SEC Confirms That Bitcoin Savings & Trust Was A Ponzi Scheme; Files Lawsuit
from the seven-percent-per-week-interest-is-a-bit-unbelievable dept
A little less than a year ago, an operation called the Bitcoin Savings & Trust (an updated name from what had been the “First Pirate Savings & Trust”) shut down suddenly, right after there was growing evidence that it was a pyramid scheme — or, as some called it, the Bernie Madoff of Bitcoin. The “deal” promised an insane 7% interest weekly. If you know even the slightest thing about compound interest (or can use a calculator for a few rounds), you’d recognize that’s insane and obviously unsustainable in any real world situation.
The guy behind it, who went by the name pirateat40, insisted it was no such scheme, and that people would get their money back. In fact, he claimed “once my process is released you’ll understand more of how coins move around.” Well, a month later the SEC officially began investigating, and along with a big lawsuit against Trendon Shavers (aka pirateat40), the SEC has now “released” his process, and it sure does look quite a lot like a Ponzi scheme.
Ironically, investors who had simply bought and held bitcoins during the period the alleged Ponzi scheme was in operation would have made a killing. While one bitcoin was worth about $6.56 on average between September 2011 and September 2012, they were valued Tuesday at $95.30 each.
Filed Under: bitcoin, bitcoin savings and trust, ponzi scheme, pyramid scheme, sec, trendon shavers
Comments on “SEC Confirms That Bitcoin Savings & Trust Was A Ponzi Scheme; Files Lawsuit”
Ah, Mike the "economist" defending "virtual" money.
Not even worth the paper it’s not printed on.
I say you’re defending the Bitcoin scam because you point out as a positive that the imaginary “value of Bitcoins” rose. And it certainly fits with your “new economy” notions and general grifting. But since there’s absolutely NOTHING backing Bitcoins except the artificial scheme itself, it will forever be a scam.
It’s desire for unearned wealth that drives the suckers into throwing real money away on scams. You can’t cheat an honest man.
Take a loopy tour of Techdirt.com! You always end up same place!
http://techdirt.com/
Where Mike daily proves the value of an economics degree.
Re: Ah, Mike the "economist" defending "virtual" money.
There’s absolutely nothing backing the bills and coins in your pocket*, other than the fact that:
a) People and governments are willing to recognize them as currency;
b) There is a limited and controlled supply.
* since the “gold standard” was abandoned
Re: Re: Ah, Mike the "economist" defending "virtual" money.
“There’s absolutely nothing backing the bills and coins in your pocket*, other than the fact that:
a) People and governments are willing to recognize them as currency;
b) There is a limited and controlled supply.
* since the “gold standard” was abandoned”
This is untrue, the Unites States has an enormous military and even a giant nuclear arsenal backing its currency.
Re: Re: Re: Ah, Mike the "economist" defending "virtual" money.
This is untrue, the Unites States has an enormous military and even a giant nuclear arsenal backing its currency.
Maybe, but that doesn’t account for all the other currencies in the world that currently have more confidence than the dollar. The Japanese Yen is even stronger than the dollar at the moment, and the Japanese have, for the most part, sworn off nuclear arsenals due to some particularly bad nuclear incidents in their past (and I am not talking about the Fukushima incident.)
I pretty much agree with AC on this one…people are willing to recognize bills and coins as currency, just as they are willing to recognize bitcoin and even barter systems. The fact that the US military and arsenal is backing its currency may add favor to using it over other systems, but it certainly isn’t necessary since many other places in the world use other currency not backed by military or arsenals.
Re: Re: Re:2 Ah, Mike the "economist" defending "virtual" money.
Have we forgotten the petrodollar? Dollars are a commodity in and of themselves.
Re: Re: Re:3 Ah, Mike the "economist" defending "virtual" money.
Have we forgotten the petrodollar? Dollars are a commodity in and of themselves.
Yes, but if the US wasn’t there to force the use of US dollars based on the Saudi’s fear of Isreal, someone else would do the same with their currency. Canada and the European Union both have done similar.
And a correlation/counter-argument to that is that drug cartels in other countries also use dollars for currency, despite their “illegal” activities and without involvement (that we know of) of the US Government. They chose to use dollars because they are of more value than the currency of their homeland, maybe due to stability, but maybe also due to the fact that most of their money comes from the US and thus is easier to hide their illegal profits.
Re: Re: Re:2 Ah, Mike the "economist" defending "virtual" money.
” he Japanese have, for the most part, sworn off nuclear arsenals due to some particularly bad nuclear incidents in their past (and I am not talking about the Fukushima incident.)”
You talking about Gojira?
Re: Re: Re:2 Ah, Mike the "economist" defending "virtual" money.
Well, not so much “sworn off as a result of being nuked” as “forbidden from having a functioning military of any sort” as a result of losing the war.
Re: Re: Re: Ah, Mike the "economist" defending "virtual" money.
How is that a “backing”?
Re: Re: Re: Ah, Mike the "economist" defending "virtual" money.
“This is untrue, the Unites States has an enormous military and even a giant nuclear arsenal backing its currency.”
DISCLAIMER: I am not an economist, so I am sorry if the following sounds misguided. Mike – being an economist and all – could explain this to you better than I ever could.
That said…
Your point is pretty irrelevant.
Now that money isn’t backed by gold, money is only worth something if is people are willing to trade something else for it.
