2012-08-29 slashdot.org - Large Bitcoin Ponzi Scheme Collapses With a Loss of

[julz]

Large Bitcoin Ponzi Scheme Collapses With a Loss of $5.6 Million

2012-08-29

http://news.slashdot.org/story/12/08/29/0349226/large-bitcoin-ponzi-scheme-collapses-with-a-loss-of-56-million


Despite the many people calling it out as a Ponzi scheme from the beginning, Pirateat40 was able to collect millions of dollars worth of Bitcoins from thousands of Bitcoin users. At almost every stage Pirateat40 copied the path of the EVE Online Ponzi scheme except on a much larger scale with a far more liquid take. Now, it has shut down, and investors are wondering where their digital currency went. Quoting: 'He claimed that BS&T was sitting on 500,000 BTC on the day of the shutdown, worth more than $5.6 million USD at today's price of $11.38. "Once my process is released you'll understand more of how coins move around," he told members of the Bitcoin community last week. Pirateat40 initially promised to refund his investors' Bitcoin deposits plus interest within a week, effectively admitting that he did not have the Bitcoins on hand. The fund normally paid out on Mondays, but last Monday and today have passed so far without refunds. BS&T investors are complaining loudly and so-called "pass-through" funds that invested with BS&T are shutting down. As of this writing, BS&T says there is "no ETA on payments."'

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[Shadow383]

So because of the greed and stupidity of some of our members, "Bitcoin" gets associated with "Ponzi" in the media once again. Sad.

[FreeMoney]

I'll give you a billion dollars for that apple. Gives apple. Doesn't pay. OMG I just lost 1B dollars.

I'd like to see evidence or even victims claims totaling 1M. Not remarkable promises unfulfilled, but actual coins sent less coins returned. The apple not the billion.

[hazek]

I'll give you a billion dollars for that apple. Gives apple. Doesn't pay. OMG I just lost 1B dollars.

I'd like to see evidence or even victims claims totaling 1M. Not remarkable promises unfulfilled, but actual coins sent less coins returned. The apple not the billion.

+1

[Stephen Gornick]

I'd like to see evidence or even victims claims totaling 1M.

I think you are underestimating the allure of 3,446% APR.  Not only were these "investors'" bitcoins appreciating in value, they were multiplying like rabbits.  It was easy for them to double down thinking the payday was just around the corner.

It is very likely that there was much more than 100K bitcoins transferred.

[nimda]

Just add up the face-values of the various bonds on GLBSE and I believe you'll find more than 100K BTC supposedly invested with pirate

[Explodicle]

It looks like the Slashdot commenters are interpreting this properly - that all Bitcoin did was enable a regulation-free environment. Boo hoo a bunch of people got greedy and lost money, at least now I can't be forced to pay for a pirate bailout or a regulatory agency that protects me from myself.

I'll take caveat emptor over caveat omnes any day.

[grondilu]

at least now I can't be forced to pay for a pirate bailout or a regulatory agency that protects me from myself.

  Very good point

[Shadow383]

Just add up the face-values of the various bonds on GLBSE and I believe you'll find more than 100K BTC supposedly invested with pirate

At the start of august it was ~260k bare minimum including bitcoinmax - a realistic appraisal of the PPTs at the point of collapse is probably 350-400k.

[FreeMoney]

I don't doubt that the balances total that much, but those balances were were never bitcoins. The interest was fantasy. Plus many of the actual bitcoins were sent back over all that time.

I would believe 100k coins, even 200k if there were even moderatly trustworthy people who made claims totaling that amount, but I don't see it.

I'd also believe (not on Pirate's word though) that he stopped because he ran out of funds. Not meaning 0 profit really, but all 'profit' already spent. Especially considering a lot of the growing time period was at $5 coins.

[nimda]

I don't doubt that the balances total that much, but those balances were were never bitcoins. The interest was fantasy. Plus many of the actual bitcoins were sent back over all that time.

I would believe 100k coins, even 200k if there were even moderatly trustworthy people who made claims totaling that amount, but I don't see it.

I'd also believe (not on Pirate's word though) that he stopped because he ran out of funds. Not meaning 0 profit really, but all 'profit' already spent. Especially considering a lot of the growing time period was at $5 coins.

Have you done what I said? The bonds couldn't be purchased for less than face value, so they do represent actual investments, not just interest.

[makomk]

Have you done what I said? The bonds couldn't be purchased for less than face value, so they do represent actual investments, not just interest.

Not necessarily. What happens if someone reinvests their interest by buying further bonds with the interest payments? Those reinvestments would show up as an increase in the total bonds outstanding but (assuming this is a ponzi) they'd still be fantasy figures that never actually represented extra bitcoins in pirate's possession, in the same way that everyone else's reinvested interest never actually represented extra bitcoins invested.

[nimda]

That's right. Interesting. It would only work if the bond was sold by the issuer to a consumer paying with interest, though. Hmm

[molecular]

So because of the greed and stupidity of some of our members, "Bitcoin" gets associated with "Ponzi" in the media once again. Sad.

The slashdot crowd, while leaning against bitcoin, seems to have no problem discerning bitcoin and btcst. Most even identify bitcoin as a non-ponzi.

[molecular]

at least now I can't be forced to pay for a pirate bailout or a regulatory agency that protects me from myself.

  Very good point

indeed! Imagine these "losses" would have to be "socialized" somehow. Unthinkable!

People lost money... tough luck. They took the risk, they take the loss as they would've (or have) reaped the gains.