Bitcoin A Ponzi Scheme?

Discussion in 'Water Cooler' started by ProSportsForums, Sep 13, 2013.

  1. ProSportsForums

    ProSportsForums Regular Member

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    Source: ABC News
     
  2. Brandon

    Brandon Regular Member

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    Bitcoin isn't a ponzi scheme, this guy just used bitcoins as currency in a ponzi scheme.
     
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  3. ProSportsForums

    ProSportsForums Regular Member

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    Yea, I should have said "Bitcoin Savings And Trust."
     
  4. Big al

    Big al Regular Member

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  5. s.molinari

    s.molinari Regular Member

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    Isn't that the same group of spoilers/ rotten apples in a free market - capitalistic system?

    Rotten apples will always spoil the whole barrel and since Bitcoin isn't regulated in any way, the rotten apples have a nice playground for their bad activities. Sooner or later these activities will finally cause trust in Bitcoin to be so low, nobody will want them or will sell anything or give up real money for them. That will mean the final death for Bitcoin.

    Scott
     
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  6. Big al

    Big al Regular Member

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    http://au.finance.yahoo.com/news/us-authorities-shut-down-silk-155328935--spt.html
    US authorities shut Silk Road website, arrest owner.
    By by Glenn Chapman | Agence-France Presse – 5 hours ago


    Bitcoin price nosedives after bust of underground drug market Silk Road

    US authorities said Wednesday that they have busted an online black market for drugs, hitmen, hacker tools and more, arresting the suspected mastermind of a nefarious bazaar called Silk Road.

    Federal agents shut down the website, which used a privacy-protecting Tor network and Bitcoin digital currency to shield the identities of buyers and sellers around the world.

    Ross William Ulbricht, also known as "Dread Pirate Roberts," was arrested on Tuesday in San Francisco after the website was shut down, the Justice Department said in a statement.

    His online moniker appeared to be taken from a character in the film "The Princess Bride."

    Prosecutors said they seized approximately $3.6 million worth of Bitcoins in the largest ever seizure of the digital currency.

    Related: Bitcoin nosedives after Silk Road bust

    "The Silk Road website has served as a sprawling black market bazaar where illegal drugs and other illicit goods and services have been regularly bought and sold by the site's users," FBI Special Agent Christopher Tarbell said in a criminal complaint filed in federal court.

    From about January 2011, Ulbricht ran a marketplace that hawked heroin, cocaine, LSD and methamphetamine, as well as hacker tools such as software for stealing passwords or logging keystrokes on people's machines, according to court documents.

    Prosecutors also charged that in March, Ulbricht tried to hire someone to kill a Silk Road user who threatened to expose the identities of others using the website.

    "The defendant deliberately set out to establish an online criminal marketplace outside the reach of law enforcement and government regulation," Tarbell said in the legal filing.

    Related: Silk Road supporters go berserk online

    Ulbricht, 29, anonymized Silk Road transactions by using a Tor computer network designed to make it almost impossible to locate computers used to host or access websites.

    He also added a Bitcoin "tumbler" to the Silk Road payment system to foil efforts to trace digital currency back to buyers, according to the criminal complaint.

    "Silk Road has emerged as the most sophisticated and extensive criminal marketplace on the Internet today," the criminal complaint contended.

    "The site has sought to make conducting illegal transactions as easy and frictionless as shopping online at mainstream e-commerce websites."

    Prosecutors maintained that Silk Road has been used by thousands of drug dealers to distribute hundreds of kilograms of illegal wares to more than 100,000 buyers and to launder hundreds of millions of dollars in ill-gotten profits.

    Related: Read alleged Silk Road founder's manifesto


    Silk Road took in commissions ranging from eight to 15 percent of sales, raking in at least $80 million on more than $1.2 billion worth of transactions, the criminal complaint estimated.

    Ulbricht controlled the website, serving as "captain" and using a handful of online "administrators" as staff, investigators said.

    Federal agents in New York posed as buyers to shop at the website, successfully ordering an array of illegal goods.

    As of last month, Silk Road featured about 13,000 listings for controlled substances, with offers coming under headings such as "High Quality #4 Heroin All Rock" and "UNCUT Crystal Cocaine," the legal filing said.

    Services for sale at Silk Road included hacking into accounts at Twitter, Facebook or other social networks and tutorials for cracking bank teller machines.

    The legal filing also told of Silk Road offers to sell stolen credit card data, forged IDs, and for "hitmen" in 10 countries.

