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 exhibits (many included below -- and others found at the RECAP case docket) include a number of public forum statements made by Shavers, many of which appear to be outright lies, especially when asked how people can tell this wasn't a giant pyramid scheme. In one forum discussion, someone points out that this sounds a lot like an "HYIP scam" -- a High Yield Investment Program scam -- which have been popping up here and there. And Shavers insists that if that were true, people would have figured it out already:
The SEC issued an "investor alert" to go along with the lawsuit, warning about ponzi schemes using virtual currency. Of course, it's not clear that this really has anything to do with it being "virtual currency." There are ponzi schemes with all sorts of currency. Either way, the real irony may be that those who chose not to invest with Shavers and to just hold onto their Bitcoins clearly were better off not just because they still had their Bitcoins, but because the (wildly fluctuating) value of Bitcoins rose even higher than the insane interest promises.
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.