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Bitcoin Ponzi Scheme Operator Pleads Guilty To $150M Fraud
JustAnotherOldGuy writes: Bitcoin Savings & Trust founder Trendon Shavers pleaded guilty to fraud over his company's Ponzi scheme, whose victims believed they would earn one percent interest every three days — an annual rate of 3,641 percent. Shavers used new depositors' money to pay the existing depositors, and skimmed enough cream to pay for a car, a $1000 Vegas steak dinner, and plenty of casino gambling. He cost his depositors about $150M and was holding onto $40.7M in Bitcoin when he was arrested. At his peak, he controlled about 7 percent of all Bitcoins in circulation. He netted $164,758 from the scheme. Under a plea deal, Shavers has agreed not to appeal any sentence at or below 41 months in prison. Sentencing before U.S. District Judge Lewis Kaplan is scheduled for Feb. 3. Shavers, who went by "pirateat40" online, was arrested in November, two months after a federal judge in Texas ordered him to pay $40.7 million in a related U.S. Securities and Exchange Commission civil lawsuit.
It's not a bad idea. If you're going to do a Ponzi scheme, it makes sense to target a population that already has proven too gullible for it's own good: Bitcoin users!
I don't respond to AC's.
Even criminals can be dumb.
Savings & TRUST... hahahaha
In further news, Trendon Shavers has just received 20 consecutive 41 month prison sentences.
When someone says, "Any fool can see
He netted $164,758 from the scheme.
Huh. That seems kinda... low, given the sums quoted. What about the $40.7M in bitcoins he was "holding on to"?
arrested in November, two months after a federal judge in Texas ordered him to pay $40.7 million
Ah, maybe that's what it was for.
systemd is Roko's Basilisk.
Seems like a reasonable target. I bet he learned the lesson from Madoff: "If it sounds too good to be true, you are dealing with an amateur."
And 41 months for a million+ ain't too bad.
Never trust any company that uses the word "trust" in their slogan or marketing campaigns.
Trust is earned; not implicitly stated.
Political correctness is really just herd psychology pushed by insecure people who desperately seek social conformity.
Explains why Banks are interested in Bitcoin now!
Actually they are interest in blockchain technology, a bitcoin is just one of many things a blockchain can be applied to.
At his peak, he controlled about 7 percent of all Bitcoins in circulation.
Although the article doesn't explicitly say so, his bitcoin wallet was presumably seized as part of his arrest and conviction. Given this and other similar high profile cases, it seems that the U.S. government may now control a not-insignificant minority of all bitcoins currently in circulation. It's difficult to see how that can be good for a system like bitcoin whose express purpose is to provide an alternative to traditional currencies.
How does that work then, all he did was move bitcoins from one person to another with a tiny percent back to him.
"Shavers amassed more than 750,000 bitcoins worth around $4.5 million when he stopped paying back investors ....Because of bitcoin's volatility as a digital currency, Shavers' scheme cost investors more like $150 million,"
So not $150 million, $4.5 million. So basically they want profits they would have made if they'd traded their own bitcoins! Not the actual money they invested.
This reminds me of Madoff, a lot of the investors wanted the government to compensate them FOR THE FAKE PROFITS MADOFF CLAIMED TO MAKE!
So when they did their calculations they worked out the claimed value of their portfolio based on Madoff lies, not the real value, and then demanded they receive that for the governments failure to detect/prosecute Madoff for so long.
Talk about fools and their money... people believing 1%/3d for any actual investment are beyond gullible. If it wasn't BitCoins, it'd be something else, like 419 fraud.
see subject
Both used complex instruments that their clients did not understand, derivatives, tranches, bitcoints...
They both talked a lot of mumbo jumbo. But it was clear the bankers did not believe in the crap they were selling. It emerged they were actively betting that their customers are going to lose a ton of money in the same deal they were selling them. They rated the mortgage backed securities in the same class as US T-bill but were willing to pay 1 percent or two above T-Bill rates. If they believed the ratings there could not be this big a spread. It shows not just the bankers but the whole damned corrupt bond trading market knew the ratings given by S&P was crap.
They gambled, gave themselves bonuses when the bets come through, when the bets go bad, they left the public holding the bag.
It is a grave injustice the bankers remain free to wreck havoc in the financial system.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
In the financial industry, nobody is to be trusted, ever.
But I repeat myself.
He should have taken the money and run long ago - I mean, it's Bitcoin, he didn't even have to launder it!
