SEC Cracks Down on Bitcoin Ponzi Scheme

One of the most common and likely ill-informed criticisms of Bitcoin is that the virtual currency is nothing more than a Ponzi scheme.  A minimal amount of research into what Bitcoin is and how it functions should, however, dispel any reasonable doubt that Bitcoin itself is a scam.  Yet that does not mean that Bitcoin cannot be used to construct traditional scams like the Ponzi scheme.  The SEC has filed a suit against one such scammer who operated an enterprise called the Bitcoin Savings and Trust.  From Entrepreneur:

The Securities and Exchange Commission has filed its first fraud lawsuit involving the virtual currency, claiming it was used in a Ponzi scheme.  The SEC filed suit against Trendon T. Shavers, founder and owner of Bitcoin Savings and Trust, saying he raised more than 700,000 BTC from 66 investors. According to the SEC’s suit, that amounted to $4.5 million in cash based on the daily Bitcoin price at the time, according to the SEC. 

Of course, knee jerk detractors of the digital currency will argue that this proves Bitcoin is  nothing more than a scam, as if the structure of such a scheme were internal to Bitcoin itself.  Interestingly, however, this action by the SEC may inadvertently serve to strengthen the Bitcoin market, since it presupposes that the digital currency is a legitimate means of investment in securities, which are regulated by the SEC.  The article notes:

The SEC also took the step of asserting its jurisdiction over virtual-currency trading. “Any investment in securities in the United States remains subject to the jurisdiction of the SEC, regardless of whether the investment is made in U.S. dollars or a virtual currency,” the agency said.