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A Bitcoin Ponzi Scheme? Say it Ain’t So!

A recent SEC complaint surrounding a purported Ponzi scheme involving that silly virtual currency, Bitcoin, highlights the continued risk of seeing this speculative fad as a real investment scheme.

Trendon T. Shavers, a Texas resident, is being  sued by the Securities and Exchange Commission for collecting Bitcoins from unwitting investors and offering a guaranteed 7% weekly return on their “investment” of the virtual currency.

If it sounds too good to be true… well, you know the rest.

“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 in a Tuesday press release.  “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, Shavers collected some 700,000 Bitcoins, worth about $4.5 million using the conversion rate in 2012, and almost $70 million at today’s value for the virtual currency.

Investors have been shelling out lots of real money for Bitcoins in 2013.The digital currency made waves this spring as it ran up from $13 in value to start the year to almost $270 in April, then crashed back to about $70 in short order. Current pricing is just shy of $100 per Bitcoin.

As the value of the digital coins has skyrocketed, so has attention from regulators around the world, who have worried about the potential for fraud and money laundering.

Investors who consider dabbling in this crazy digital currency should take notice of this trend, as well as the incredible volatility in Bitcoin prices.

There are much safer places to invest, guys.

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Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP

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  • David T.

    This article highlights the author’s inability to read the SEC complaint.

    “…highlights the continued risk of seeing this speculative fad as a real investment scheme.” ???

    Be fair and keep the two things seperate, Ponzi Schemes involving traditional asset classes are almost a daily occurance.

  • confused

    So USD are a speculative fad? As the number of ponzi schemes involving USD each year is many magnitudes greater than BTC. If anything the desire to defraud someone of BTC indicates they have value. Nobody attempts to defraud someone of something lacking value.

  • Calling out liars since birth

    Who didn’t see that coming? A bunch of brain dead journalists who are too stupid to comprehend what Bitcoins are.

  • Satoshi Nakamoto

    Did Bernie Madoff use BTC too?