shortcoming of not receiving the schedule was neutralized. Also, Lee used a proprietary tool to conduct his block chain analysis to which Denker never had access. However, Denker had an opportunity to examine Lee about his core analysis at deposition. The court held this to be sufficient and denied the motion.

    Issue 3: Daubert challenge

    Lee had given a valuation opinion and had also opined that Ricchio was a mere hobbyist when it came to cryptocurrency trading. Denker challenged both these opinions under Daubert. 

    Regarding the valuation opinion, the Court held that:

    1. the use of an incorrect conversion for Iconomi coins, which Lee subsequently corrected, could be addressed on cross examination and only went to the weight of his opinion
    2. he used a “consulting” standard rather than an audit standard again went to weight 
    3. there was nothing improper about experts assuming one version of disputed facts 
    4. the challenge to various inputs to Lee’s analysis went to weight rather than admissibility.

    The court held that these factors called for a forceful cross examination that would not be cause for exclusion.

    With respect to the “hobbyist” opinion, the Court noted that Lee tied his analysis to a dictionary definition of hobbyist in which area he conceded he had no expertise. The court allowed Lee to present his frequency analysis, and let the jury draw its own conclusions. The judge also stated that frequency analysis is a legitimate, repeatable methodology.

    The motion to strike Lee’s testimony was denied.

    Dorothy Haraminac (Plaintiff’s Witness)

    Issue 1: Calculation of damages

    In calculating damages, Haraminac used a “Demand Date,” the date on which Denker requested the return of funds, and “Date of Refusal,” the date on which Ricchio refused to return the funds. She used these benchmarks in making her calculations. An expert is not required to vouch for each assumption that goes into a calculation. Others can be cross-examined as to the accuracy of  these benchmarks.

    The motion was denied.

    Issue 2: Additional considerations

    In her opinion concerning Denker’s losses, she included a section entitled “Additional Considerations.” These included surmises about Ricchio’s possible use of Denker’s funds for his own transactions and details Ricchio’s other unrelated trading activities in the period.

    The Court excluded this paragraph as irrelevant.

    Issue 3: “Hobbyist” opinion

    Haraminac relied on an IRS standard to form her opinion that Ricchio was not a “hobbyist” trade. Haraminac made three points:

    1. she does not know whether the IRS uses the factors for cryptocurrency;
    2. she never previously applied these factors to cryptocurrency; and
    3. she offers no opinion with regard to the applicability of these factors to cryptocurrency.

    The court held Haraminac to be simply incorrect as to the third point. The other issues were decided to go to weight, and to be tested on cross-examination. The court declined to exclude this opinion.