

U.S. judge awards $40.7M in SEC case over Bitcoin Ponzi scheme - uptown
http://www.reuters.com/article/2014/09/19/us-sec-bitcoin-fraud-idUSKBN0HE1Z820140919?feedType=RSS&feedName=technologyNews

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dustcoin
From the SEC complaint [1]:

    
    
        During the relevant period, Shavers transferred at least 150,649 BTC to
        his personal account at an online BTC currency exchange which,
        among other things, he then sold or used to day-trade 
        (converting BTC to U.S. dollars and vice versa). As a result of this activity, 
        Shavers suffered a net loss from his day-trading,
        but realized net proceeds of $164,758 from his net sales of 86,202 BTC.
    

It is interesting how little money he actually made from the scam, unless he
hid BTC outside of law enforcements' reach.

[1] [http://www.sec.gov/litigation/complaints/2013/comp-
pr2013-13...](http://www.sec.gov/litigation/complaints/2013/comp-
pr2013-132.pdf)

~~~
Buge
Maybe I don't understand, but to me it sounds like he sold 86,202 BTC for
$164,758. Which means he still has 64,476 BTC, currently worth $25,778,155.

~~~
dustcoin
The complaint implies that he lost 64k BTC trading. Based on my observations
of pirateat40's behavior and personality during the time he ran the scam, this
is a much more likely outcome than him secretly holding on to a large number
of BTC. In my opinion, Pirate manipulated the market to feed his own ego, not
to make a profit, and incurred large losses buying high to raise the price and
selling low to drop it.

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biot
Without any jail time, what's the disincentive? A smart scheme would have a
bunch of funds paid out to numerous early, repeat investors, where each one is
secretly the ponzi creator but is made to look like a normal investor.
Meanwhile, the creator transparently takes a small fraction of the bitcoin as
profit, knowing that it will be found and forfeit later. After the fines
accumulate give up the transparent amount, declare bankruptcy, and enjoy the
secret horde of hidden, untraceable bitcoin.

~~~
pmorici
"Without any jail time, what's the disincentive?"

The SEC doesn't have the authority to file criminal charges they can only
pursue things themselves in civil court.

[http://knowledge.wharton.upenn.edu/article/why-so-few-
securi...](http://knowledge.wharton.upenn.edu/article/why-so-few-securities-
fraud-cases-are-criminally-prosecuted/)

~~~
dragonwriter
> The SEC doesn't have the authority to file criminal charges they can only
> pursue things themselves in civil court.

There are criminal laws that apply to securities fraud, and the SEC is
supposed to refer violations to the Justice Department, which can file
criminal charges. So, while this is true, it isn't really relevant to the
criticism raised (which indicate that the absence of jail time was a problem,
but did not indicate that the _source_ of the problem was the SEC; all
pointing out the boundaries on what the SEC can do "in house" is relevant to
is which box on the federal org chart should be the target of complaints.)

------
rayiner
> Mazzant held Shavers and his company liable to give up $38.6 million of
> illegal profits plus $1.8 million in interest. Each defendant was also fined
> $150,000.

The loss to investors was about $150 million.

~~~
bryanlarsen
That's at today's bitcoin prices, though. The scheme operated in 2011-2012,
when bitcoin prices ranged between 30 cents and 30 dollars.

~~~
EStudley
I'm curious as to how they dealt with that price evaluation.. Is this the
first Bitcoin related SEC case?

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samdroid
It is great to see the US punishing people using bitcoin the wrong way... They
even kind of implied that they think it is a real currency! I'm sure that this
is a reversal on their position!

~~~
qq66
Not really. The US government has been quite supportive of bitcoin. They even
auctioned a block of bitcoin to the public.

~~~
drivingmenuts
I wouldn't call that support, so much as auctioning it off because they're
required to, need to convert it to real currency, or just don't know what the
hell else to do with it.

Nothing was ever mentioned about supporting it in any way, shape or form.

~~~
qq66
I think treating it as something of value is a meaningful type of support. If
they seized something like a broken DVD player they'd probably just dispose of
it, and if they seized illicit drugs they'd destroy them. Auctioning them says
that it's a legal store of value.

