dread pirate bitcoin

Shockingly, Something Called ‘Bitcoin Savings and Trust’ Was a Ponzi Scheme

Artist’s rendition of Trendon T. Shavers Photo: iStockphoto

I know, I know. It’s scary to think that Bitcoin — that nice, simple crypto-currency beloved by upstanding church ladies and milkmen the world over — would get itself tangled up in financial fraud.

So it’s unnerving that an investment fund called Bitcoin Savings and Trust that “offered and sold Bitcoin-denominated investments through the Internet using the monikers ’Pirate’ and ‘pirateat40,’” and that promised investors a 7 percent return per week, was busted by the SEC for being a Ponzi scheme.

According to the SEC, Texan investor Trendon T. Shavers was behind the fraud, which was not exactly subtle:

Shavers posted general solicitations on a website dedicated to Bitcoin discussions, and he misled investors with such false assurances about his investment opportunity as “It’s growing, it’s growing!” and “I have yet to come close to taking a loss on any deal,” and “risk is almost 0.” Contrary to the representations made to investors, BTCST was not in the business of buying and selling Bitcoin at all.

This is precisely why I wrote Bitcoin’s obituary earlier this summer. Not all Bitcoin dealers are frauds, of course, but the currency’s traceless nature lends itself to quackery and schemes. That’s why regulators are tracking it carefully, and why, if you’re looking to get in the Bitcoin game, it’s actually a slightly better idea to buy into a public, regulated ETF (like the Winklevoss’s) than invest directly in the currency yourself. At least then, if you lose your money, it’ll be a function of making a bad bet on an inflated currency, rather than getting ripped off by a guy named Pirate.

‘Bitcoin Savings and Trust’ Was a Ponzi Scheme