Just like the title says. Logs and depositions are coming out showing how much BFL did to defraud customers, other companies, banks, and whatever else. Some highlights:
At the request of the Federal Trade Commission, a federal court has shut down Butterfly Labs, a Missouri-based company that allegedly deceptively marketed specialized computers designed to produce Bitcoins, a payment system sometimes referred to as “virtual currency.”
The FTC’s complaint against the company and its corporate officers alleges that Butterfly Labs charged consumers thousands of dollars for its Bitcoin computers, but then failed to provide the computers until they were practically useless, or in many cases, did not provide the computers at all.
Perennial Bitcoin Übermensch Bruce Wagner has returned to the spotlight with a new totally-not-a-scam website and plan to make buying Bitcoins easier! BuyBitcoin dot com seems to aim to replace the currently unavailable LocalBitcoins website through the use of a gay hookup social networking app, creating the “The Human Bitcoin ATM Project”, a network of 78-year-old men with buttcoins acting as ATMs, or, since they’re neither automatic nor machines, tellers. Simply set your age to 78, then only search for other 78-year-olds who’ve changed their user icons to a group of hands groping a Bitcoin. If you want to hook up or buy bitcoins, just check the app that was not at all designed to facilitate Bitcoin trades for nearby marks and then knife them in a parking garage, just like you would on LocalBitcoins!
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.
In case you’re not following closely, pirateat40 (AKA Trendon Shavers) has been formally charged by the SEC, and a judge has given the case a green light. The filed a “show cause” that seized Shavers’ assets before trial, and this is his real, unedited response to this action:
Defendant’s preliminary response to show cause
The court does not have jurisdiction because it is not within the securities law.
1) freezing Defendants’ assets;
It’s ridiculous for the court to freeze my assets that are required to pay rent, utilities, food, etc and be able to pay for an attorney. My wife does not work and cares for our two children.
2) directing Defendants to provide verified accountings to the Commission;
The court has no authority to order this because it is not within the jurisdiction and does not show a need for it.
3) authorizing expedited discovery concerning the location and extent of Defendants’assets;
Three days is too short and there is no reason for it based on other orders. This should be revised based and agreed to.
Have we mentioned he is appearing pro se in court? This should be amazing.
In his ruling, judge Amos Mazzant made the mistake of saying “It is clear that Bitcoin can be used as money” and bitcoiners have taken this to mean that the US court system, along with the rest of the world governments, have declared Bitcoin to be a real currency that will soon destroy the US Dollar, Euro, various Pesos, and so on. Some have simplified it to the point that they are just shouting “Bitcoin is MONEY” at no one in particular.
Federal judge declares Bitcoin "realest money ever" & sets fire to a pile of cash & laughs at idiot hell fuckers who still use USD, dancing
— Butt Coin (@ButtCoin) August 7, 2013
Every bitcoiner’s favorite scam artist, the venerable pirateat40, has been formally charged with defrauding people with… a Ponzi scheme! Shocking news, bitcoins being involved with a Ponzi scheme, but here it is, laid out by the evil feds, who are OK this time since they’re punishing the wicked instead of holding down captains of industry.
Washington D.C., July 23, 2013 — The Securities and Exchange Commission today charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin, a virtual currency traded on online exchanges for conventional currencies like the U.S. dollar or used to purchase goods or services online.
The SEC alleges that Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold. Today the value of 700,000 Bitcoin exceeds $60 million.
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. 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. Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses.
The SEC issued an investor alert today warning investors about the dangers of potential investment scams involving virtual currencies promoted through the Internet.
“Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed.”
According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Shavers sold BTCST investments over the Internet to investors in such states as Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania. Shavers posted general solicitations on a website dedicated to Bitcoin discussions, and he misled investors with such false assurances about his investment opportunity as “It’s growing, it’s growing!” and “I have yet to come close to taking a loss on any deal,” and “risk is almost 0.” Contrary to the representations made to investors, BTCST was not in the business of buying and selling Bitcoin at all.
