

Texas man charged with running $60M Bitcoin Ponzi scheme - Sealy
http://venturebeat.com/2013/07/23/texas-man-charged-with-running-60m-bitcoin-ponzi-scheme/

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mmanfrin
I remember when egold was a big thing, and every other site called itself a
'HYIP', high yield investment program -- they were _all_ ponzi schemes, but
the popularity of the larger ones spawned an entire ecosystem of these sites
that were propelled only on the naive fantasies of those buying in to them.
People truly believed that these programs worked.

~~~
brazzy
I recently heard about HYIP for the first time and did some reading - the
amount of self-deception I saw was breathtaking. There were even sites that
rated HYIPs by their "investment" structure and current payout status. People
_knew_ it was a Ponzi scheme and still believed that they could profit.

Truly, money eats brains.

~~~
ROFISH
Those HYIP forums felt, to me at least, like it was Ponzi meta-investing. Many
of the HYIPs paid out for a little while to encourage more 'investments'. So
the part of the game was to get into early ones, but then get your money out
before it closed.

~~~
brazzy
So there were absolutely no differences to "normal" Ponzi schemes, except the
participants went into into fully knowing what it was, but believing they knew
how to beat the odds.

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downandout
The sad part is that for a long time the 7% per week he promised was actually
possible with arbitrage if you knew what you were doing (though probably not
at the scale he was operating at). There are a few more lawsuits/prosecutions
likely in the pipeline - Bitinstant for one.

~~~
awt
Why Bitinstant?

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downandout
They turned into a quasi-Ponzi scheme earlier this year. Until they shut down,
they delaying orders, in some cases by months, and using money from new orders
to pay for the old pending orders. Who knows where the money from the old
pending orders went.

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modeless
Previous discussion:
[https://news.ycombinator.com/item?id=6091412](https://news.ycombinator.com/item?id=6091412)

~~~
zby
And the bitcointalk thread:
[https://bitcointalk.org/index.php?topic=108282.0](https://bitcointalk.org/index.php?topic=108282.0)

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holdenk
The SEC press release is at
[http://www.sec.gov/News/PressRelease/Detail/PressRelease/137...](http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539730583#.Ue9eOTOJDna)

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nullterminated
Hmm... was expecting an article on Butterfly Labs.

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ivanbrussik
I ask why, if he got 4.5 in investments and it grew to 60, why not just pay
back investors the 7% and still pocket some nice earnings?

~~~
jbert
Perhaps his debt was in bitcoins, so it also increased (as priced in USD)

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javert
That is correct.

Trendon's whole scheme would have worked if the price of bitcoin had started
falling, instead of rising so much.

~~~
javert
No, really, the debt to depositors was owed in bitcoins. Don't know why I'm
getting downvoted. It is a fact.

~~~
joesb
If he convert all bitcoin to USD and bitcoin value went down, he can the
previous USD to buy the promised bitcoin and payback.

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Cthulhu_
So why does the title indicate it's a $60M scheme when the value of it is in
bitcoins?

Unless, of course, bitcoins themselves have no intrinsic value of their own,
and are only worth something when converted to USD.

Which they are, outside of a few small-scale incentives.

~~~
rmc
The title used USD because it's a newspaper that is trying to communicate the
news to people, and is avoiding the jargon that night not be widely
understood. Don't read too much into it.