    Website seller and buyer guides that were described as including advice about how to avoid getting caught by using tactics such as shipping drugs in sealed plastic containers to avoid scent detection.

    Silk Road last year added a "stealth mode" for vendors who considered themselves "at risk of becoming a target for law enforcement," according to the complaint.

    As of July of this year, Silk Road had just shy of a million registered users, with 30 percent of them indicating they were in the US and the rest spread about the globe.

    A Silk Road "fallout" forum at the Reddit Internet platform sizzled with worry that police are tracking down buyers and sellers from the online bazaar.

    "I know many of you are freaking out," read a message from 'bassandlights' posted atop the forum.

    "Yes. The party is over. However, the only consequences for 99.9 percent of us will be having to look harder for stuff."

    The message reasoned that police wouldn't devote resources to chasing down small-time buyers of illicit goods, and that data on Silk Road servers was likely highly encrypted.

    "Honestly, I'm still optimistic about all this," another member of the discussion said in a post.

    "Opportunistic dum-dums will leap at the chance to set up 'the next Silk Road,' and although few of these imitation sites will be successful, it'll eventually just be a waste of LE's time to try and shut them all down."

    A pile of Bitcoin slugs sit in a box ready to be minted on April 26, 2013 in Sandy, Utah.
     
  7. Brandon

    Brandon Regular Member

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    The US did not shut it down, they don't normally place the sites logo as a watermark on the shut down certificate. ;)

    Also the price of btc did go down, but it bounced right back up.
     
  8. Big al

    Big al Regular Member

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  9. s.molinari

    s.molinari Regular Member

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    As long as Bitcoin doesn't fall under any currency laws, this kind of BS will continue unfortunately.

    Germany in their efforts to take in taxes for Bitcoin transactions (VAT for example), announced Bitcoin as a real currency. This needs to be done all over the world, then Bitcoin won't be as "lawless", as some people think it is and the taking advantage of this perceived lawlessness will end.

    Scott
     
  10. Brandon

    Brandon Regular Member

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  11. Big al

    Big al Regular Member

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    Bitcoins coming up for auction soon?


    FBI seizes over $27 million in bitcoins, likely from Silk Road suspect
    .

    http://arstechnica.com/tech-policy/...on-in-bitcoins-likely-from-silk-road-suspect/

    FBI seizes over $27 million in bitcoins, likely from Silk Road suspect
    Feds tell Forbes that the 26,000 bitcoins belonged to Dread Pirate Roberts.

    by Cyrus Farivar - Oct 25 2013, 11:58pm +0200

    When we left off earlier this month, the FBI had acknowledged that it seized over 26,000 bitcoins as part of its case against the Silk Road, the infamous Bitcoin- and Tor-fueled illicit marketplace.

    But on Friday, an anonymous source at the FBI told Forbes that the agency has now also seized 144,000 bitcoins, worth over $27 million at current exchange rates.

    The magazine reports:

    The FBI official wouldn’t say how the agency had determined that the Bitcoin “wallet”–a collection of Bitcoins at a single address in the Bitcoin network–belonged to [suspect Ross Ulbricht], but that it was sure they were his. “This is his wallet,” said the FBI official. “We seized this from DPR,” the official added, referring to the pseudonym “the Dread Pirate Roberts,” which prosecutors say Ulbricht allegedly used while running the Silk Road.

    When Ars called the FBI to confirm Forbes' report, Kelly J. Langmesser, a spokesperson for the FBI in New York, declined to comment.

    Forbes also linked to a particular Bitcoin address, which received a massive influx of bitcoins within the last 24 hours. And just like the last time the Internet identified one of the accounts believed to be controlled by the feds, there have been new small donations to that account, ostensibly so that the donors can send comments to the owner of the account. For now, those comments appear only to be advertisements rather than insults, along the lines of "Get cheap USB hubs and networking equipment to your door in 2 days. Bitcoin only of course" and "www.zeroblock.com: Real-time Bitcoin market data and aggregated news feed."

    So what will government authorities do with all these seized bitcoins once the case is wrapped up? They'll mostly likely just liquidate (read: sell) them, as with any other seized asset in a criminal case.
     
  12. s.molinari

    s.molinari Regular Member

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    How do you seize a bitcoin? I thought they were virtual/ digital?:P

    Scott
     
  13. Big al

    Big al Regular Member

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    A virtual seize? :cool:

    The question may be that if the FBI sell them, are they condoning and recognizing Bitcoin as a legitimate currency?

