http://www.infowars.com/sec-charges-texas-man-with-running-bitcoin-denominated-ponzi-scheme/
And here is the latest from Mt Gox....
Mt.Gox Team
https://mtgox.com/press_release_20130704.html
SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme
zerohedge.com
July 23, 2013
July 23, 2013
That didn’t take long.
From the SEC:
The Securities and Exchange Commission today charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin, a virtual currency traded on online exchanges for conventional currencies like the U.S. dollar or used to purchase goods or services online.
The SEC alleges that Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold. Today the value of 700,000 Bitcoin exceeds $60 million.
The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities. In reality, BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments. Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses.
The SEC issued an investor alert today warning investors about the dangers of potential investment scams involving virtual currencies promoted through the Internet.
“Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed.”
According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Shavers sold BTCST investments over the Internet to investors in such states as Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania. 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.
The SEC alleges that Shavers, who lives in McKinney, Texas, paid 507,148 Bitcoin in investor withdrawals and purported interest payments. He transferred at least 150,649 Bitcoin to his personal account at an online Bitcoin currency exchange. Shavers suffered a net loss from his day trading, but realized net proceeds of $164,758 from his sales of 86,202 Bitcoin. Shavers transferred $147,102 from his personal account at the online Bitcoin currency exchange to accounts he controlled at an online payment processor as well as his personal checking account. He used this money to pay his rent, utilities, and car-related expenses as well as for food and retail purchases and gambling.
The SEC’s complaint charges Shavers and BTCST with offering and selling investments in violation of the anti-fraud and registration provisions of the securities laws, specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. The SEC is seeking a court order to freeze the assets of Shavers and BTCST in addition to other relief, including permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.
The SEC’s investor alert, prepared by the agency’s Office of Investor Education and Advocacy, recommends that investors be wary of so-called investment opportunities that promise high rates of return with little or no risk, especially when dealing with unregistered, Internet-based investments sold by unlicensed promoters.
“Ponzi scheme operators often claim to have a tie to a new and emerging technology as a lure to potential victims,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Investors should understand that regardless of the type of investment, a promise of high returns with little or no risk is a classic warning sign of fraud.”
Original news item from 2012........
http://rt.com/usa/investors-currency-digital-fund-868/
Bitcoin ponzi scheme – investors lose $5 million USD in online hedge fund
Published time: August 29, 2012 19:03
Edited time: August 29, 2012 23:03
Edited time: August 29, 2012 23:03
The decentralized, digital Bitcoin currency has caught the attention of people around the globe who are unhappy with how national bank mismanagement is impacting the world economy. It has also, apparently, caught the eye of one very clever schemer.
An invite-only online hedge fund that promised lucrative returns for investors called the Bitcoin Savings & Trust has shut down, and with it have disappeared the service’s administrator — a user known in the digital currency community as pirateat40 — as well as millions of dollars’ worth of the cryptocash, currently valued at around $11 USD per coin.
Pirateat40 claimed that Bitcoin Savings & Trust had collected from investors roughly 500,000 worth of the currency, or around $5.49 million in US dollars, but not before disappearing off the face of the Web. The virtual hedge fund went offline this month following pirateat40’s announcement that the site would be shutting down soon, but the investors that had their own Bitcoins tied up in BS&T say that they think the e-bankster in charge has bolted with their money.
When pirateat40 first announced the service would be shutting down, the administrator said, “The decision was based on the general size and overall time required to manage the transactions,” adding, “As the fund grew there were larger and larger coin movements which put strain on my reserve accounts and ultimately caused delays on withdraws and the inability to fund orders within my system.”
“On the 14th I made a final attempt to relieve pressure off the system by reducing the rates I offered for deposits,” pirateat40 wrote in a post on the Bitcointalk.org forum last edited August 17. “In a perfect world this would allow me to hold more coins in reserve outside the system, but instead it only exponentially increased the amount of withdrawals overnight causing mass panic from many of my lenders.”
