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?
> In reality, BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments.
Since the bitcoin ledger itself is public record anybody could analyze the addresses associated with the fund and see the inflows and outflows[1]. Even if new addresses are generated for each transaction at some point the fund manager would need to roll them up and combine them. It would be possible to see the ponzi flows in the ledger itself.
[1]: Assuming the fund manager isn't using some kind of bitcoin mixer. If he is then that's probably a sign that something bad is going on. https://en.bitcoin.it/wiki/Mixing_service
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 investment, they should shut up, and that the only reason for them to make a big fuss about it was to . This comment was about par for the course, and bear in mind this was after the scheme imploded: https://bitcointalk.org/index.php?topic=101377.0
A number of widely-respected members of the Bitcoin community supported the Ponzi and even ran pass-through schemes for it.
I have been following the whole development of his Ponzi scheme. Yes it was obvious to some in the community that it was a Ponzi. I remember writing a few lengthy posts on bitcointalk.org accusing him of a Ponzi. But surprisingly, many people adamantly chose to believe in Shavers and argued against me, ignoring my warnings, telling me why I was wrong. Their argument boiled down to "it has to be legit since he has been paying everybody so far". Sigh... Money prevents people from thinking straight.
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.
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.
Given this, is anyone algorithmically analyzing the ledger for anomalies like Ponzi schemes? That could be an interesting project.
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.
PPT operators did not have an incentive to go after pirate, unless they had also invested significant personal holdings in BS&T, because:
1) They were investing other peoples' money and taking a fee off the top
2) They could face investigation themselves if they went to the authorities.
That would make people worried about buying bitcoin because, simplistically, "Bitcoin = scams".
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.
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?
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.
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....
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.
Bitcoin is obviously a currency. Law that applies to currency applies to Bitcoin. Trying that "it's just electronic messages" thing in front of a judge will get you laughed out of court.
[0]: http://www.tentonhammer.com/eve/news/eve-online-ponzi-scheme...
I think it's mostly a matter of FinCEN et. al. not yet training their sights on ISK, because ISK is not widely supported in terms of fiat-exchange and online purchases.
There's certainly no reason someone couldn't accept ISK on Silk Road in exchange for their magic mushrooms, but the reality is, why take ISK when you could take Bitcoin which has better tools/software for trading, better liquidity, and no centralized control?
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.
You will buy bitcoins at regulated, fully legal and non-anonymous exchanges. Then, you will exchange bitcoins for A-coins at anonymous, online-only exchanges. Since they can operate only on digital currency they need no physical presence and no connection to the regulated global financial system and will thus not be vulnerable to government regulation or control.
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.
