Pirate@40 fined $40 million dollars

[kgo]

Surprised there isn't a thread on this yet:

http://www.reuters.com/article/2014/09/19/us-sec-bitcoin-fraud-idUSKBN0HE1Z820140919

Discuss...

[remotemass]

Is it final?

[ChrisKoss]

Anybody have a link to the court ruling doc?

[Gleb Gamow]

Surprised there isn't a thread on this yet:

http://www.reuters.com/article/2014/09/19/us-sec-bitcoin-fraud-idUSKBN0HE1Z820140919

Discuss...

Mazzant held Shavers and his company liable to give up $38.6 million of illegal profits plus $1.8 million in interest. Each defendant was also fined $150,000.

I give! What other defendants?

https://bitcointalk.org/index.php?topic=55819.0

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One episode ends, with another beginning with the US Marshals closing down BFL today.

[dogtor]

There were two defendants in the case iirc: BTCST and Trendon Shavers.

[CoinDiver]

What if the crash is pirate@40 selling off coins he still has to pay the judgement?

[bornil267645]

bad for us bad for the BTC community

[CoinHoarder]

One episode ends, with another beginning with the US Marshals closing down BFL today.

Proof?

[bigasic]

Might as well been a billion dollars. He doesn't have a dime to his name.. So, its something that he will owe for the rest of his life..

[snarlpill]

$40 million is a pretty hefty amount for sure. Pirateat40 was before my time in Bitcoin, but I've read a lot about it. The crazy thing is he made it a Long time with payouts continuing for a Ponzi and even had a few trusted members on here vouching for him didn't he? All I can say is if he does have to pay for the rest of his life, I hope most of it goes to the people he ended up stealing from. Although sadly this money will probably just be swallowed up by the govt. 

Also about the price crashing being him dumping his coins- my guess is if he had any money in BTC left, that'd he want to keep it in cryptos, if you know what I'm saying. That would allow him to earn and spend money without chunks of it being automatically taken for his debt.

[juju]

One episode ends, with another beginning with the US Marshals closing down BFL today.

Proof?

I don't have any proof CoinHoarder but I have heard this news from 2 others today as well. If someone has info link it

Edit:
This might be of some Help:
https://bitcointalk.org/index.php?topic=150803.msg8891220#msg8891220

Still haven't read through it yet.

[gog1]

I don't think the victims will see a penny

[Ruthful]

bad for us bad for the BTC community

I don't get it .I thought you guys would be happy that somebody that has been scamming the bitcoin community is getting his just desserts.

[Ruthful]

I don't think the victims will see a penny

That depends, does the court appoint a receivership yet?If it has , chances are  the victims can get some of their monies back if they file claims.In the ASD ponzi case , all the victim that filed claim with the receivership got back 100% of their money back And the Zeek reward receivership is set up to give favourable returns to the victims( judging by the clawback infos).

[BCB]

Why was this person targeted? From the CoinDesk article I thought he was like selling to little old ladies or something, but it looks like he was doing it on here. Was a class action set up of BTC Talk members?

It's a LONG story.  The forum is fill with threads.  Search "Trendon Shavers" "pirate@40"  It will go down in history as one of the great bitcoin scams.

[CoinHoarder]

One episode ends, with another beginning with the US Marshals closing down BFL today.

Proof?

I don't have any proof CoinHoarder but I have heard this news from 2 others today as well. If someone has info link it

Edit:
This might be of some Help:
https://bitcointalk.org/index.php?topic=150803.msg8891220#msg8891220

Still haven't read through it yet.

No worries. I ended up finding that thread. I hope it's true, BFL are crooks.

[SgtMoth]

Good for him!

[leannemckim46]

I don't think the victims will see a penny

That depends, does the court appoint a receivership yet?If it has , chances are  the victims can get some of their monies back if they file claims.In the ASD ponzi case , all the victim that filed claim with the receivership got back 100% of their money back And the Zeek reward receivership is set up to give favourable returns to the victims( judging by the clawback infos).

Well they will certainly not receive the fiat equivalent of what their bitcoin would be worth today if they had not invested (due to huge gains in the price of bitcoin since this happened). However they may received a good portion of their money back if pirate had kept even a small portion of the money in bitcoin 

[yayayo]

And how is he going to pay that $40 million? From a secret treasure chest?

To me it seems that public authorities try to distinguish themselves as good guys doing consumer protection in Bitcoin's wild West, legitimizing further Bitcoin "regulation".

