Bitcoin-company as a pyramid
http://www.proza.ru/pics/2013/11/09/2063.jpg
Company Bitcoin Savings and Trust, which offers its customers to make investments using cryptocurrency, has been recognized as a Ponzi scheme, reports The Aftershock site. The Securities and Exchange Commission fined its management $40.7 million.
This case once again raises questions about the future of Bitcoin. It is necessary to pay attention to the amount of the fine, if not the most well-known company is able to pay such an amount; it means cryptocurrency remains a very profitable business. Even if the only way to make money is the creation of pyramids, the role of Bitcoin should not be underestimated.
Federal Judge Texas returned a verdict in the case of Bitcoin Savings on the results of the investigation initiated earlier by SEC – the Securities and Exchange Commission. American trial concluded that the company knowingly and intentionally created the pyramid, deceiving customers and providing them with false information about where they invested their cryptocurrency. The criminal scheme managed to raise quite a large sum – 732 thousand Bitcoins. Each coin is now worth about $400, so we can talk about $ 292 million.
The investors were promised that they would receive weekly up to 7% of the investment in Bitcoin Savings and Trust sum. In fact, new investors’ money was used to pay interest to existing ones, while the tip of the scheme sent people’s money into their own wallets. Some of the money was stored on the Exchange Mt. Gox, which was closed down earlier this year. Due to an error in the protocol exchange lost at least 744 thousand. BTC (about $350 million) and digital currency fell in trading by 40% from $ 700 to $ 450. According to the investigation, the illegal profit of Bitcoin Savings and Trust amounted to $ 38.6 million.
Earlier this year, the US Securities and Exchange Commission issued a formal statement about Bitcoin. The document states that the use of Bitcoins significantly increases the risk of being cheated or becoming a victim of fraud schemes, and in the case of theft there are no mechanisms that will return the funds to the rightful owner. “A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities. Potential investors can be easily enticed with the promise of high returns in a new investment space and also may be less skeptical when assessing something novel, new and cutting-edge,” said the SEC.
Bitcoin is a virtual currency which is created by computers solving complex mathematical problems – known as “mining” – to create a peer-to-peer system with no central authority. The code itself does not bear practical value, but it is a complex and unique one, allowing you to distinguish one coin from each other and makes it difficult to create fakes. Until now, no one has managed to forge cryptocurrency. The more coins thre are in the system, the harder they are to create. Today it is unprofitable to produce cryptocurrency on a standard PC, and, for example, in China it is set aside under the whole server stations. Bitcoin isn’t used by the central bank, for many countries, including Russia and China, do not recognize Bitcoins real currency. The value of Bitcoins is effectively determined by demand in the stock exchange, so any change in market sentiment can lead to a sharp increase in rates or a significant drop.