U.S. judge awards $40.7M in SEC case over Bitcoin Ponzi scheme

[dustcoin]

From the SEC complaint [1]:

    During the relevant period, Shavers transferred at least 150,649 BTC to
    his personal account at an online BTC currency exchange which,
    among other things, he then sold or used to day-trade 
    (converting BTC to U.S. dollars and vice versa). As a result of this activity, 
    Shavers suffered a net loss from his day-trading,
    but realized net proceeds of $164,758 from his net sales of 86,202 BTC.

It is interesting how little money he actually made from the scam, unless he hid BTC outside of law enforcements' reach.

[1] http://www.sec.gov/litigation/complaints/2013/comp-pr2013-13...

[Buge]

Maybe I don't understand, but to me it sounds like he sold 86,202 BTC for $164,758. Which means he still has 64,476 BTC, currently worth $25,778,155.

[grimtrigger]

Is it possible his "losses" were really just transfers to other accounts he owned?

[biot]

Without any jail time, what's the disincentive? A smart scheme would have a bunch of funds paid out to numerous early, repeat investors, where each one is secretly the ponzi creator but is made to look like a normal investor. Meanwhile, the creator transparently takes a small fraction of the bitcoin as profit, knowing that it will be found and forfeit later. After the fines accumulate give up the transparent amount, declare bankruptcy, and enjoy the secret horde of hidden, untraceable bitcoin.

[pmorici]

"Without any jail time, what's the disincentive?"

The SEC doesn't have the authority to file criminal charges they can only pursue things themselves in civil court.

http://knowledge.wharton.upenn.edu/article/why-so-few-securi...

[wmf]

Unless there are clawbacks like in the Madoff case.

[rayiner]

> 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.

The loss to investors was about $150 million.

[bryanlarsen]

That's at today's bitcoin prices, though. The scheme operated in 2011-2012, when bitcoin prices ranged between 30 cents and 30 dollars.

[aikah]

So in total the investors lost 150 millions in a ponzi scheme,which is of course totally illegal,but the company only has to pay 40 millions + the fine ?

Which basically means they get away with 110 millions ? (granted that since it's a ponzi scheme they may have given some money to early investors).

[samdroid]

It is great to see the US punishing people using bitcoin the wrong way... They even kind of implied that they think it is a real currency! I'm sure that this is a reversal on their position!

[qq66]

Not really. The US government has been quite supportive of bitcoin. They even auctioned a block of bitcoin to the public.