The SEC alleges that Shavers, who lives in McKinney, Texas, paid 507,148 Bitcoin in investor withdrawals and purported interest payments. He transferred at least 150,649 Bitcoin to his personal account at an online Bitcoin currency exchange. Shavers suffered a net loss from his day trading, but realized net proceeds of $164,758 from his sales of 86,202 Bitcoin. Shavers transferred $147,102 from his personal account at the online Bitcoin currency exchange to accounts he controlled at an online payment processor as well as his personal checking account. He used this money to pay his rent, utilities, and car-related expenses as well as for food and retail purchases and gambling.
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.
The SEC’s investor alert, prepared by the agency’s Office of Investor Education and Advocacy, recommends that investors be wary of so-called investment opportunities that promise high rates of return with little or no risk, especially when dealing with unregistered, Internet-based investments sold by unlicensed promoters.
“Ponzi scheme operators often claim to have a tie to a new and emerging technology as a lure to potential victims,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Investors should understand that regardless of the type of investment, a promise of high returns with little or no risk is a classic warning sign of fraud.”
I hate to say we told you so, but we told you so.
Satoshi Dice, the quasi-legal Bitcoin gambling website that is nearly destroying the entire Bitcoin protocol by performing a systematic DDoS attack on the blockchain, just sold for a cool $12 million dollars. Founder Erik Vorhees, a bit wheel down at the Bitcoin factory, is going to make out a like a bandit right before the entire site either gets banned from playing the blockchain like it is or crushed by the feds when they realize it’s the single largest source of Bitcoin money laundering.
Dear Asset Holders,
I have some very important news to share with you. Some of you will be pleased, and some upset, but I believe this to be a solid, desirable, and fair outcome for those who have put their trust in S.DICE.
SatoshiDice is being sold, in full, to a new company that will take over all ownership, operations, and management. The total sale price is 126,315 BTC, or 0.00126315 BTC per share.
According to the MPEX Agreement, MPEX holders are entitled to receive 0.00126315 BTC per share, alongside other private owners. However, for the good of the MPEX holders and for the sake of the general Bitcoin community, which the site always has intended to support and nurture, SatoshiDice has arranged to pay MPEX holders an additional .00223685 BTC per share bringing the total to 0.0035 BTC per share.
This is a 277% premium over the sale price and a roughly 175% premium over the current market price of S.DICE shares on MPEX. It is also roughly equivalent to the average price of S.DICE shares at IPO (though BTC was $12 back then, and over $90 today).
Note that the MPEX order book for S.DICE was cancelled just prior to this announcement in order to prevent anyone from taking advantage of standing orders.
While I know some S.DICE owners intended to hold for a long time, and will thus be dismayed by the buyout, it is my sincere hope that this compensation level will be amenable. It is substantially higher than the contract mandates, and it is almost 3x higher than all private owners are being paid. It has not been easy to negotiate to this level, but I believe it is the right thing to do.
Further, there will be an additional small amount added to compensate for the previously deducted costs of the new website development, as it did not feel right for S.DICE holders to have paid for development of a site they won’t have a stake in after the buyout.
This letter is being posted roughly 24 hours prior to the payout, at which point MPEX holders will receive .0035 BTC per share plus the small additional amounts mentioned above. MPEX will then de-list the asset and the S.DICE MPEX Agreement will be satisfied. The payout will occur in roughly 20 increments over a period of several hours and will arrive in S.DICE holders’ accounts (in the same manner as dividends). All passthrough operators are responsible for their own assets and customers, obviously.
As per the S.DICE agreement, asset owners do not have voting rights to effect operational changes, nor any rights to negotiate nor block a full buyout of the company. Nevertheless, SatoshiDice has kept the interests of the asset holders in mind throughout this negotiation process, and has intended to treat these holders fairly, above and beyond contractual obligations.
