The $38 million South Korean Bitcoin Ponzi Scheme

The $38 million South Korean Bitcoin Ponzi Scheme


In 2015, Texas-based outfit pirateat40’s CEO Trendon Shavers was prosecuted for conning investors out of close to $6 million dollars worth of Bitcoin under a setup known as Bitcoin Savings & Trust.

The scheme, which promised investors a return of 1% per day on their Bitcoin holdings and managed to do so by redistributing the investments of newer investors to older investors until newer investors began to dry up, had been the largest Bitcoin Ponzi scheme of its kind.

That dubious record appears now to have been surpassed by a South Korean operation which has swindled from more than 3,900 South Korean investors the Bitcoin equivalent of $38 million dollars. Police have made seven arrests. 

Since January 2017, the South Korea’s Central Bank and regulatory authorities have uncovered a number of Ponzi schemes operating within the digital currency space within the country.

Bitcoin Itself Reprimanded as Ponzi

Singapore-based DBS bank’s CIO David Gledhill last week joined the growing ranks of prominent individuals from within traditional finance who have been accusing Bitcoin itself of being a Ponzi. JP Morgan’s CEO Jamie Dillon and Oaktree Capital’s Chairman Howard Marks hit the headlines recently with similar, high profile accusations of their own.

Whilst these comments gain massive media coverage, there is suspicion in some quarters that the remarks are opportunistic attempts to undermine the challenges posed to traditional finance by newly emerging financial instruments appearing within the cryptocurrency space. 

The South Korean and pirate40 cases form part of a wider phenomenon of fraud, however, within the cryptocurrency space which have helped to tarnish the reputation of  both Bitcoin and cryptocurrencies within the public eye.

Ongoing episodes of fraudulent schemes such as the Confido ICO scam reported yesterday are posing a challenge to the credibility of cryptos more generally.

Whilst some are calling for regulatory intervention to help eliminate cases of fraud, others are pointing to the issue of undiscerning investors who are not undertaking basic due diligence.