Going after Trendon Shavers, Pirateat40, BTCST

[thebaron]

I wonder if he was smart enough not to put all his eggs in one basket. There's other ways to withdraw wealth from BTC besides an exchange platform.

[1714771042]

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[DeathAndTaxes]

Pretty sure in texas they cant take his house. Also this is only the sec and not the fbi.

It depends.  Was funds from the scam used to make house payments.   If so then more than one district attorney has gone the "procedes of a criminal enterprise angle".  More common to deprive drug dealers of physical assets (that they could use for bail) but who knows.

[DeathAndTaxes]

Pretty sure in texas they cant take his house. Also this is only the sec and not the fbi.

The sec is trying to get a court order... why not do it first then tell pirate?

Seems like they have a weak case or something. Anyway 150000.... that wont go far even if collected.

yeah, I think it will be hard to get a conviction. Still, I didn't expect the SEC to do anything.

What would be hard about a conviction.  ponzi schemes are completely illegal.  Did he promise investors a return?  Did he pay investors from the deposits of newer investors? That is really all that is needed. Some financial crime can be very tough to prove but something is either a ponzi or not.  

The uncliensed security issue is even easier to prove.  He didn't register with SEC.  They simply needs to find one or more persons willing to testify that Pirate offered them an investment.  Note the word offered.  Proof that funds exchanged hands or securities were sold isn't even a requirement.

BTW though the SEC can't file criminal charges that would be the job of the Justice Dept.  Of course the SEC can hand over everything they have to them.  If Justice Dept doesn't move it probably has more to do with the small scale then any inability to secure a conviction. 

[wachtwoord]

Pretty sure in texas they cant take his house. Also this is only the sec and not the fbi.

The sec is trying to get a court order... why not do it first then tell pirate?

Seems like they have a weak case or something. Anyway 150000.... that wont go far even if collected.

yeah, I think it will be hard to get a conviction. Still, I didn't expect the SEC to do anything.

What would be hard about a conviction.  ponzi schemes are completely illegal.  Did he promise investors a return?  Did he pay investors from the deposits of newer investors?

That is really all that is needed. Some financial crime can be very tough to prove but something is either a ponzi or not. 

BTW though the SEC can't file criminal charges that would be the job of the Justice Dept.  Of course the SEC can hand over everything they have to them.

If investments were made in US Dollars it would be far easier to prove he actually received the money, the pseudo anonymity of Bitcoin makes this complicated. Further the legal status of Bitcoin is far from certain. If I make a Ponzi in Eve Online/Wow will the SEC (or the justice department) prosecute me as well?

[DeathAndTaxes]

Pretty sure in texas they cant take his house. Also this is only the sec and not the fbi.

The sec is trying to get a court order... why not do it first then tell pirate?

Seems like they have a weak case or something. Anyway 150000.... that wont go far even if collected.

yeah, I think it will be hard to get a conviction. Still, I didn't expect the SEC to do anything.

What would be hard about a conviction.  ponzi schemes are completely illegal.  Did he promise investors a return?  Did he pay investors from the deposits of newer investors?

That is really all that is needed. Some financial crime can be very tough to prove but something is either a ponzi or not. 

BTW though the SEC can't file criminal charges that would be the job of the Justice Dept.  Of course the SEC can hand over everything they have to them.

If investments were made in US Dollars it would be far easier to prove he actually received the money, the pseudo anonymity of Bitcoin makes this complicated. Further the legal status of Bitcoin is far from certain. If I make a Ponzi in Eve Online/Wow will the SEC (or the justice department) prosecute me as well?

Well per the press release he deposited 150,000 BTC on an exchange and then lost about half in day trading and then transfered ~$150K worth (USD) into a checking account.    If necessary getting the records of the exchange to obtain his deposit addresses wouldn't be very difficult. 

Investors BTC --->  Ponzi ---> His Exchange Account ----> USD in his checking account.

[Scott J]

Pet rocks are serious business.

[wachtwoord]

Investors BTC --->  Ponzi ---> His Exchange Account ----> USD in his checking account.

I would imagine the above connection to be hard to prove.

[DeathAndTaxes]

Investors BTC --->  Ponzi ---> His Exchange Account ----> USD in his checking account.

I would imagine the above connection to be hard to prove.

Really?  With the exchange account in his name?  To withdraw $150K would require full KYC and docs.
To seize assets you require a warrant and that would require proving at least to a judge that there is sufficient cause.

Now if he had kept it all as BTC and sent them to a variety of encrypted and brainwallets that would be a lot harder.  Then again at least according to the press release Pirate was an idiot. I mean he lost the lion's share of what he stole.

[wachtwoord]

Investors BTC --->  Ponzi ---> His Exchange Account ----> USD in his checking account.

I would imagine the above connection to be hard to prove.

Really?  With the exchange account in his name?  To withdraw $150K would require full KYC and docs.

this.

or pirate would have to claim he got the btc some other way and it was his. like he mined it all back in 2009/2010...   i don't know. seems messy.

Guys the account is in his name sure. Good luck proving the connection with the (alleged) Ponzi though Bitcoins are Bitcoins. In a criminal case Trendon is the accused, he doesn't have to explain how he got the Bitcoins. The prosecution needs to prove how he got it beyond reasonable doubt. IANAL though

[wachtwoord]

Investors BTC --->  Ponzi ---> His Exchange Account ----> USD in his checking account.

