SEC Alleges 'Bitcoin Savings & Trust' Is a Ponzi Scheme

New submitter craighansen writes "The U.S. Securities and Exchange Commission has filed a lawsuit against a man they allege ran a Ponzi scheme using Bitcoin. According to the complaint (PDF), during 2011-2012, Trendon Shavers, operating under the username pirateat40, collected investments of over 700,000 Bitcoins from at least 66 'investors' (a valuation of $4.5M) with the promise of as much as 7% weekly returns. These 'investors' received about 500,000 Bitcoins in returns, so on average, they're probably much better-off than investors in Madoff's scheme. Nevertheless, with the rising value of Bitcoins, the $4.5M investments would be worth $65M at recent pricing if they had actually been left in Bitcoins, which approximates the 1% per day returns that the scheme promised."

interesting

[poetmatt]

so they're selectively acknowledging bitcoin? how else can SEC get involved unless this is considered a legitimate security?

Re:Legal

[1s44c]

This really has nothing to do with bitcoin itself, and is just someone trying to use them to scam people. Nothing new here.

The reason it's a big deal is that he wasn't just trying to scam people, he was actually very successful at scamming people. If he just tried and failed no-one would care.

I saw give him a fair trail and if found guilty lock him up with a bunch of violent offenders for very many years.

Re:Legal

[i kan reed]

I know how trollish this is going to sound, but it's consistent with my observations. This was a demonstration of just how well libertarian investors do in a (mostly) unregulated environment.

Re:Legal

[Anonymous Coward]

When the economy bounces back gold prices go down and platinum prices go up.

...because people buy more cars, and platinum has actual intrinsic value as a catalyst for your catalytic converter. Gold is useful for.. what? Plating on corrosion-resistant electrical connectors, I guess, but we can deposit nanometer-thin layers now. Jewelry, if the current fashion dictates, I guess.

The usual breakdown for gold use is 50% jewelry, 10% industry, and 40% hoarding -- sorry, I meant "an investment vehicle to hedge against inflation". When the hoarding percentage goes above 50% or so, there's a sudden crash in gold prices, unsurprisingly.

Re:Legal

[Registered Coward v2]

Gold is and always will be a solid hedge against inflation.

Actually, gold is a pretty poor hedge - as with any commodity, it is very volatile and it's long term returns are not that great. For example, $100 invested on gold in 1965 would be worth around $4000 in 2012 vs about $6000 for the same investment in the S&P 500. Gold touts play on people's fears and their belief that others will continue to share those fears to drive up the price; when in reality gold is a basic commodity and behaves as such. It even has a limited upside because as prices rise uneconomic means of production become viable; and there is a lot more gold that has not been recovered than there is demand.

Of course, it doesn't hurt that you tossed in "Fox News" to get all your liberal friends panties in a wad. And when Obama's monetary policy lead to rampant inflation ... well you will not look so smart.

Actually the Fed sets monetary policy and it is notorious for doing things that piss off presidents; to the point of being accused of acting to influence elections. Of course, you use "Obama" the same way as others use "Fox."