We here at Buttcoin have obtained newly filed paperwork (1, 2) in the SEC’s case against Trendon Shavers, AKA pirateat40, owner of the now-collapsed pyramid scheme Bitcoin Savings and Trust. Some highlights:
- He’s been unemployed for 4 years. (Father of 10-ish year old twins)
- He began his ponzi efforts informally starting in February of 2011 through IRC channels, with microloans that turned into larger loans
- He said for the last 2 years he’s been “self employed in currency trading”. When asked what that meant, he said he used localbitcoins.com to arrange trades throughout Texas, always receiving cash for BTC.
- At a bitcoin conference in Las Vegas in July 2012, he hit up a bunch of bitcoin bigwigs for investments in his ponzi. They invested a lot into him, and he names names. Burt Wagner is the only name [our source] recognized. But he netted a lot of whales at that thing.
- Paraphrased question: Why did you take deposits in Vegas by paper transactions? “In Vegas I didn’t have access to a computer to be able to connect. Vegas’ network was horrible. So I told anybody that made deposits that I couldn’t verify on the server… I would pay them an additional percentage for those coins.”
- One of the Vegas investors stiffed him with the paper transaction, withdrawing the amount before the blockchain confirmed his deposit.
- He mentions that he had to change all of his passwords when bitcointalk got hacked: “It became Bill Cosby coins, a bunch of stuff got messed up, and everything went haywire, so they had everybody reset their passwords”
- He says about 60 to 70 percent of his ponzi was invested in Bitcoinica, the rest he was daytrading or cashing out in-person through localbitcoin.com.
- They seemed to spend like 30 minutes going around in a circle for pirate to explain that he used a large number of addresses to hide his transaction. Finally he had to spell it out: “It was to keep people from knowing exactly which large – I held most of the large bitcoin addresses on the internet. … they figured out a way to look through the blockchain to find out who has the most bitcoins. Well, for me, I needed a way to hide that.”
- He had some big bet with a bitcointalk poster named Vandroidy. He bet 5000 that he wasn’t a ponzi, apparently this was a big public thing? He had a big plan to publicly “mess” with vandroidy and win the bet, but his plans fell through as his entire business collapsed and he was behind hundreds of thousands of BTC.
- QUESTION: “Did you pay the 5000 bitcoin to Vandroidy?”
- ANSWER: “Oh yeah”<pause>
- QUESTION: “Why?”
- ANSWER: “Because I had to secure the bet”
- Shavers made an unsecured loan of 202,000 bitcoins to BTCST’s largest borrower, who promptly absconded with the funds.
- Shavers admits the July 2, 2012 rate-change announcement on the Bitcoin Forum precipitated a “wave” of withdrawal requests from BTCST investors.
- Pirate took in about 732,050 BTC.
- He paid out about 551,231 BTC…
- 150,649 BTC were transferred from the business wallet to Pirate’s personal accounts with… MT GOX! (deposition was taken in september, everything is silent as to the current status of the coins)
- At least $150,000 was successfully withdrawn as cash for him to live on
- The Fed is using curent exchange rates (3/3/14) to say investors were defrauded of $149 million
Additional food for thought:
Shavers paired with someone called “Big One” and “Number Two” to source coins and interest payments to keep his ponzi (a ponzi within a ponzi) going but he talked about “Big One” manipulating the market. He was basically suggesting that the Mt. Gox crashes that we saw happening on Fridays were his doing and that he had control of so many coins that he would cause a drop in price and scoop them up at lower prices on Friday, sell on Monday and give 10% interest on the invested coins to pirateat40. pirateat40 would then take his investor’s bitcoins, hand them to Big One”, he would drop the price again and reap more interest and then pay it out
Both “Big One” and “Number Two” had access to his bitcointalk account and posted on his behalf too. Silent bitcoin ponzi partners.
And finally, the icing on this cake of hilarity:
All admitted without legal counsel present, because Shavers considers himself a Freeman on the land, and therefore something something gold fringe berth certificate etc. He’s doomed.
