Assignment #2 - Analysis of an online crime
A man from
Texas, Trendon Shavers, was sued by the SEC (The U.S. Securities and Exchange
Commission) this summer for allegedly running a Ponzi-Scheme using the virtual
currency Bitcoin as the form of payment allowed when making investments in his
firm; “Bitcoin Savings and Trust” (Bitcoin is a virtual currency with real
monetary value). Shavers promised investors up to 7% weekly return on the
investments and raised about 700 000 Bitcoins during the period for which he is
sued, 2011-2012 (but this might have been going on for a longer period before
2011 or even after 2012). Based on the average exchange rates in the period for
which he is sued, the 700 000 Bitcoins are calculated to have a value of about
$4.5m. Shavers used Bitcoin payments from new investors to make the interest
payments to existing investors as well as shifting investors´ Bitcoin holdings to
his personal account and used them for day-trading and to purchase personal
goods and trips.
Virtual
crimes may sometimes occur due to disinhibition effects (John Suler “Online
Dishinibition Effect”), and the effect that most likely affected Trendon
Shavers would be the anonymity affect of operating on the Internet. Even though
using Bitcoin does not allow you total anonymity, it offers enough anonymity that
some people feel there´s a lesser chance of being caught committing fraud.
“Fraudsters may plan scams using virtual currencies because they supposedly
have greater privacy benefits and less regulatory oversight than transactions
in conventional currencies” Andrew Calamari, director of SEC´s New York Office.
In the same interview Calamari stressed the fact that “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” – all
security investments in the US are subject to SEC jurisdiction no matter real
of virtual currencies. So even though criminals might feel their “operations”
online are not covered by national laws, they actually are.
This is an
example of a crime that is committed in a virtual space, but might get very
serious real life consequences. After SEC had committed the complaint they also
issued a general warning for investors of the risk of falling for traps
involving virtual currencies, so this is probably a type of crime that we´ll be
seeing much more of!
- Mia Helen Roos
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