From what I understand nefario only had a couple thousand BTC in his wallet and the majority of the BTC was passed through to the asset issuer. Unless you have proof otherwise, I doubt there will be enough assets to recover from nefario to sue for in any court.

Please keep in mind that nefario taught english in China, tried to vacation in the US and got denied by customs, and worked on a low salary as a sacrifice to the Bitcoin community. Even if most of the people he serviced were scammers (the issuers of GLBSE stock), personally I don't see him as a scammer. He was someone who had a series of bad ideas.

Also try to keep in mind that he has a family who he is responsible for during all this mess, and I doubt that was easy. I wish nefario the best as he reestablishes his programming career. He may find his idea of establishing a legit bitcoin stock market is impossible, and has to return to the corporate work world.

From what I understand he passed these funds through to fraudulent asset issuers. He was just a middleman. It's a bad idea, but he didn't really profit that much himself.

I hope we can identify and pursue the asset issuers to recover the investors' money.

If he doesn't pay back a dime nefario won't get anything out of this. Perhaps a couple thousand bitcoins, but thats less than a years salary for a normal person.

Ideally you would pursue the asset issuer. If they can't be located I guess we can assume it is nefario.

I think nefario's life since leaving Sun Systems is a worse punishment than any government can place on him.

Nefario sacrificed a lot in his personal life to make GLBSE.

It's sad because no matter how good he made it the fundamental thing GLBSE was doing was illegal.

I'm glad he decided to step back and reevaluate what he was doing.

I hope his very public involvement in bitcoin has not made him unemployable.

Actually, what you wrote up there is one of the best descriptions of what the SEC does. It's hard to explain to people that have never looked into it.

If you are a pirate investor you should follow it to the letter.

Please don't think you are losing anything by giving up your anonymity. I know many people in this community see anonymity as being the most precious resource, but I promise its not worth that much in this context.

Also, don't consider this to be "snitching." This is not the police as BCB said.


I hope I have not contributed to this misinformation.

I like to comment and speculate on things that are happening because it is entertaining. I have two motivations for sharing my opinion.

1) I do not like to see people be burdened by a investigation/trial and hope people will make wise decisions to do the right thing. It is an excruciating process.

2) Even worse is the effect of a fraudulent schemes on victims; I have seen the absolute worst here. I hope it never happens to you.

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Sometime later...


Later still...

I would guess that ninjaat40 is either Pirate, one of his "feeder fund" managers like goat, or one of his shills like reeses.

To run a successful Ponzi you have to spread the rumor that you are doing something that is difficult for average people to achieve to obtain higher than likely returns.

The original Ponzi used buying and selling International Reply Coupons for his scheme.

Most Ponzi schemes these days are based on getting a cut of illegally obtained income. For example, getting a cut of income from illegal drug sales.

I don't really feel very sorry for any of pirates investors, because they literally thought they were getting a cut of drug money through the internet fake stock market.

It makes sense that Pirate and his salesmen would go out of their way to spread this rumor in the newbie forum. Especially if the volumes of new suckers flowing into the ponzi is in decline.

If only Chaang Noi displayed the level of candor in his business dealings as he has shown in disclosing other's identities.

Most people are too stupid to know what to do with their money.

Most people would be better off with a pension plan than a self-managed 401k.

I'd rather own shares of companies you named, than a kickstarter style startup where 100% losses are all but guaranteed, like "wikispeed."

1) I have reduced it to a shorter quote.

2) Its particularly unsettling to read that you've been in a coma for the last month. I hope the damage is not permanent.

Crowdfunding: Potential Legal Disaster Waiting To Happen

10/22/2012 @ 7:00AM |810 views
Guest post written by Bryan Sullivan and Stephen Ma
http://www.forbes.com/sites/ericsavitz/2012/10/22/crowdfunding-potential-legal-disaster-waiting-to-happen/

Bryan Sullivan and Stephen Ma are attorneys with Early Sullivan Wright Gizer & McRae, a Los Angeles-based entertainment and business law firm.

In theory, crowdfunding appears to be a great way for people with good ideas to take advantage of the Internet. Throw your idea online and a slew of like-minded investors will give you money to bring your idea to fruition. Artists have been doing it successfully for a few years on Kickstarter to fund creative projects, and teachers on Funding4Learning to fund education projects. To bolster this burgeoning concept, in April 2012, the United States Government passed the Jumpstart Our Business Startups (JOBS) Act, which contains crowdfunding provisions to help these entrepreneurs raise funds. Taking a closer look at crowdfunding reveals a system fraught with peril that will likely lead to an increase in litigation.

The JOBS Act allows any Zuckerberg wannabe with an idea to skirt securities laws to attract equity investors. Anyone, be it an entrepreneur or corporate entity, can raise up to $1 million from investors putting in no more than $10,000 each, or no more than 10% of their income, whichever is less. That amount increases to $2 million if the crowdfunding entity supplies the “crowd” investors with audited financial statements. Under this system, a crowdfunder will not have to disclose financial statements until it has more than 1,000 shareholders; traditional, full regulatory SEC disclosure rules kick in at 500 shareholders. Essentially, it allows startups to raise up to $50 million in an IPO without having to comply with the SEC’s full regulatory structure and related fees. Yes, you read that correctly – and we can only guess the disasters and class actions resulting from the future of crowdfunding.