Currency is just another commodity that can be traded like gold, rugs or tablet PCs. And just like those things, money is only worth what people are willing to pay (trade) for it. If someone is willing to – say – trade a rug for 50 currency units (CU), then that is what a rug is worth. Likewise, that means that each CU is worth 1/50th of a rug.
This is a very simplistic point of view, but you get the picture.
Military power is irrelevant for this picture, expect, perhaps, if you were implying that you are willing to use that power to force your point of view on others. But that is basically the “fry the rules” option. I can also win at monopoly if I threaten to beat everyone up with a chair.
Re: Re: Re:2 Ah, Mike the "economist" defending "virtual" money.
“Your point is pretty irrelevant.”
Much of the value of the US dollar comes from the percieved stability of its government. This perception is largely the result of the extreme military power it has. This is something BIT COINS do not have, so Im not sure how the point is irrelevant?
Re: Re: Re:3 Ah, Mike the "economist" defending "virtual" money.
It is? I don’t really know one way or the other, but I would have thought that it would lean the other way. Powerful military does not equal stable government. It’s more usually the other way around (which is why the founders were against having a standing military).
Re: Re: Re:2 Ah, Mike the "economist" defending "virtual" money.
The fact that you can pay taxes with it factors quite a bit into the value of a currency, actually.
Re: Re: Re:2 Ah, Mike the "economist" defending "virtual" money.
The government forces you, with guns, to pay them in US Dollars. That means that billions of dollars worth of value are forced to go through US dollars.
Bitcoin has no such advantage. Bitcoins could be worthless tomorrow, but US Dollars won’t be unless the US is completely nuked.
Re: Re: Re: Ah, Mike the "economist" defending "virtual" money.
No military can “back” a currency. Currency is imaginary and only works when people agree to pretend it has value. The most powerful military possible cannot force people to pretend this.
The best it can do is to steal things through threat of force, and pretend to pay for it by giving some worthless “currency”.
Re: Re: Re:2 Ah, Mike the "economist" defending "virtual" money.
“The best it can do is to steal things through threat of force, and pretend to pay for it by giving some worthless “currency”.
You dont really understand the dynamic and keep looking at this from the wrong POV. The military provides stability making the US dollar “the currency of last resort” preceisely because its strength ensures that the government (and therefore its chosen currency) cannot be over thrown. This is something BIT COIN simply doesnt and never can have and its significant.
Re: Re: Re:3 Ah, Mike the "economist" defending "virtual" money.
I understand. I just disagree that this is what an overly-strong military does.
Because it doesn’t need it. Bitcoin does not need to rely on any national structure whatsoever to ensure its stability.
Re: Ah, Mike the "economist" defending "virtual" money.
and real money has never been involved in scams?
Bitcoin, as little an experiment as it has been, has went through many of the tribulations that real money goes through. It has been subject to ponzi schemes, people have found all sorts of creative ways to steal it, manipulate it, etc… If this isn’t reminiscent of real money then I don’t know what is.
Re: Re: Ah, Mike the "economist" defending "virtual" money.
Not only that, but if it didn’t hold value like real currency, I doubt the SEC would be getting involved. It’s the real value that makes it worth the time to deal with the problem.
Re: Re: Re: Ah, Mike the "economist" defending "virtual" money.
It’s the real value that creates incentive to have all these schemes and scams.
Tut tut, Mike
Considering how often you point out the need for due process to run its proper course, it’s a real shame to see a headline promoting the kind of guilt-by-accusation thinking you so often accuse others of committing.
Re: Tut tut, Mike
Ummm… wow. Where to start. Let’s see, oh, look! There’s evidence linked and embedded that actually supports the article content! You must have missed that, so we’ll give you a pass.
I know you’ll probably argue there’s no difference, but for those with open minds and who are comfortable actually debating something, the reason there is no hypocrisy here is that when he accuses others of guilt-by-accusation, it is when those throwing accusations do so with ZERO supporting evidence. Ad-hominem and subjective assertion versus an evaluation of facts or analysis.
Re: Tut tut, Mike
So when the perp in this case promised 7% WEEKLY compound interest, you would have given him the benefit of the doubt, despite the fact that that violates every single economic truism there is?
Simple logic tells us that the guy is guilty. There’s no way, none at all, for him to have kept his word, so therefore, he must be guilty of a ponzi scheme.
Re: Re: Tut tut, Mike
Except, as noted, if he accepted money as USD, converted it to Bitcoins, and then paid people back out in USD (or whatever “real” currency they wanted) during that time. Granted there was no way to guarantee that ROI…
Re: Re: Tut tut, Mike
There was a time when Bitcoin ran up quickly from $40 to $200 when I could have, during that month, given people 10% interest per year for 5 years easily. Just because something seems to good to be true, doesn’t mean it ALWAYS is. Of course, Bitcoin couldn’t do that now for you, but if I had stopped taking investments after it dropped, I would have been fine.
(Warning: nitpicking ahead)
You’re using “Ponzi” and “pyramid” interchangeably, but they’re not quite the same thing. In a Ponzi scheme you lure in more investors to cover earlier debts. The pyramid scheme starts there, but you set it up so that new investors become an active part of the scheme by requiring them to bring in even more investors; it’s self-sustaining until it falls apart.
The pyramid investors may or may not undertand the true nature of the scheme but the Ponzi investors would not.
So fast to scam
Oh..my…these “insightful” people did not waste time creating yet another ponzi scheme! It makes youo think who’s more to blame: Scammers or People That Fall For These Scams!