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SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

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Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#31

Post by fnordfnordfnord »

sehrope wrote: post #3

> The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities Anybody that is not skeptical about 7% weekly returns on anything is just asking for it. That's 33x your money in 1 year. How can that sound legit to anybody?…

>Anybody that is not skeptical about 7% weekly returns on anything is just asking for it.

True enough. But crazy returns like that do occasionally exist, though I have never seen them be a "sure thing" nor an ongoing thing. That's just crazy, or cheating.

I was getting APR's in the hundreds of percent for a very short time by lending USD to margin traders. It happened over the course of a few weeks after the latest big gold rush. I was afraid the whole time that something would happen to the exchange and I would lose my (tiny) account.

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#32

Post by mindslight »

This is yet another step on the path of Bitcoin exposing that it is not the operational-semantics/capability/irreversibility based cryptocurrency many people wishfully thought that it was. The POW-based solution to the Byzantine agreement problem was quite novel. It's unfortunate that this novelty was wasted on the same old title-based accounting rather than something more appropriate for a fungible commodity.

A system based on accounts with default linkability invites all the tired old thinking that plagues our modern transactions - fraud, taxes, involuntary/post-facto regulation, etc. In this instance, the status-quo masses, having developed an interest in Bitcoin, will be reading this comment and thinking 'but of course the SEC should pursue fraud', because it fits their pattern of how the world works - it feels like someone has been wronged, so the big man with the big stick comes and sets things right. The underlying idea of irreversible transactions and "it is how it works" won't enter their world view. And these status-quo infusions of ambient authority will encourage additional ones until the novel autonomy-attempting properties of Bitcoin have been completely mitigated.

I just hope adequate electronic currencies don't end up stillborn due to the Bitcoin vaccine.

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#34

Post by cmdkeen »

Intriguingly this is also very similar to the original scheme by Charles Ponzi in that it purported to make its money from arbitrage opportunities.

It's amazing how people will suspend their disbelief when the chance for a "too good to be true" return exists. In the original scheme the US Post Office put out a statement saying that whilst arbitration was possible the amounts allegedly being invested were simply not possible the in the market.

Given there are estimates of daily bitcoin volume the same principle applies - you could only carry out such profitable arbitrage on a very small scale, not the much higher scale the scheme claimed.

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#35

Post by notahacker »

fnordfnordfnord wrote: post #31
sehrope wrote: post #3

> The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities Anybody that is not skeptical about 7% weekly returns on anything is just asking for it. That's 33x your money in 1 year. How can that sound legit to anybody?…

>Anybody that is not skeptical about 7% weekly returns on anything is just asking for it. True enough. But crazy returns like that do occasionally exist, though I have never seen them be a "sure thing" nor an ongoing thing. That's just crazy, or cheating. I was getting APR's in the hundreds of percent for a very short time by lending USD to margin traders. It happened over the course of a few weeks after the latest b…

You might have been able to achieve those returns over a short period of time [edit: posted too early] by actively investing and absorbing the risks, but would you have offered anyone who wanted you to manage their money a no-effort 7% weekly return on a liquid cash account when you could borrow on better terms from a loan shark?

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#36

Post by fnordfnordfnord »

notahacker wrote: post #35
fnordfnordfnord wrote: post #31

Earlier quoted context omitted.

>Anybody that is not skeptical about 7% weekly returns on anything is just asking for it. True enough. But crazy returns like that do occasionally exist, though I have never seen them be a "sure thing" nor an ongoing thing. That's just crazy, or cheating. I was getting APR's in the hundreds of percent for a very short time by lending USD to margin traders. It happened over the course of a few weeks after the latest b…

You might have been able to achieve those returns over a short period of time [edit: posted too early] by actively investing and absorbing the risks, but would you have offered anyone who wanted you to manage their money a no-effort 7% weekly return on a liquid cash account when you could borrow on better terms from a loan shark?

That's what I said. For a few weeks, there were wild market fluctuations coupled with a lack of dollars to borrow, producing big opportunities for profits, and hence margin traders were willing to pay obscene rates to borrow USD. The only reason it lasted as long as it did is the difficulty of converting from USD to BTC.

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#37

Post by [deleted] »

fnordfnordfnord wrote: post #31
sehrope wrote: post #3

> The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities Anybody that is not skeptical about 7% weekly returns on anything is just asking for it. That's 33x your money in 1 year. How can that sound legit to anybody?…

>Anybody that is not skeptical about 7% weekly returns on anything is just asking for it. True enough. But crazy returns like that do occasionally exist, though I have never seen them be a "sure thing" nor an ongoing thing. That's just crazy, or cheating. I was getting APR's in the hundreds of percent for a very short time by lending USD to margin traders. It happened over the course of a few weeks after the latest b…

[deleted]

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#38

Post by noname123 »

How can the SEC regulate this? BTC is not a real currency but electronic messages being sent back and forth and logged in an electronic ledger. Not a legal tender currency or security registered or traded in a US-based exchange.

So apparently this is an SEC "Investor Alert," but do the legal minds here know if SEC can indict and prosecute this guy? This is important for people who are also running Bitcoin casinos, sports books and prediction markets.

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#39

Post by forrestthewoods »

sneak wrote: post #17
mtgx wrote: post #8

I'm not arguing over what they're doing, the guy was asking for it, but it seems someone at a high level asked for more regulation and attention on the Bitcoin ecosystem.

As was demonstrated, Ponzi schemes are already illegal, regardless of denomination. No new laws or regulations required. 99% of the time in the USA, blatant fuckery is already illegal six ways from Sunday. The last thing we need are more laws.

Are they? What about in video games? Eve Online had a gigantic ponzi scheme where players stole vast amounts of in-game currency. Is that illegal? I'm not being snarky, I genuinely don't understand when it is and is not illegal.

Re: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme

#40

Post by Everlag »

7% WEEKLY INTEREST and people thought it was legit. You'd be damn lucky to find a reliable place that'll get you 5% annually. I'm not condoning what the fellow did but really people, if you got taken by those kind of numbers without second thought you need to take a look at other areas of investment.
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