Slashdot Mirror
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.
In further news, Trendon Shavers has just received 20 consecutive 41 month prison sentences.
When someone says, "Any fool can see
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.
Wait, 1.01^121 (every third day) is 3.3 So we are talking about THREE HUNDERT percent a year. Never mind.
The summary says "one percent interest every three days", which is nowhere near 3.6% per year.
"I don't know, therefore Aliens" Wafflebox1
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.
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
He should have taken the money and run long ago - I mean, it's Bitcoin, he didn't even have to launder it!
It's a secure doubly-linked list. As in, once you add your node to the list, it's fixed - it cannot be edited without breaking the blockchain or forcing a majority to agree to the edit (this is where the bitcoin 51% issue comes into play).
Part of the input into the miners is the current hash of the blockchain (thanks to the way hashes work, you can incrementally hash so no one has to hash the entire blockchain every time), and the miners test many nonces to come up with a hash that meets certain requirements (e.g., the hash starts with a bunch of zeros). Once that nonce is found, it ends the current block in the chain and a new one is started, beginning with the hash of the blockchain with the new block. Thus you're hashing and locking in all the previous transactions and other things in the block - you cannot change it without breaking the hash, or having to recomputed new hashes and nonces. So older transactions get more secure as time passes.
That's the magic of blockchain - you cannot edit it without spending huge effort in not only recomputing all the transactions and hashes afterwards, but also convincing a majority of people that your modified blockchain is the correct version.
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 ]
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 ]
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" ...