More large law firms are accepting bitcoin payments for their legal services, signaling the digital currency’s firmer foothold in corporate America. In the years ahead, cryptocurrencies such as Bitcoin and blockchain technology will have an impact on just about every private and public institution in the nation. Understanding and accepting cryptocurrency as a form of payment puts firms in a better position to help clients who have been targeted by the FTC.
Do you need to pay your attorney before the FTC can seize your war chest?
Paying a large retainer early on can help you safeguard funds that would otherwise be seized by the FTC – depriving you of any ability to pay for a legal defense. This is one of the FTC’s dirtiest tactics that they’ve used to secure plea deals in cases where they never would have won based on evidence. However, even if you pay your retainer in advance, failing to safeguard those funds adequately can allow the FTC to seize them; even from a client trust account. When using a blockchain technology to pay for the firm’s fees, your attorney will need to consider ethical requirements imposed by the state bar.
The Nebraska ethics board was concerned with whether a Bitcoin payment would be reasonable if not converted into dollars immediately after receipt. A fee that is unconscionably high can be unethical in some cases, such as overly greedy contingency fee arrangements. However, an attorney is also ethically obligated to prepare a plan to repay substantial funds that may later be returned to the client if the case is resolved. (See Utah State Bar Ethics Advisory Opinion Committee, Opinion No. 12-02, Issued December 13, 2012).
That means that your attorney may have an ethical duty to hold the funds you pay as a retainer in a way that will ensure that they can be returned to you if the case ends prematurely. Christensen & Jensen is a firm that has extensive experience helping clients with large-asset cases to structure their fee payments in a way that helps them ensure that they will be able to defend themselves. If you want more info about how to protect yourself from the FTC or another government agency, contact us now.
Bitcoin payments to attorneys must be reasonable, identifiable, and secure
A recent Nebraska Ethics Board gave the green light to attorneys accepting bitcoin, but warned against other ethical issues that this type of payment could bring up. With similar caution, the board also approved Bitcoin payment of legal fees by third-parties, and holding bitcoins in escrow on behalf of a legal client. In describing the ethical obligations associated with Bitcoin legal fees, the board emphasized the following:
- Fees must be reasonable – Ethical rules prohibit an attorney from accepting an unconscionable over-payment for services. The ethics board said that, due to the volatility in the market, attorneys should convert currencies into U.S. dollars immediately after payment. However, if the fee is paid as property in exchange for legal fees, your attorney may not be required to exchange bitcoins to cash right away.
- Third party payers must identify – Where a third party wishes to pay for a client’s legal fees, the attorney must be able to identify the payer, and ensure that the third-party payment doesn’t interfere with the attorney’s independent relationship with the client. Some state ethics boards would take issue with an attorney accepting anonymous payments from a shadowy third-party, but accepting payment from a third-party is fine as long as the party verifies identity and the payment doesn’t interfere with the attorney-client relationship.
- Bitcoins in escrow must be separate – As long as holdings are kept separate from a firm or attorney’s own property, an attorney may hold cryptocurrency in escrow on behalf of a client. However, the ethics board in Nebraska also required the attorney to maintain records on any digital currencies in escrow for at least five years.
Payment of your legal fees should be a simple matter, but where FTC is concerned, nothing is simple.
If you suspect you are being investigated by a government agency, it is always better to err on the side of caution. That means that you should most likely overestimate how much you will need to provide for your legal defense. The FTC can be ruthless in their pursuit of a case, and the agency will try to take advantage of your inability to mount a legal defense. Bitcoin technology can make it easier for you to pay for your legal fees in advance, and avoid being held hostage to a plea agreement. Contact Christensen & Jensen to help you come up with the best defense strategy possible.
Extra security measures may be advised
In addition to these standards, the ethics board also called for the use of “multi-signature wallets” in order to keep escrow funds more secure. The court also stated:
Other reasonable measures may include maintenance of the wallet in a computer or other storage device that is disconnected from the Internet (also known as “cold storage”), a method that would also allow for off-line storage of one or more private keys.
Some of the concerns that an ethics board might have with this type of payment involve security as well. One of the quintessential strengths of Bitcoin is that transactions are instant and irreversible, but that also means that traditional banking fraud protections are not available if your virtual wallet is burglarized by a hacker. Using multi-signature wallets and cold storage can reduce this risk significantly. If you have questions about the advantages of using Bitcoin or other cryptocurrency technology in connection with legal services, contact Christentsen & Jensen – a firm that can help you avoid legal pitfalls of adopting this secure technology while taking advantage of the benefits.