Texas Man Arrested for $4.5M Bitcoin Ponzi Scheme | Hacker News Reader

Texas Man Arrested for $4.5M Bitcoin Ponzi Scheme

forbes.com

85 pointsdavidst36 comments

I remember seeing pirateat40's scam happening live. I could not believe that anyone could possibly fall for a fund offering 10%+ per week, and when I found out that he ran off with 150k bit coins, I laughed so hard. The bitcoin community always found ways to amaze me.

To think, that it has come to pass that you can't trust an investment scheme in an unregulated currency by someone who calls themselves a pirate.

What's really hilarious is that not only did the vast majority of the bitcoin community not get scammed, but you don't have to be a bitcoin user to be ponzi-scheme'd, since it happens to people everywhere all the time! It's so funny.

reactive defensiveness and insecurity isn't actually very funny imo

The whole situation is not funny. That was my point.

if you can't find humor in the absurd level of fraud in the bitcoin sphere you're poorer for it

This reply is in direct contradiction to your first reply to me, which was a write-off of my laughing at the situation.

"In total, Shavers took in more than 700,000 BTC - which at one point constituted approximately seven percent of all Bitcoin then in public circulation."

I don't know how you'd define "the vast majority of the Bitcoin community", but 7% of the money supply is a pretty significant minority.

I am shocked! Shocked that an unregulated asset class that has attracted every technoutopian, financial naïf, and get-rich-quick dreamer would have a Ponzi scheme in the community.

Every once in a while something happens where possibly some of the old rules don't apply; suddenly a lot of people believe that none of the old rules are of any use at all. E.g., the dot-com bubble, when the new economy changed everything! Until it all came crashing down.

I'm hoping for more of these Internet crimes, if only because the transcription of Twitter posts into official court documents amuses me. Or is that "#amusesme"?

its called #seeyouindeposition

Does anyone know more about this story? Could he have gotten away with this if he were in a country with less regulations? Was part of the pitch that he was from the US or was that irrelevant to his investors?

You can rarely get away with Ponzi schemes. For an example of a less regulated country, check out the Albanian schemes [1] which reached 50% of GDP and then led to rioting, civil war, the fall of the government.

[1] http://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm

But they ~got away with it.

Here's the entire historical thread from pirateat40 on bitcointalk.org. Note the first post was updated later on to indicate he closed it, but the rest of the thread is archived.

https://bitcointalk.org/index.php?topic=50822.0

11% per _week_! If it sounds too good...

If it sounds too good to be true, then you'd better put all your savings into it quick before it gets shut down?

You're liable for clawbacks. Madoff investors who pulled out early and received more than they should have at the expense of others were all sued by the trust responsible for recompensing victims. Best to just stay out of it.

Wow, I had no idea. I was joking, but that's interesting just the same.

With ponzi schemes, I always have wondered if they "work" because some people even see that they are ponzi schemes, but believe themselves to be part of the early investor set that will receive they promised shares and "outsmart" the person leading the scheme.

Should've tried Kickstarter instead.

I assume that's a joke, but there's a lot of shady crowdfunding, "crowdsales", IPOs, and "ICOs" going on in Bitcoin land. They're not Ponzis because they don't promise any specific level of return but the effect is similar and the SEC is cracking down on some of them.

4.5 million bitcoin scheme, 40 million in fines? Ridiculous. According to the article he took around 1 million for personal use and returned the rest.

If you only had to pay back what you stole, it wouldn't really be punishment.

And it has to be punishment, instead of, say, rehabilitation, because?

So you don't scam twice as big and just get caught for half of it on purpose. Pretty sure that's Die Hard though.

Because retributive theory of punishment.

How do you rehabilitate a person who does something like this such that they won't do it again? Serious question.

Deterrent.

Well, possibly it could be rehabilitation, but what if rehabilitation fails and they offend again? Do you just layer on more rehabilitation each time, or do you eventually decide on punishment at some point?

Justice

Because there are a thousand other people saying "oooh, what a good scheme. Maybe I should try that."

Deterrence is a significant part of the justice system.

Because otherwise it would be irrational not to commit crimes?

He kept 150,000 Bitcoin.. Today they'd be worth over $50M. If you stole a stack of stock certificates on a day when they were only worth $10 and were arrested on a day when they were worth $100, you couldn't just pay back $10 in cash and walk away with the stock, why should BTC be any different?

Failure to repay is subtly different from going out and stealing in the traditional manner. If you fail to repay stock and get super lucky with the value I think you should be able to pay cash+interest+penalties* and walk away. (And play roulette next time, less likely to end in jail.)

They're not going to demand less money if the stock goes down, are they?

*penalties perhaps meaning you pay $30 plus interest

What if they were now worth $0? Should he not have to pay then?

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