Newspaper article THE JOURNAL RECORD

Oklahoma Traders Unmoved by SEC Bitcoin Warning

Newspaper article THE JOURNAL RECORD

Oklahoma Traders Unmoved by SEC Bitcoin Warning

Article excerpt

To alleviate some of his unease about the economy, Tulsa resident Christopher King saves some of his personal wealth in non-dollar assets such as silver and Bitcoins.

The latter currency has been trading lately at a ratio of about 100 Bitcoins per U.S. dollar. When the King family savings account reaches a certain level, dollar-wise, King said he has to put his wife's concerns to rest over the latest developments in the Bitcoin market.

"My spouse is not as sold on it as I am," he said. "It's the same with any investment - you have to explain your reasons to the boss. And we're focused on moving at the end of the year, so she's more focused on dollar amounts right now."

Their next chat will probably include details about the latest SEC action: The Securities and Exchange Commission last week issued an alert warning investors about the dangers of potential investment scams involving virtual currencies promoted through the Internet. The warning follows the SEC's charges against Texan Trendon Shavers and his company on allegations he defrauded investors in a Ponzi scheme involving Bitcoin, a virtual currency traded on online exchanges for conventional currencies.

Officials at the SEC said Shavers, as the founder and operator of Bitcoin Savings and Trust, or BTCST, sold Bitcoin-denominated investments through Internet aliases. Shavers raised at least 700,000 Bitcoin in BTCST investments, or more than $4.5 million in 2011 and 2012 currency rate exchange values. Those Bitcoin resources now have a value of more than $60 million.

The SEC alleges that Shavers promised investors up to 7-percent weekly interest based on BTCST's Bitcoin market arbitrage activity. Instead, Shavers was running a Ponzi scheme, using new investors to pay off earlier promises, officials said. Adding insult to injury, Shavers exchanged investors' Bitcoin for U.S. dollars to pay his personal expenses.

"The short answer is that financial scams are everywhere and it pays to be cautious about any investment and ensure that you understand it and trust those operating it, before giving them your dollars or your Bitcoins," said Tulsa Bitcoin trader Ryan Underwood.

"This question of where to place confidence is not a Bitcoin- specific issue but a problem with all investments that make future promises in exchange for taking investor money in the present," Underwood said. Citing former stockbroker Bernie Madoff's massive Ponzi scheme a few years ago, he said, "The SEC did not protect investors from Madoff despite numerous whistle-blowers coming forward in advance. Only their own diligence could have protected them."

Underwood has as much confidence in Bitcoin as King; they're both members of the Tulsa Bitcoin Buttonwood group, which meets at a local coffee shop each month to talk about the Bitcoin economy. …

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