Pirate adds that the process of paying out his investors would be finished within a week, but ten days later the service’s clients claim that they have been duped. Investors have been so persistent for answers regarding the whereabouts of their money that pirate has put his online away message to read,“When I know, you will,” and has disappeared from the chat room set up to answer inquiries.
“You now have a very limited amount of time till the phone starts ringing. You may be in hiding, but others are not so well hid,” one user writes on the forum. “Do you really want to see how this plays out ? As of right now, I have about 2500 reasons to chase you down. Please don't give me anymore.”
Another user of the message board believes that the person using the pirateat40 handle is really a Texas resident who has done business as both Trendon Shavers and Don Shrents, the latter of whom had previously registered an operation called Business Cognition, which billed itself as being able to use “the power of our client base to provide you with the tools and services required to both optimize your expenses and maximize your profits.”
Business Cognition also disappeared from the Web at the same time that BS&T did, leaving some investors saying pirateat40 is a digital world’s own Bernie Madoff.
"It's game over, just a question of who wants to believe it yet," Bryan Micon, a poker player and pirateat40 skeptic, says in an email to TheVerge.com. "He has been paying interest since late 2011, albeit a helluvalot more recently… it looks like he doubled the size of the scam from April until it went boom."
Earlier this year, an unaffiliated website that exchanged Bitcoins for paper currency was hacked, leading to the loss of around $87,000 USD.
https://support.mtgox.com/entries/21692589-Changes-to-Deposit-Transfer-Procedures
Changes to Deposit Transfer Procedures
Dear Mt. Gox Customers,
Due to enhanced banking compliance procedures we have changed our method of processing currency deposits, meaning that it will take slightly more time to see deposited funds in your Mt.Gox account.
In the past we were able to credit customer accounts before the funds arrived in our own bank account, meaning that it could only take 3~4 days to register. The new process may take a week to ten days to register on your account depending on your bank, as well as weekends and holidays.
Our new process functions as follows:
• Our bank sends us a SWIFT message informing us that the funds will arrive, but are not confirmed
• Funds arrive in our account and are verified
• This amount is immediately credited to your Mt.Gox account.
We apologize for the inconvenience, and are working with our banking partners to speed up the process.
• Funds arrive in our account and are verified
• This amount is immediately credited to your Mt.Gox account.
We apologize for the inconvenience, and are working with our banking partners to speed up the process.
Mt.Gox Team
Statement on Resumption of Withdrawals and Improved Banking
TOKYO - JAPAN - July 4th, 2013 Dear Mt. Gox Merchants, Mt. Gox is happy to announce that global account withdrawals have now fully resumed as of today, after several days of testing our new system for processing transactions. We want to keep you informed about our progress in this arena, and especially assure our customers that their funds are accessible.
Progress in the Previous Two Weeks
While we announced that there would be a temporary hiatus on withdrawals, during our testing over the past two weeks we managed to process over $1,000,000 USD to customers. As this required a great deal of manpower and was not a perfect solution, we are quite happy with the progress made despite the conditions.
New Banking Partners
Mt. Gox has now formed relationships with several new banking partners both in Japan and around the world, and we are still in the process of finalizing even more. This means that we will have increased stability and ability to transmit withdrawals going forward.
Current Back-log
The new system is just now getting under way, so there is still a back-log of withdrawals that we need to process. Our team is working hard to increase transaction speeds, but there is approximately a two-week back-log we need to overcome. It will take a few weeks to get back to normal, and we thank you for your patience during this time.
Moving Forward
We at Mt. Gox are proud to be one of the first advocates and entrepreneurs in this growing ecosystem, but much still needs to be accomplished to bring trust and stability to a mass market. In addition to our improved withdrawal system and new trading engine, we are very excited about the innovation happening across our industry and around the world. Despite the hiccups, these are exciting times and we are eternally grateful for your confidence and support along this bumpy road.
Regards
Mt.Gox Co. Ltd Team.
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