If you’re not yet familiar with Bitcoin, then you probably have more normal friends than those of the “techie” variety or have managed to avoid people in libertarian-leaning circles. Bitcoin is a digital “cryptocurrency,” a sort of online cash that is generated via a network of computers crunching numbers to solve a mathematical puzzle, so to speak. The technical aspects can be quite difficult to explain and comprehend, especially to those who wouldn’t consider themselves computer literate or those who simply cannot be bothered to care.
It was created in 2009 by a person or persons going by the pseudonym “Satoshi Nakamoto” as an experimental proof of concept in building a trustless payment system for the “dangerously antisocial.” Banks and other traditional financial institutions are eschewed in favor of a point-to-point network that shares a public ledger of every transaction made throughout the system, the “blockchain,” which users must download (and upload) in order to participate in the network. There are some exceptions to this, but for the time being, we won’t be focusing on them.
The experiment went largely unnoticed at its beginning and was mostly the domain of cryptographers and other such geeks until mid-2010, when tech media attention increased and brought in a wave of new users. At this point people began to assign value to the Bitcoin, and Bitcoin exchanges began to spring up, allowing users to trade them for other currencies, most frequently the US dollar. As it gained popularity, it began to attract a different crowd of users, those who are ideologically opposed to governmental regulation and central banking, often identifying as libertarians or worse, anarcho-capitalists.
I love political cartooning, and this weekend a number of political cartoonists have either discovered or focused on Bitcoin. It’s great to see that cartoonists from all over the political spectrum can come together and mock libertarian shitheads:
Flailing wildly as it’s dragged into the swamp, the price of Bitcoin is sinking after Mt. Gox is revealed to be essentially insolvent, having no more money and no more Bitcoins. Meanwhile, all the other bitcoiners are distancing themselves from the falling giant after it once more halted withdrawals and deleted all of its twitter history.
Edit: Here is the lazily redacted income statement slide:
Thanks to /biz/ for reminding me to add the above image!
Inspired by a comment attempting to answer the question of using Bitcoin without internet access, Buttcoin has launched a brief investigation into how Bitcoin might work if the grid were to go down:
One of our ham radio pals advised us that “the fastest/most common digital protocol on the ham bands is 300 bps.” That’s right: bits per second. How long would it take to download the Bitcoin blockchain (currently approaching a size of 15 GB) at these rates? After some careful calculation (punching things into Wolfram Alpha) we came to 12.6755 years. But this isn’t the end! Taking into account the estimate that you’d only have acceptable propagation about half a day at best, this time would then double to 25.351 years. Add in an estimated 25% for noise-induced errors and you’re now up to 31.68875 years. Add to this the fact that we are coming off the peak of a 22-year solar cycle and that in approximately 11 years, shortwave communications will be drastically hindered compared to our current transmission ability so it wouldn’t be outlandish to estimate 40+ years for this step alone.
Provided there is uninterrupted power and reception for over forty years and that the cheap radios bitcoiners would by last that long, you can now spend your Bitcoin. Don’t forget to wait for your six confirmations, and watch out for the FCC!
Thanks jonny290 for helping us with this stupid and terrible thought experiment!
Please, Bitcoin Jesus, take a moment to inform Darfur War Orphans that water, food, and even air are worthless to you and that they should be eating Bitcoins instead.
Earlier today MtGox put out a press release regarding their issues surrounding halting all withdrawals. Friendly SA Forums goon Begby breaks it down for us here:
Basically when you send bitcoins to someone, there are several inputs in the transaction. Like the destination address, the amount, etc. Based on those inputs you get a transaction ID which is a hash of those inputs. If you want to see if something was confirmed on the blockchain, you can look up that transaction ID.
However, there is an attack you can do. You can actually change the order of the inputs and have the transaction still go through and end up with a different transaction ID.
Here is how the attack works:
1. Hey, MT Gox, I want to withdraw 4 butts to this address.
2. Mt Gox sends you those 4 butts and gets a transaction ID, broadcasts the transaction to get confirmed (basically yells to the internet, hey you stupid miners confirm this)
3. You, the totally awesome hacker, also broadcast the transaction with the inputs in a different order and yell to the internet louder. This results in a different transaction ID if it gets confirmed first.