I think in hindsight it was an obvious ponzi and I don't know how it was possible that it grew to such proportions. I think it's a good lesson for everyone not to be blinded by greed.

ya.ya.yo!

[BCB]

not to be blinded by greed.

Famous last words.   The history books are filled with stories of men who have been brought down by greed.

[Soros Shorts]

I don't think the victims will see a penny

That depends, does the court appoint a receivership yet?If it has , chances are  the victims can get some of their monies back if they file claims.In the ASD ponzi case , all the victim that filed claim with the receivership got back 100% of their money back And the Zeek reward receivership is set up to give favourable returns to the victims( judging by the clawback infos).

Well many BCST investors went indirectly through passthroughs because they were getting better rates at up to 7% a week. The problem is that many of the passthrough operators were anonymous and are now long gone. I just don't see how these investors could ever make a claim and get something back as Pirate does not have their individual records.

[CoinHeavy]

What are the prospects for recovering any funds?

Does he claim to have access to the private keys for these coins?

[jbreher]

What are the prospects for recovering any funds?

Does he claim to have access to the private keys for these coins?

There are no funds. No keys. No coins. All gone. Finito. Think through the mechanics of how a Ponzi scheme operates.

[Bitsky]

Well many BCST investors went indirectly through passthroughs because they were getting better rates at up to 7% a week. The problem is that many of the passthrough operators were anonymous and are now long gone. I just don't see how these investors could ever make a claim and get something back as Pirate does not have their individual records.

Many, not all. The operator of the biggest one (BitcoinMax) is known. I wonder if Ian is still thinking that burying the head in the sand is a long-term solution.

[robhimself]

Glad to see court are willing to lay the civil suit smackdown on BTC related fraudsters.

[freedomno1]

They finally went and fined Trendon Shavers
Took long enough

But according to the decision, Shavers used new bitcoin to repay earlier investors, diverted some to personal accounts at the now-bankrupt Mt. Gox exchange and elsewhere, and spent some investor funds on rent, food, shopping and casino visits.

Ah Gox RIP.

[tss]

ahh.. ponzi after ponzi.  we all know how to spot them yet we're still participating and advertising for them.  some things never change.

[Scott J]

Glad to finally see some justice, even if it is mostly ineffectual.

Even is he somehow paid the $40 million, would the SEC even try to distribute to victims.

It's a fine rather than an order to pay people back.

[jbreher]

Glad to see court are willing to lay the civil suit smackdown on BTC related fraudsters.

I don't really know how our laws are structured in these matters. But in my mind, justice should have been served through criminal prosecution, not civil. It seems quite simple to me. Shavers employed fraud to steal from people. Steal. Criminal.

[pedrog]

Well, I guess now it's pirate at 40 million dollars debt!

[snarlpill]

^ Awesome. So much better as epic Horatio tagline.

[Melbustus]

...
I think in hindsight it was an obvious ponzi and I don't know how it was possible that it grew to such proportions.
...

Hindsight?!

It was obvious to probably the majority of people that it was a Ponzi from day-1. 7% weekly is obviously mathematically unsustainable. Plenty of people made this point over and over. The reality is that many of the "investors" knew it had to be a Ponzi, or highly suspected as much, and put money in anyway because they figured they could get out earlier than the next guy.

Frankly, it's a little hard to consider the vast majority of "investors" in this to be "victims". More accurately, they were gamblers who lost. This was not some well-hidden accounting-tricks/book-obfuscation thing that took diligent people by surprise...


tl;dr: The pirate scam was despicable, but its "investors" should probably be called "gamblers" more so than "victims".

[toleng]

Glad to see court are willing to lay the civil suit smackdown on BTC related fraudsters.

I don't really know how our laws are structured in these matters. But in my mind, justice should have been served through criminal prosecution, not civil. It seems quite simple to me. Shavers employed fraud to steal from people. Steal. Criminal.

Criminal prosecution is more difficult because there is a higher standard of proof in order for the government to win it's case. If the case were to be tried criminally then there would be a greater chance he be found not guilty and double jeopardy would prevent anyone from suing him for any losses. A civil case on the other hand only requires "preponderance of the evidence" to win a case and the end result is that investors would see some recovery.

[dogtor]

...
I think in hindsight it was an obvious ponzi and I don't know how it was possible that it grew to such proportions.
...

Hindsight?!