I would imagine the above connection to be hard to prove.

Really?  With the exchange account in his name?  To withdraw $150K would require full KYC and docs.

this.

or pirate would have to claim he got the btc some other way and it was his. like he mined it all back in 2009/2010...   i don't know. seems messy.

Guys the account is in his name sure. Good luck proving the connection with the (alleged) Ponzi though Bitcoins are Bitcoins. In a criminal case Trendon is the accused, he doesn't have to explain how he got the Bitcoins. The prosecution needs to prove how he got it beyond reasonable doubt. IANAL though

But all they would have to do is link him to his pirateat40 account, the lowest charge they can throw at him is an unregistered security.

They still have to prove he received Bitcoins for the investment. (and even then convince the judge this is a value transfer)

[DeathAndTaxes]

Investors BTC --->  Ponzi ---> His Exchange Account ----> USD in his checking account.

I would imagine the above connection to be hard to prove.

Really?  With the exchange account in his name?  To withdraw $150K would require full KYC and docs.

this.

or pirate would have to claim he got the btc some other way and it was his. like he mined it all back in 2009/2010...   i don't know. seems messy.

Guys the account is in his name sure. Good luck proving the connection with the (alleged) Ponzi though Bitcoins are Bitcoins. In a criminal case Trendon is the accused, he doesn't have to explain how he got the Bitcoins. The prosecution needs to prove how he got it beyond reasonable doubt. IANAL though

But all they would have to do is link him to his pirateat40 account, the lowest charge they can throw at him is an unregistered security.

They still have to prove he received Bitcoins for the investment. (and even then convince the judge this is a value transfer)

Nope the mere offering of unlicensed security is a crime.

[DeathAndTaxes]

does it matter at all that this ruling was after he did what he did?

No.  This kind of thing annoys me because it creates a defacto run around the prohibition on ex post facto laws.  FINCen guidance is that the regulations ALWAYS applied to Bitcoin even before the creation of Bitcoin it applied to any theoretical virtual currency. The guidance was merely clarification of existing law/regulation.

[thebaron]

Investors BTC --->  Ponzi ---> His Exchange Account ----> USD in his checking account.

I would imagine the above connection to be hard to prove.

Really?  With the exchange account in his name?  To withdraw $150K would require full KYC and docs.

Have you seen what you can buy on the Silk Road?

[thebaron]

What confuses me is the value of cashing in all those BTC given at around $1.91 each. Unless they're counting each individual "day trade" in that, and him just cashing out his final balance after losses.

[bigdude]

Front Page on Australian news

$4.5 million Bitcoin Ponzi scheme - Man charged in alleged Bitcoin scam

http://www.news.com.au/money/money-matters/man-charged-in-alleged-bitcoin-scam/story-e6frfmd9-1226684102340

[RoadTrain]

Front Page on Australian news

$4.5 million Bitcoin Ponzi scheme - Man charged in alleged Bitcoin scam

http://www.news.com.au/money/money-matters/man-charged-in-alleged-bitcoin-scam/story-e6frfmd9-1226684102340

On Bloomberg as well.
http://www.bloomberg.com/news/2013-07-23/bitcoin-ponzi-scheme-alleged-by-sec-in-lawsuit-against-texas-man.html

[User705]

I'm no lawyer, heck I don't even play one on TV LOL...

But reading the original complaint from the SEC Gov site, this appears to be a Civil complaint, not criminal.

https://www.sec.gov/litigation/complaints/2013/comp-pr2013-132.pdf


Any lawyers can comment?


~BCX~

Sec is only civil. But they will pass on the evidance they collected to everyone.

I can't picture any criminal prosecutor touching this with a ten foot pole.  Civil burden of proof is much lower and the remedies are just monies but criminal is a whole other level.  The proof required on various BTC issues will be a crazy mess for the prosecutor.  BTC addresses and BTC in them can't be owned in a legal sense and if they can be and are payment methods as well then BTC itself is likely an illegal security.  This is what happens when something revolutionary meets old laws.

[MelMan2002]

I'm no lawyer, heck I don't even play one on TV LOL...

But reading the original complaint from the SEC Gov site, this appears to be a Civil complaint, not criminal.

https://www.sec.gov/litigation/complaints/2013/comp-pr2013-132.pdf


Any lawyers can comment?


~BCX~

Sec is only civil. But they will pass on the evidance they collected to everyone.

I can't picture any criminal prosecutor touching this with a ten foot pole.  Civil burden of proof is much lower and the remedies are just monies but criminal is a whole other level.  The proof required on various BTC issues will be a crazy mess for the prosecutor.  BTC addresses and BTC in them can't be owned in a legal sense and if they can be and are payment methods as well then BTC itself is likely an illegal security.  This is what happens when something revolutionary meets old laws.

Seems to be moving forward:
http://www.ibtimes.com/federal-magistrate-says-bitcoin-real-money-he-allows-sec-suit-go-forward-ponzi-scheme-case-1375669?goback=.gde_3721050_member_264189881

[BCB]

This will continue to be a precedent setting case and I believe we'll see criminal prosecution of Trendon and maybe even some of the pass throughs.

[ErebusBat]

This will continue to be a precedent setting case and I believe we'll see criminal prosecution of Trendon and maybe even some of the pass throughs.

As well as an official US legal opinion that bitcoin is legal tender?