He was convicted because he was selling coins which were deceptively similar to US legal tender, using language that indicate a connection to US govt, and deceptively using less precious metal than face value of coin. For example the $10 silver coin had ~$6 worth of silver in it. Language on the website indicated that the coins were backed by silver and could be redeemed for silver certifercite. What wasn't mentioned is that redeeming a $10 coin (purchased for $10 USD) would get you a $6 silver cert which could be redeemed for an equivelent amount in silver based on spot prices.
It was fraud and it is a poor example to illustrate the legality of Bitcoin.
Ah, I forgot that the US govt is directly connected to God and all the rest should pay the broker if they want to communicate with God. Of course, if the silver spot price was an issue those coins should be legalized now as silver spot is currently $33 per ounce! So, if you want to make a silver coin illegal you have to artificially depress the price of silver?!
No three times the coins were redebased. No one coin was minted with an amount of silver equal to the face value. Same amount of silver and price of coin went from $10 to $20 to $25 as the price of . Acquirers were never advised that while coins were backed by the value of silver they weren't backed by ENOUGH silver even at the time of minting.
The coins were minted to be obviously misleading, misleading enough that a jury of his peers felt it was his intent to defraud.
http://www.howtovanish.com/wp-content/uploads/2011/03/Liberty-Dollars-multiple.jpgIt went way beyond that ...
Liberty Dollar actively encouraged merchants who traded Liberty Dollars to give them to unsuspecting customers as change. An unsuspecting customer might receive a "$10 Liberty Dollar" medallion instead of $10 in Federal Reserve Notes. The value of the silver in those medallions was less than $10 FRN, so the unsuspecting customer would receive less than the value they thought they were receiving. It appears that such an exchange was viewed by the prosecution, and the jury, as evidence of an intent to defraud.
http://www.lewrockwell.com/rounds/rounds34.1.htmlSo you are owed $10 in change and you are given a $10 Liberty Coin (which looks like US currency) something you likely didn't want and it turns out the coin is really only worth $6 because it has little to no trace value and only $6 worth of silver in it. You don't see anything wrong with that? When those actions are combined with the groups stated intent to disrupt and overthrow the federal reserve and US currency it isn't difficult to see this stinks.
The case was about fraud & counterfitting. It has nothing to do with Bitcoin.The Liberty Dollar case was about fraud. It was not about using gold or silver in commerce, it wasn’t about protecting government power, or even about using private money. There are all kinds of alternate currencies in circulation in the US. Ithaca Hours, Potomacs, gift certificates, and Chuck E. Cheese tokens can all be used to barter and transact instead of legal tender coins and bills. It is not illegal for a dentist to take payment in chickens or in sacks of potatoes. Liberty Dollar was investigated and indicted because it could, and did, fool some people into thinking it was something that it was not.
Atleast according to one of my wife's US tax guides here. That goes for capital gains and gross receipts. 