If the interest is paid every three days, on day 4 you're getting interest on your interest. On day 8, you're getting paid interest on the interest on the interest. At the end of a year, you've made thousands of percent. Compound interest is very powerful and it's how the vast majority of millionaires become millionaires.
You put in a little bit of money and over time your money makes money, and that money makes more money, which in turn makes even more money. If you don't "get" the power of compounding, PLEASE look it up. It's one of the most powerful forces which affects your financial security.
I personally tore him a new ass on the bitcoin forums when he was promoting this idiotic, clearly fake investment. Everyone else supported me. Only complete morons invested with him.
Apparently, there's a sucker born every millisecond.
There is no God, and Dirac is his prophet.
Netcraft confirms USD is dying.
1.01 ^ round(365/3) = 3.367 according to my bc -l, "only" about 337%, not 3,641%
He cost his depositors about $150M [...] He netted $164,758 from the scheme.
Errr....
What happened to the other $149,835,241 ?
Given this and other similar high profile cases, it seems that the U.S. government may now control a not-insignificant minority of all bitcoins currently in circulation. It's difficult to see how that can be good for a system like bitcoin whose express purpose is to provide an alternative to traditional currencies.
As usual, some explanation: The core innovation of alt-currencies, is the bitcoin protocol itself. It works in distributed manner and guarantees thus that there is *no central authority*.
There's no "Bitcoin, inc." company that you can goto and force to shut down or attempt to manipulate with court orders.
No matter which entity at a given point of time holds 10% of all BTCs in circulation. That doesn't change much. ...on the other hand if a single entity manage to get hold on 51% percent of all the hashing/mining power, that's another situation:
At worst, said entity could decide to attempt to manipulate exchange and either withhold the bitcoins or attempt to dump them all at once. That may make a small dent on the exchange rate... but need to compete with all the crazy shit that the other 90% BTCs in use.
- that entity will more or less be able to re-write the ledger and force transactions, reject them, etc. Than entity will become the famed "Bitcoin Inc." that controls the bitcoins transaction.
That hasn't happened yet.
(But could. Depending on where hashing/mining hardware, mining farms, and grouped mining go in the long term).
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
IANAL but it sounds like his prison time will be about the same as you'd get for normal robbery (without weapons or other aggregating factors).
Lesson to be learned...if you're going to steal, steal a LOT.
blindly antisocialist = antisocial
I mean, it's Bitcoin, he didn't even have to launder it!
Actually, it's quite the opposite:
- there's no central authority on bitcoin transaction. and because there isn't, that missing central authority can't keep secrecy on transaction.
Instead, at the centre of bictoin protocol is the block chain.
- A sort of cryptographically secured big ledger of all transaction.
- Any new transaction is broadcast to the whole network.
- Every single node of the network gets a copy from the transaction in it local copy of the ledger ( <- the whole point of the "distributed" nature of bitcoin protocole)
- Every single node can scan the blockchain and verify that the ledger is okay, and that the transaction is legit and matchs the ledger ( <- bitcoin protocol has no central authority, everyone is part of the authority by consensus).
The main result (what bitcoin protocole was designed for): no central authority. Any 2 random people can exchange things (mostly BTCs, but could also be data or whatever) securly with the blockchain, without needing to trust a specific 3rd party. And no risk of abuse from such a 3rd party (unlike credit card companies. The main trigger which made alt-currencies popular when mastercard and visa decided to block donation to wikileaks. There's no such company able to do the same blockade with bitcoin protocol).
The side result is that THERE CAN'T BE any anonymity with bitcoin. By design (other wise you couldn't have the whole network able to check if transaction are legit).
At best, you have pseudononymity (you don't actually put your real ID information. you sign everything with public/private key pair that are generated on the flight at every transaction. The public keys become your pseudonyme in the blockchain).
So your identity isn't directly written in the block chain. But its not impossible to track the flow of money jumping from one key-pair to the next. And eventually end up with a probable identity.
Given the amount at stake, chance are high that some will put the necessary ressource at tracking down where the money has flown.
Putting the money through "tumblers", or exchanging the BTCs against harder to track values would be a necessary step in case of a big enough heist.
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
just ask wall street!
There's no way an investor performing due diligence could have known that 1% every 3 days was an obvious scam. The people who were taken by this scam are clearly representative of all bitcoin users, thus proving their stupidity as a group. We need to regulate bitcoin so they can be protected by the wisdom of voters and congress!
https://en.wikipedia.org/wiki/Bernard_Madoff
How much of an idiot does someone have to be to invest with a guy whose nickname is "pirateat40" and who promises you returns of 7% per *week*? Doesn't anything seem fishy? Even Madoff had some people doubting his methods right up until the end, and he had a whole office dedicated to producing fake statements/trade confirmations.