I highly value and respect the trust you have placed in me, and I hope this outcome reciprocates that respect.
Even though he’s cashing out a made man, in a final “Fuck You” he’s decided to force all this shareholders (yes, people bought shares in this sham) to sell at a price he sees fit. No, you can’t hold long term and no you can’t continue to profit under the new ownership. Too bad, read the fine print.
Of course, it wouldn’t be bitcoin without a little bit scamming in the form of some insider trading
Someone bought a bunch of shares just yesterday before the announcement.
Good luck Satoshi Dice and I hope you fucking burn into the ground.
Don’t worry if those words don’t make any damn sense to you, because the entire thing is utterly nonsensical. Aside from the absolutely ridiculous name, the concept is outstandingly foolish: you, the hapless butt enthusiast, buy shares in the Winklevoss twins’ Bitcoin holdings and they take your money, then list dozens of ways your money can disappear, along with a hefty dose of caveat emptor, followed by cacophonous laughter.
Some choice readings from the writeup, thanks to SA‘s terrifying Bitcoin robot, …!, followed by translations for us regular folk:
As the Sponsor and its management have no history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitable to manage the Trust.
Translation: We, the absurdly named Winklevoss twins, have no idea what the fuck we are doing here.
The loss or destruction of a private key required to access a Bitcoin may be irreversible. The Trust’s loss of access to its private keys or its experience of a data loss relating to the Trust’s Bitcoins could adversely affect an investment in the Shares.
Translation: Oops we deleted our wallet.dat/reset the Amazon servers/forgot our password!
Political or economic crises may motivate large-scale sales of Bitcoins, which could result in a reduction in the Blended Bitcoin Price and adversely affect an investment in the Shares.
Translation: Some idiot will shout “Cyprus!” and the price will swing wildly.
It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoins in one or more countries, and ownership of, holding or trading in Shares may also be considered illegal and subject to sanction.
Translation: The US government is cracking down on Bitcoin because all it’s really used for is to buy drugs and underage porn.
Shareholders cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Trust.
Translation: We very well may just take the money and run.
The reviews thus far are mixed. Wait, no they aren’t:
I've seen a lot of bad ETF ideas come to market. Some are still around, some aren't. I can assure you the bitcoin idea is dreadful.
— ETF Professor (@ETFProfessor1) July 1, 2013
winklevoss bitcoins sounds like a medieval british child sex crime
— Raven Mack, say word (@SSVa_Raven) July 2, 2013
Not got a ticker yet Winklvii? SCKR is free. FYI
— James von Simson (@jamesvonsimson) July 1, 2013
— financial acrobat (@finansakrobat) July 1, 2013
Winklevoss twins are making a play to make bitcoins mainstream. How am I supposed to fund Central American revolutionaries now?
— A$AP Thready (@JacoboLaSombra) July 2, 2013
After much consideration, my comment on the winklevoss twins starting a bitcoin ETF is "lolololololololol"
— Jordan Haley (@JordanAHaley) July 2, 2013
Where do you trade Bitcoin ETF shares for WoW gold?
— J. Vincent Bennett (@JVincentBennett) July 2, 2013
The Winklevosses should have realized their Bitcoin exchange wasn't such a hot idea when Mark Zuckerburg didn't try to steal it from them.
— Brandon Z Smith (@BrandonZSmith) July 2, 2013
The Winklevoss twins are creating a Bitcoin ETF: http://t.co/VvE1TH4efr Ummmmmmmmmm
— Evan G (@eYank45) July 2, 2013
Having never seen Social Network, not getting all these Winklevoss puns but seem to be the only guys who can make Bitcoin even more annoying
— P Millenium Ducats (@PMileniumDucats) July 2, 2013
Even some of the True Believers at Bitcointalk are not so thrilled:
Do not give your money to anybody named “Winklevoss,” especially if they’re offering you Bitcoins in return.