    $27 million may prove too much to bypass.
     
  14. Big al

    Big al Regular Member

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    How FBI caught Ross Ulbricht, alleged creator of criminal marketplace Silk Road

    http://edition.cnn.com/2013/10/04/world/americas/silk-road-ross-ulbricht/index.html

    How FBI caught Ross Ulbricht, alleged creator of criminal marketplace Silk Road
    By Tim Hume, CNN
    October 4, 2013 -- Updated 1531 GMT (2331 HKT)

    Alleged creator of the Internet's biggest criminal marketplace arrested in U.S.
    The FBI claims Ross Ulbricht, 29, earned $80 million in commission from the shadowy site
    It had nearly a million registered users, responsible for an estimated $1.2 billion in sales
    Despite the site's secrecy, Ulbricht was tracked after a number of online slip-ups

    (CNN) -- The FBI caught the man accused of creating Silk Road -- the shadowy e-commerce site it describes as "the most sophisticated and extensive criminal marketplace on the Internet today" -- after he allegedly posted his Gmail address online, according to court documents.

    Federal agents swooped on Ross William Ulbricht in a San Francisco public library Tuesday afternoon, charging the 29-year-old American with narcotics trafficking, computer hacking and money laundering. They allege he is "the Dread Pirate Roberts," the Silk Road's mysterious founder, who drew his pseudonym from the feared, fictitious character in the film The Princess Bride.

    The FBI claims the former physics and engineering student even publicly alluded to his alleged criminal enterprise on his LinkedIn profile, with a statement describing how his goals had "shifted" in accordance with his libertarian economic views since leaving grad school at Pennsylvania State University.

    Ulbricht's LinkedIn profile states that, since completing his studies in 2010, he has focused on "creating an economic simulation to give people a first-hand experience of what it would be like to live in a world without the systemic use of force" of the kind imposed by "institutions and governments."

    "I want to use economic theory as a means to abolish the use of coercion and agression (sic) amongst mankind," he wrote.

    In the indictment against Ulbricht, filed in a New York court, the FBI cyber-crime specialist who led the investigation, Christopher Tarbell, stated that he believed "that this 'economic simulation' referred to by Ulbricht is Silk Road."

    The Amazon.com of vice
    Ulbricht as pictured in his LinkedIn profile, which the FBI alleges alluded to Silk Road.

    The FBI swiftly shuttered the site, an underground digital marketplace that, since its inception in 2011, has allowed users to anonymously trade illegal goods and services in near total secrecy, using the digital currency bitcoin, and an encryption network called Tor that routes traffic through a "hidden" area of the Internet known as "the dark web."

    Time.com: Online drug markets alive and thriving
    Tarbell said the site "sought to make conducting illegal transactions on the Internet as easy and frictionless as shopping online at mainstream e-commerce websites," and carried listings for hard drugs, hackers, counterfeit cash, forged ID documents, firearms, ammunition, even hitmen -- one of whom Ulbricht is alleged to have enlisted to kill a blackmailer.

    According to the indictment, Silk Road had acquired nearly a million registered users worldwide -- about 30% of whom were based in the U.S. -- in its two and a half years of operation, providing them guidance on how to encrypt their communications and vacuum-pack their wares before shipping through the postal service to avoid detection by law enforcement. Last year, it said, the site added a "stealth mode" for users who considered themselves "at risk of becoming a target for law enforcement."

    The indictment said the site had generated over 9.5 million bitcoins in sales revenue and over 600,000 bitcoins in commissions for its owner, allowing the site to employ a team of administrators. The value of bitcoins has fluctuated dramatically since the digital currency was created -- it plummeted after Ulbricht's arrest -- but Tarbell estimated Silk Road's turnover to be worth about $1.2 billion in sales, and $80 million in commissions.

    In February, an Australian drug dealer became the first person to be convicted in connection to Silk Road after using the site to import cocaine and MDMA from Europe.

    Catching the Dread Pirate Roberts
    In the section of the indictment outlining how the link between Ulbricht and Dread Pirate Roberts was established, Tarbell detailed how an FBI expert codenamed Agent-1 had located an early online mention of Silk Road dating to January 27, 2011, when a user under the handle "Altoid" made a post on a forum for users of magic mushrooms.