It was obvious to probably the majority of people that it was a Ponzi from day-1. 7% weekly is obviously mathematically unsustainable. Plenty of people made this point over and over. The reality is that many of the "investors" knew it had to be a Ponzi, or highly suspected as much, and put money in anyway because they figured they could get out earlier than the next guy.

Frankly, it's a little hard to consider the vast majority of "investors" in this to be "victims". More accurately, they were gamblers who lost. This was not some well-hidden accounting-tricks/book-obfuscation thing that took diligent people by surprise...


tl;dr: The pirate scam was despicable, but its "investors" should probably be called "gamblers" more so than "victims".

Some would say bitcoin's volatility makes us "gamblers" more than "investors."

[bitlover]

Some would say bitcoin's volatility makes us "gamblers" more than "investors."

I'm pretty sure that, at this stage of the game, that "some" is actually pretty much anybody.

[Melbustus]

Some would say bitcoin's volatility makes us "gamblers" more than "investors."

I'm pretty sure that, at this stage of the game, that "some" is actually pretty much anybody.

Volatility doesn't define whether you can consider something an "investment" or not. Arguably the only reasonable definition is whether a decent case can be made that the position is positive-expectation, whatever the variance. There are plenty of decent theses for buying/holding bitcoin right now being +EV. Note that some may consider investments with variance beyond some threshold to be "bad investments" due to what they subjectively consider to be unacceptably-high volatility, which is a perfectly rational opinion to hold and definition to make.

By contrast, there was no reasonable thesis for the pirate scam to be long-run profitable for participants. Thus, it was a -EV position for participants, much like roulette is necessarily -EV at a casino, but poker is not (necessarily).

[leannemckim46]

Some would say bitcoin's volatility makes us "gamblers" more than "investors."

I'm pretty sure that, at this stage of the game, that "some" is actually pretty much anybody.

Volatility doesn't define whether you can consider something an "investment" or not. Arguably the only reasonable definition is whether a decent case can be made that the position is positive-expectation, whatever the variance. There are plenty of decent theses for buying/holding bitcoin right now being +EV. Note that some may consider investments with variance beyond some threshold to be "bad investments" due to what they subjectively consider to be unacceptably-high volatility, which is a perfectly rational opinion to hold and definition to make.

By contrast, there was no reasonable thesis for the pirate scam to be long-run profitable for participants. Thus, it was a -EV position for participants, much like roulette is necessarily -EV at a casino, but poker is not (necessarily).

There are times when the EV of the powerball lottery in the US is positive because the jackpot has gotten to be so large. This does not mean that powerball lottery tickets are anything more then a gamble.

[snappa4ever]

Some would say bitcoin's volatility makes us "gamblers" more than "investors."

I'm pretty sure that, at this stage of the game, that "some" is actually pretty much anybody.

Volatility doesn't define whether you can consider something an "investment" or not. Arguably the only reasonable definition is whether a decent case can be made that the position is positive-expectation, whatever the variance. There are plenty of decent theses for buying/holding bitcoin right now being +EV. Note that some may consider investments with variance beyond some threshold to be "bad investments" due to what they subjectively consider to be unacceptably-high volatility, which is a perfectly rational opinion to hold and definition to make.

By contrast, there was no reasonable thesis for the pirate scam to be long-run profitable for participants. Thus, it was a -EV position for participants, much like roulette is necessarily -EV at a casino, but poker is not (necessarily).

An investments' potential risk is sometimes measured by the volatility. If something has a high volatility then it it should only be purchased if the money used to invest will not be needed for a long time. At a point if the volatility is high enough, an investment will become nothing more then a gamble (regardless of it's EV).
 

[yayayo]

...
I think in hindsight it was an obvious ponzi and I don't know how it was possible that it grew to such proportions.
...

Hindsight?!

It was obvious to probably the majority of people that it was a Ponzi from day-1. 7% weekly is obviously mathematically unsustainable. Plenty of people made this point over and over. The reality is that many of the "investors" knew it had to be a Ponzi, or highly suspected as much, and put money in anyway because they figured they could get out earlier than the next guy.
...

When the promised reward is high enough, people's emotions tend to override logical thought. So many people willingly accept almost any explanation for the exceptionally high reward because they want it to be true.

While it does not shift away the responsibility from the ponzi "investors", this emotional interface is exploited by a great number of ponzi schemes.

A gambling addict often can understand the irrationality of his behavior, but when confronted with a high potential reward his logic processor is deactivated by the positive emotionality of the possible future reward.

ya.ya.yo!