4. If you yell loud enough, the blockchain confirms your set of inputs. So the transaction went through, but not under the transaction ID that Mt. Gox was expecting.
5. Call up Mt Gox and complain that you didn’t get your butts
6. Mt. Gox looks in their DB for the transaction ID they have on record, tries to look it up in the blockchain and can’t find it so they think it wasn’t confirmed. They then send you the butts again.
This is a well known issue with the bitcoin protocol and other exchanges workaround this by looking up the inputs in the blockchain instead of relying on the transaction ID, and only using the transaction ID after the transaction has been reliably confirmed. Mt. Gox is saying that this is a problem with bitcoin to cover their ass. I am not sure if its even bug. Its more of “don’t assume a transaction ID is legit until the transaction has actually been confirmed”.
So basically Mt. Gox has been getting ass raped by this known exploit for who knows how long, and has resent god knows how many butts. So their internal ledger is completely and totally fucked and they are going to have to go through every transaction they have ever done, look it up in the blockchain by inputs instead of transaction ID, and try to pick up the pieces. This is like finding out that you have accidentally been writing two checks for all your bills and then only realize this when your account goes negative.
TLDR; Mt. Gox got robbed using a well known exploit with an easy workaround that is so well known is not even a top ten issue for the devs. When successful this exploit will cause gox to double send butts to someone on a withdrawal. Who knows how much they double sent, they probably don’t even know.
Edit: Bonus, one of the devs said he had warned Mt. Gox of this several times over the past few years.
FUD (Fear, Uncertainty, and Doubt) is nothing new in the world of Bitcoin; any rational arguments against insane claims that Bitcoin will take over the world are often met with chants of “FUD, FUD, FUD!” as a ward against evil or an attempt to discredit the source. FUD is more often shorthand for “this person must be lying” when uttered by bitcoiners. Recently they’re the ones spreading FUD, however.
As you may have seen recently, disgruntled Bitcoin aficionados have taken to destroying their iPhones to “protest” the Apple App Store removing Blockchain’s iOS app. They’ve accused Apple of violating antitrust laws, of being afraid of Bitcoin, and even of being part of the NWO conspiracy, and the tech “media” have taken these mischaracterizations and run with them, blindly reporting that Apple hates Bitcoin and that it’s trying to crush it.
What actually happened is much simpler. Blockchain broke the App Store’s rules (here is a mirror, in case you don’t have an Apple developer account). Repeatedly. So let’s take a look at some of the relevant guidelines:
2.4 Apps that include undocumented or hidden features inconsistent with the description of the app will be rejected
This is probably the greatest offender. Blockchain’s app repeatedly snuck in functionality to allow users to send and receive bitcoins through the app. In fact, their original iterations contained these features which Apple rejected, forcing them to remove them only to attempt including them again in later updates. This can be seen clearly in the following images:
This is closely related to
11.1 Apps that unlock or enable additional features or functionality with mechanisms other than the App Store will be rejected
11.2 Apps utilizing a system other than the In App Purchase API (IAP) to purchase content, functionality, or services in an app will be rejected
In case it was in question whether Blockchain did all of this knowingly or were merely bumbling victims:
Next up, we have the following, which is frequently quoted in numerous articles about the removal of Bitcoin apps such as Gliph, Coinbase, and Coinjar:
22.1 Apps must comply with all legal requirements in any location where they are made available to users. It is the developer’s obligation to understand and conform to all local laws
Given Bitcoin’s dodgy history and questionable legal status in numerous countries, this comes as no surprise. Finally, we have this:
2.12 Apps that are not very useful or do not provide any lasting entertainment value may be rejected
There you have it. Apple does not have some vendetta against Bitcoin, they are simply enforcing their developer guidelines. Any app that violates these, whether it deals in Bitcoin, Litecoin, Dogecoin, Amazon gift certificates, or any other currency can and will be removed. Don’t believe the hype, misinformation, and outright lies that the so-called tech “reporters” are presenting. We here at Buttcoin are dedicated to presenting the unbiased truth, as presented above.