It amazes me that there are people this dumb about money, AND that there's an even greater push to make people manage their own retirement accounts and health insurance purchases. Seriously people, what looks good on paper does not work well in the real world. This is how people lose their money to scam artist "financial advisers" all the time. I see at least one or two stories a month about some shady guy running off with an old widow's million dollar annuity -- most people should be forewarned to never trust independent financial advisers by now.
Nothing is funnier than people investing their money, with a guy that has the nickname... "PIRATE".
Then complaining that they lost their money.
"Hello, police? I gave this guy money to invest and he stole it all!"
"Whats his name"
"pirate at 40" ...
government sucks. it is full of abuses and corruption and malfeasance
however, it is simply superior to all of the abuses possible without government, or with weak government
people who talk about a need for government do not love government. they aren't blind to the problems inherent with government. they instead have a wisdom you lack: lack of government or weak government is simply worse than all the problems you have with government. it also doesn't mean we don't clean up government, of course we can do better
in life, many problems are not a choice between "shiny happy clean magic fairy land" and "sulfurous vile dark wicked demon zone"
they are a choice between "slightly gray but not too gray maybe a little more gray" and "slightly gray but not too gray maybe slightly more gray" and "slightly gray but not too gray maybe a little less gray"
you pick the better of a range of choices that all suck, and you have to pick the choice that sucks slightly less, according to complex long term determinations
so choose government, only in this way
welcome to life. bitcoin enthusiasm was fueled by a hatred of sovereign currency and the abuses inherent. and now a bunch of idots are learning the hard way why you still want the *protections* inherent
all these victims clamor for regulators and the police. irony
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
> Especially now we have an interest rate at nearly zero percent and inflation higher than that,
So interest is an insignificant amount of money.
> "compound interest" is just an easy way to support those poor starving bankers.
Which covers the $150 billion profit that banks make each year, along with all of their expenses.
Pick one.
Or at least not all of them. The BTC faithful are really uneducated when it comes to money. Many really thought that Bitcoin would just grow forever. I had one confidently tell me that in two year (this was about 2 years ago) it would be worth over $10,000 per Bitcoin and so on.
So I'm sure there were a fair share of dummies that really did think that magic Bitcoins = tons of interest through some magic method. They thought that normal rules of money didn't apply because this was the Internet, or some such crap.
Really, if it looks far, far too god to be true, then it is. However these things find their victims time ans again. Truly fascinating and explains a lot of other things that go wrong. Incidentally, Ponzi did this US-wide in 1920, but the idea is significantly older. So victims are not only stupid, but also ignorant.
Most ACs are not even worth the keystrokes to insult them. Be generically insulted by this and ignored otherwise.
> ALL the people doing the real work and producing all of the real goods and services in the economy struggle under a debt burden
If you don't have extra money to throw away, wasting your money on debt service is stupid.* Many people do that, but certainly not ALL. Some of us were taught how to make a budget. Personally, I was taught in a Dave Ramsey class, after I spent half my life doing stupid.
* Because houses generally INCREASE in value over time, borrowing to help buy the house you need anyway may not be stupid. The equity increase each year should more than offset the interest.
This may not have been a ponzi scheme actually. What Trevor was probably attempting to do is equivalent to short selling a stock into oblivion. Namely, he was borrowing all the bitcoin he could and then dumping it on the market, hoping he'd have a big enough influence to push the price down enough to make up for his 1% interest per 3 days.
What he did with the money after selling the bitcoin, (the Las Vegas dinners, and gambling, etc.) doesn't really matter to the business plan, and therefore irrelevant. After all, if you are trying to crash the price of bitcoin to $0, and you succeed, then the cash you received from selling it isn't needed anymore.
The only problem is that he failed to sell enough of it fast enough. So, in reality, it is just like any other hedge fund that shorts on stocks, and the fact that it failed should really just be a notice to the investors to be careful of high risk investments.
You're right. Doing the math in my head, I put the decimal point in the wrong place.
I intended to be helpful, not be a jerk. If an adult doesn't see the power of compounding, either the monthly compounding they're paying on a credit card or the compound returns they could be earning, there is a opportunity for them to benefit considerably by gaining an understanding of how it works.
Certainly you, understanding the math, wouldn't say you'd want people to be blind to the true cost of their Capital One card?