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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

#41

Post by philhippus »

DanBC wrote: post #22
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.

People wanting to discredit bitcoin would have left this scheme running and would not do anything to prosecute the people involved. That would make people worried about buying bitcoin because, simplistically, "Bitcoin = scams".

My first thought at this story was that the action serves to legitimise bitcoin as a means of exchange. If the Ponzi scheme had been peanut-denominated, would the SEC have taken action?

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

#42

Post by rmah »

noname123 wrote: post #38

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, sp…

The SEC can go after ponzi schemes because those are effectively investment scams. Any ponzi scheme effectively issues IOU's (e.g. shares in a fund, debt instruments or just verbal promises of future payment). These are the securities involved and thus fall under the SEC's domain. The SEC regulates securities and exchanges. Not just registered public securities and public exchanges, ALL of them. And they say what is a security or an exchange, not you.

Gambling operations such as casinos and sports books are regulated by local, state and federal law enforcement. At the federal level, I think it's the FBI.

On another point, you write, "BTC is not a real currency but electronic messages being sent back and forth and logged in an electronic ledger". Most money is exactly that: entries in electronic ledgers and most money transfers are just electronic messages. You don't really think that banks reconcile transfers with big piles of $100 notes, do you?

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

#43

Post by nullc »

makomk wrote: post #5
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. That's 33x your money in 1 year. How can that sound legit to anybody? If you were following the Bitcoin forums at the height of the Ponzi, anyone who suggested it was a Ponzi was called a troll who was libelling pirateat40 by what felt like half the forum. Everyone insisted that unless they had actual proof it wasn't a genuine…

At the same time— a lot of well respected people also called it out and did not participate.

(And made all the same points which are also obvious in hindsight...)

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

#44

Post by nullc »

dobbsbob wrote: post #16
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?…

His "fund" was a mixing service. He was getting mined coins in and paying out probably with SR coins. Originally I'm pretty sure he was laundering for himself or somebody else, or ran his own mixing service like bitcoinfog then it became a ponzi and fell apart. He was also a chronic gambler with delusions of being a good poker player, a lot of coins prob went to gambling

This was one of several rumors he benefited from (and carefully, quietly encouraged). There doesn't appear to be any strong factual basis for it beyond speculation, but it sure helped people believe the insane rewards.

It doesn't really make a ton of sense when you think about it: "Laundering" Bitcoin doesn't really do you a ton of good as you still end up with a bunch of inexplicable Bitcoin, and if you were laundering it a service where people put coins on deposit and then got returns forever doesn't produce the right kind of transaction patterns for laundering.

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

#45

Post by nullc »

noname123 wrote: post #38

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, sp…

Who cares about "real currency"?! It's irrelevant here.

Say you own a bunch of coal. Some guy tells you that if you "invest" your coal with him he'll return 7% of it per-week risk free. He returns a bit and then he vanishes with all your coal.

The fact that coal is not a currency is irrelevant. Its something valuable to you and you got scammed out of it by a phony investment.

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

#46

Post by wmf »

forrestthewoods wrote: post #39
sneak wrote: post #17

Earlier quoted context omitted.

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.

AFAIK EVE has a TOS saying that everything that happens in the game is fictional and that ISK is not real money. Essentially all players have waived their right to complain, although it might be possible for a court to overrule that.

I think plenty of Bitcoiners were trying to have it both ways, telling the IRS and SEC that Bitcoin is not real money while cashing out their schemes on MtGox at the same time. As with any license to steal, this was too good to be true.

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

#47

Post by smackfu »

noname123 wrote: post #38

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, sp…

>So apparently this is an SEC "Investor Alert," but do the legal minds here know if SEC can indict and prosecute this guy?

Here's what they did:

The SEC’s complaint charges Shavers and BTCST with offering and selling investments in violation of the anti-fraud and registration provisions of the securities laws, specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. The SEC is seeking a court order to freeze the assets of Shavers and BTCST in addition to other relief, including permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

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

#48

Post by forrestthewoods »

wmf wrote: post #46
forrestthewoods wrote: post #39

Earlier quoted context omitted.

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.

AFAIK EVE has a TOS saying that everything that happens in the game is fictional and that ISK is not real money. Essentially all players have waived their right to complain, although it might be possible for a court to overrule that. I think plenty of Bitcoiners were trying to have it both ways, telling the IRS and SEC that Bitcoin is not real money while cashing out their schemes on MtGox at the same time. As with a…

But there are plenty of black market sites where you can convert video game currency to and from cash. It's an extra step, but it's trivial to do. There are even sites that aggregate video game black markets and show the best conversion rates and most trusted services.

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

#49

Post by mrb »

noname123 wrote: post #38

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, sp…

For your information, the US govt is very much treating Bitcoin like a "real" currency.

In addition to the SEC prosecution, the US Treasury bureau FinCEN tacitly approved of Bitcoin ("virtual currencies") in http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001....

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

#50

Post by nrivadeneira »

biot wrote: post #9

It's just like what happened in EVE Online[0], only with real-world consequences instead of "that sucks, but player beware". [0]: http://www.tentonhammer.com/eve/news/eve-online-ponzi-scheme...

I think this is actually a really interesting parallel. They're both virtual currencies, but one carries actual legal risk and the other doesn't. The question is, are they really all that different?
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