    "I came across this website called Silk Road," wrote Altoid, in a post which linked to the site. "I'm thinking of buying off it... Let me know what you think."

    Two days later, someone using the handle "Altoid" made a similar post on a forum called Bitcoin Talk, recommending Silk Road and providing a link. "Has anyone seen Silk Road yet? It's kind of like an anonymous Amazon.com. I don't think they have heroin on there, but they are selling other stuff," it read.

    The posts, said Tarbell, were an attempt to drum up interest in Silk Road, employing the online marketing tactic of "astroturfing."

    Investigators were given a major break when, eight months later, "Altoid" made another posting on Bitcoin Talk, stating he was looking for "an IT pro in the Bitcoin community" to hire in connection with "a venture backed Bitcoin startup company." The posting asked interested parties to contact [email protected].

    The indictment also noted that Ulbricht and Dread Pirate Roberts were both vocal adherents of the libertarian theories of Austrian School economist Ludwig von Mises, with Ulbricht's public Google+ account linking to YouTube videos posted by the Ludwig von Mises Institute, and Dread Pirate Roberts repeatedly crediting von Mises with "providing the philosophical underpinnings for Silk Road."

    From a San Francisco Internet cafe

    Tarbell said that while Dread Pirate Roberts used a "virtual private network," or VPN, to create a "false" IP address, the VPN server's records indicated a user had accessed it from a San Francisco Internet café near the home of a friend Ulbricht had gone to live with around September last year.

    Records obtained from Google showed Ulbricht had regularly logged into his Gmail account from the Internet café, he said -- including on the same day in June that the VPN was accessed.

    In July, Ulbricht was visited in San Francisco by Homeland Security agents who had intercepted a package from Canada containing fake ID documents in nine different names, each bearing a photograph of Ulbricht.

    According to the indictment, Ulbricht -- whose roommates knew him as "Josh," and said he was always at home on his computer -- refused to answer questions about the IDs, but told the agents that "hypothetically" anyone could go on the Silk Road and purchase them.

    In the weeks prior to the encounter, said Tarbell, Dread Pirate Roberts had been inquiring with Silk Road users about buying fake IDs, saying he needed them in order to rent extra servers for the site.

    A killing for hire?

    It was not the only time Ulbricht is alleged to have used the site to procure illegal services. Tarbell claimed that in March, Dread Pirate Roberts solicited the killing of a Silk Road user who was attempting to blackmail him by threatening to release the identities of thousands of users of the site.

    The FBI alleges that the Canada-based extortionist, known as FriendlyChemist, demanded $500,000 to prevent the release of the information, prompting Dread Pirate Roberts to contact another user and order a hit on FriendlyChemist.

    "In my eyes, FriendlyChemist is a liability and I wouldn't mind if he was executed," he is alleged to have written, before attempting to haggle down the price. "Don't want to be a pain here, but the price seems high. Not long ago, I had a clean hit done for $80k."

    The FBI claims the hitman later sent a picture of the victim after the job was done -- for approximately $150,000 in bitcoins -- although Tarbell said Canadian authorities had no record of a Canadian resident with the name passed to the alleged hitman, nor any record of a homicide around that location and time.

    Ulbricht's lawyer, Brandon Leblanc, declined to comment on the case.

    Silk Road's closure is unlikely to bring an end to the trade of illegal goods on the "dark web," as similar sites operate on the Tor network.
     
  15. Autopilot

    Autopilot Regular Member

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  16. Brandon

    Brandon Regular Member

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    The ATM will drastically improve the ways to get bitcoins.
    There have been a few people talking about making them, here is one made with a raspberry pi :)



    Well.. it was suppose to start at 2:45, so just move the tracker in 2 1/2 minutes.
     
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  17. Autopilot

    Autopilot Regular Member

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    It's all definitely a Barnum and Bailey moment in technological advancement. We called them snake oil salesmen. Step right up for the deal of the century, give me 10 bucks and if you can guess what I have in my left hand I'll give you twice what I have in my right hand.

    I hope he doesn't take that case anywhere near the bomb squad. They might get the wrong ideas. LMAO
     
  18. MyDigitalpoint

    MyDigitalpoint Regular Member

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    I have heard of many complaints citing that bitcoins are a ponzi scheme, but this reading has made me see what is really happening; people using bitcoins to develop ponzi schemes.

    It's like if we would suddenly build a ponzi scheme based on PayPal, where they would be the instrument, but not the source of the scam.
     
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