William Galvin, Secretary of the Commonwealth for Massachusetts, was so concerned about crowdfunding risks that in August he sent a letter to the SEC identifying crowdfunding’s many pitfalls. The letter is spot on. Mr. Galvin writes:

“While this picture of the potential benefits of crowdfunding is undeniably attractive, as regulators we must be vigilant that the exemption will not become a tool for financial fraud and abuse…Unscrupulous penny stock promoters have used misrepresentations to market obscure and low-value stocks to individuals, often through pump and dump schemes. These kinds of fraud operators have not gone away.

The risk for fraud is far more real than crowdfunding participants or the SEC want to admit. By its nature, crowdfunding appeals to a less sophisticated investor who will invest in any project they think will be the next Facebook. Typical crowdfunding investors, even with basic disclosure requirements for participation, won’t have the investment savvy to determine whether an investment is real or a fraud. After all, many fraudsters and scam artists are brilliant at presenting their investments on paper to meet the very basic disclosures of crowdfunding. Just look to Charles Ponzi and Bernie Madoff, both appearing as entirely legitimate businessmen, who were able to dupe sophisticated investors and, in Madoff’s case, the SEC itself. The bottom line is that, while unintentional, crowdfunding is tailor made to assist fraudsters in duping unsophisticated “investors.” Indeed, even if the SEC, in an attempt to avert fraud, increases the amount of disclosures, the individual investment contributions will still be too small for law enforcement authorities to expend resources to investigate or for attorneys to take on a fraud lawsuit, unless of course a contingency business litigator can bring a class action. Galvin likely would agree with this concern since he specifically noted:

“ The typical crowdfunding offering will be small (many may be far below $1 million), so there is the great risk that these offerings will fly under the radars of many regulators.

... article continues ...

http://www.forbes.com/sites/ericsavitz/2012/10/22/crowdfunding-potential-legal-disaster-waiting-to-happen/

Here is a PDF of what it takes to do this.

Keep in mind this assumes you have free-trading shares in the hands of investors which is an entirely different worm to swallow.

I can cover this subject also if the forum wants.

http://www.spartansecurities.com/forms/otcbb.pdf

The low priced ones probably have a history you don't want to be involved in, like being shells from former pump and dump scheme, have outstanding judgments and/or liens against them, or have some sort of poison pills in their charter. Which means whoever buys out the shell is on hook for paying a lot of money. It could possibly ruin you no matter how much money you have.

One of these in good condition probably costs 150,000$ at the very least, and because of the way economics works it would probably cost you much more than that to form one from nothing.

You have over 100,000$ on GLBSE?

I see the beginnings of a remake...

A plucky, middle aged man of indeterminable foreign origin opens a fictional stock exchange. Follow him on this raucous adventure as he gets busted by the State's Attorney. He can't afford the $50,000 for his own attorney so he decides to go at it "Pro Se." Will his hail mary "It's all just a MMO" specious defense keep him out of the slammer or will he be doing hard time? Find out in
 
My Cousin Mircea

Exactly.

http://techcrunch.com/2007/07/25/second-life-bans-gambling-following-fbi-investigation/

Yeah, well, if you're so smart why did you have your money on GLBSE?

No, really. If you know this much about banking what the hell were you thinking?

[/quote]

There are other rules that can be used as well, but I believe the goal is to raise money for bitcoin related products from normal people, so Reg D is the most appropriate.

Just for completeness the list of ways to investigate are:

1) Full Registration (S-1, and others)
2) Regulation D
3) Regulation A
4) Intrastate offering
5) Rule 144
6) Reverse Merger into a reporting shell company
7) Private placement
Accredited Investor Offering

After the stock is issued and the legends are removed you can find a broker-dealer to help with Rule 15c2-11 (Form 211) quotations.

I'm unsure what the regulations are for starting your own exchange!

Pink sheets and OTCBB are the same thing. They are competitors.

The exemptions are very strict and your Regulation D exempt stock will have a restrictive legend on it that does not allow free trading (meaning no pink sheets).




You do not need a broker-dealer or market maker. You need a Transfer Agent. Let's be completely clear -- a broker-dealer is not required.

Complying with the law is the best option, and I'd like to enhance your knowledge of this process. A clean, legal SEC-registered OTCBB shell company will run higher than most people's idea of pocket change. Please do your Due Diligence, YMMV. Also, you certainly must be registered with the SEC, unless you are classified under a Regulation D exemption.

He knew what the issues were even before talking to an attorney.


I'd imagine during the initial consultation Nefario outlined exactly what was wrong (and illegal) with his business model while his solicitor nodded solemnly, parroting back what was said whilst sizing Nefario up, and guessing how much money he had.

Unfortunately, he will be disappointed because selling phony securities to children and college students isn't a particularly profitable endeavor.