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UPDATE: Why You Should Be Wary Trading Bitcoin


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Like any investment, one should be wary trading Bitcoin. Over the past few months we have seen our fair share of Bitcoin headlines, both positive and negative. From the questionable start-up hoppers like the Winklevoss twins attempting to transition Bitcoin to ETF markets to the illegal activities surrounding Liberty Reserve and it’s recent shutdown. As the ever volatile virtual currency finds themselves surrounded by bad press (although as they say ‘Any press is good press’) let’s take a look at why they are under fire this week.

Bitcoin Savings and Trust Founder Charged With Ponzi Scheme

(Photo Credit to: WhattheGeek.net)

(Photo Credit to: WhattheGeek.net)

Well, as you can see by the title, this would be the catalyst for Bitcoin’s current spotlight. Trendon Shavers, founder and operator of Bitcoin Savings and Trust was recently charged by the SEC for coordinating a Ponzi scheme. Shavers had originally sold and offered Bitcoin denominated investments for an approximate total of 700,000 Btc which was worth roughly $4.5 million at the time of the snag. Infamously known for their extreme fluctuating prices, by today’s prices that $4.5 million actually accrues to a total of a whopping $63 million.

How Did Shavers Bait Bitcoin Investors?

According the the complaint and the SEC’s official announcement, Shavers was promising his investors up to 7% weekly interest based on his Savings and Trust market arbitrage activity. Allegedly, this also included selling the virtual currency to those who wanted to stay off the radar while purchasing large quantities of Bitcoin quickly. While investors thought they were making a return on the interest percentage, Shavers was using Bitcoin from new investors to cover investor withdrawals on any outstanding Savings and Trust investments. Besides Bitcoin Savings and Trust being a complete sham, Shavers was also diverting investor-bought Bitcoin into his day trading account using a Bitcoin currency exchange to convert the investor-owned Bitcoin into cash that he then used to pay personal expenses.

The SEC also reports that while Shavers paid 507,148 in Bitcoin investor withdrawals and interest payments, he transferred at least 150,649 Bitcoin into his personal account using an online currency exchange. Now, even though Shavers had the intelligence to run this ponzi scheme, it seems he wasn’t very good at day trading. Even while suffering a net loss from his day trading Shavers still realized net profits of $164,758 from selling 86,202 Bitcoin.

From there Shavers transferred almost $150,000 into various personal accounts to pay for his rent, utilities, expenses, and gambling. Basically these duped investors were paying for Shavers’ extravagant purchases and gambling debts.

What Does This Mean For Bitcoin Trading?

Lucky for Bitcoin, owners and operators have become used to the continuous headlines spotlighting the illegal activities Bitcoin has been associated with over the years. Besides Shavers’ recent ponzi scheme, Liberty Reserve was one of the most recent busts. Even if any press is good press, this still hurts the overall image of Bitcoin. While the virtual currency holds so much potential for reshaping currency and online purchases, Bitcoin’s illegal activities and constant busts will only prevent the virtual currency from maintaining a positive appearance. While certain individuals want to bring Bitcoin into the ETF market and grow the community, a continuous string of these kind of headlines will definitely hinder any positive progress.

Be Wary Trading Bitcoin Wrap-Up

Even though Shavers’ recent ponzi scheme affects Bitcoin’s image, this is not the only market this can happen in. That’s why thorough research and investigation is such a crucial part of any investment. Without it you can fall victim to a scheme or ruse just like this one, even if you stray from Bitcoin. Additionally, Bitcoin always tends to be the black sheep of virtual currency, with their bad press always outweighing any positive aspects surrounding Bitcoin. In the end, thorough research and your own gut feelings will be the determining factor on if Bitcoin trading is right for you.

To see the official SEC Complaint: Click Here

It’s definitely worth the consideration! What do you think? Will you avoid Bitcoin like the plague or take your chances to make a lucrative profit? Let us know!

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