Bitcoin Exchange Scam – Bitcoins Are Now Worthless

After considerable thought, I’ve decided to put the Bitcoin Exchange Scammer comment back up as I believe it’s in the public interest, especially so given recent events on Bitcoin Exchanges. For those unaware, every now and then, I receive a … Continue reading

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262 Responses to Bitcoin Exchange Scam – Bitcoins Are Now Worthless

  1. I think i will set up my own bitcoin, then ill have my personal currency and if you want to trade with me you have to use my money which has no intrinsic value no underpinning.

    Very much like supermarket vouchers except youll have to pay real money and it being pretty much useless and valueless outside of my domain.

    In fact whats stopping you from creating your own worthless bitcoin money .. But you will get rich.

  2. Why not as the head of the say mafia create your own version of bitcoin. Perfect.

    Now just need greedy punters to speculate in thin air.

  3. Extraordinary fact that 25% of bitcoins are held by one individual and that 70% are not being traded/used.

    If that alone does not send the warning bells nothing will.

    But great for speculators who know how to play the game eg max keiser.

  4. Yeah, right. Very smart. Anwer to this: how do you think things were when traditional currencies were created? Even worse. Even more scams and corruption. But i guess you are not interested in history.

  5. Isn’t it great, that in this awesome world, that people who are against free markets, are allowed such free speech that someone could call a thing so similar to cash shanky? I mean if you think about it… cash is shanky. You can hold it in your hand, count it.. And recount it.. But why count when you can have someone else’s machine count for you and give you a digital read out? Thats right- because the person giving you the read out is the most trustworthy group of folks… who always do the right thing, fairly compensate themselves for their time, and only take the minimal for their needs. You can only do shady deals with cash. You can buy stuff and the record be nothing more than the transaction totals and change amounts. Who would ever want that when you can have a credit card or other means of tracking. Why wouldn’t you want anyone else to know your business? You’re a straight up guy… right? So is your bank.

    • The banks are stand up people? WHY NOT USE CREDIT CARDS INSTEAD?


      Bitcoins are secure, neutral, safe.

    • SarcasmEscapesMe

      I’m not picking up what you’re putting down.

      And put down you do…

      I just don’t know wat.

    • Really? Did you really say banks are stand up people? OH hell no…they are the greediest people on the planet…legal loan fish sharks that should be bullet lead in the street….You mean like the federal reserve that is in the USA? Oh did you know that was also setup by foreign bankers? Yeah those taxes are being shipped out to another country…how does that make you feel? Don’t believe me? Look it up on the web.

      I bet you didn’t know this either they also like to call them selves as the elite…why don’t you think Switzerland ever goes to war? They are the ones responsible for hurting the economy and dumbing currency down, they create wars and control your government…why? Because our leaders of our countries are greedy cat that like to line their pockets rather then stand up and do the right thing…this world goes beyond corruption….Research the Rothschild family, and Rockefeller family.

      Now for bitcoins, im sure there are some shady people, but most just want to get away from banks controlling currency and destroying it! Like the federal reserve does to america, and being able to print endless amounts of money knowing we don’t have the resources to back it up like gold and silver!

      Cat ALL BANKERS!!!!.

      • With loan to deposit at 19x that means you get a better economy. More investment is possible because of leveraged assets, which includes mortgage securities. This is what banks create and allow. Without a leveraged asset economy we would all be sitting in mud huts swapping sheep for shoes.

        Look at the countries with leveraged and geared investments. Look at the countries with centralized banking. Those are all the western developed countries. Do you really think it is an accident that these countries are also the most technologically advanced with the highest quality of life?

        It is BECAUSE of the credit system central banking provides that we live in such advanced societies. Don’t hate the hand that feeds us.

  6. If the exchange operator bids the price up artificially he will lose money. And if instead he manipulates bids it will be obvious to traders on the exchange, when their asks aren’t filled but the price exceeds them.

  7. Isn’t it time to return to the time when a coin had a certain value in the metal it was made of? And banks should have values that meet up with the money they handle? Today the financemarket are built like a PyramidGame – and we know that and do nothing to change it, that makes me pissed off.

  8. In response to your question at the end of your article, of course I wouldn’t put my life savings into bitcoin and whoever did at this point in the game would have to have something going desperately wrong in their head, or their lives to do so. But, the fact that exchanges are technically able to be manipulated (although, as there are multiple exchanges and therefore an ability to aggregate values, thereby mitigating against the kind of fraud being discussed here, I’m actually surprised this fact hasn’t had more traction as a discussion point) is not a revelation (nor was it when this email was initially revealed), anyone who has seriously looked at buying bitcoin (or better put, looked at buying a serious amount of bitcoin) knows there are a range of vulnerabilities to consider. In my opinion however, bitcoin is far more of a commodity at this point than a currency. Real people are making real money from “investing” in it as a commodity (I don’t really see how accurate describing it as a “Ponzi” or pyramid scheme is, to me, it’s more of an unorthodox experiment in alternative currency that now happens to have reached a billion dollar market cap, largely based on speculation) and the pertinent question is will it be able to actually manifest the infrastructure required as a currency, to support it’s given market value? And if this is the case, when will people look through the hype and poke the bubble to see if it bursts? I think this is fundamentally what could spell the end of bitcoin, if people suddenly realise they’ve been investing in a currency that actually, as of right now, can’t begin to justify its market value against its practical value, and hadn’t already approached bitcoin with a speculative mentality. They’d most likely shake their heads as if they’ve just snapped out of a reverie and sell out. Bitcoin needs to get far more widespread points of access in the real world or at least, become a major method of payment online (effectively to the detriment of companies such as Paypal). There’s plenty of money to be made developing platforms like this, and in other ways of innovating applications for bitcoin, therefore continuing to “legitimise” it as an actual, viable alternative currency. And from my point of view, in a world which revolves around “money”, where there are opportunities to profit there are ventures in place. I also find accusations being leveled at how “shady” bitcoin is slightly hilarious when you consider how, by example, the internet was regarded after the dotcom bust, and where the vast majority of online transactions were coming from online up until quite recently (porn in case you didn’t know, not illegal in most respects, but not exactly a noble pioneer who kept the home fires burning until technology, and the rest of the world caught up on how to monetise it).
    As for the email itself, I can’t find anything about it that lends a sense of authenticity. I’m assuming the author speaks English as a 2nd language, because the writing style does not convey the level of mental acuity you’d expect from someone who set up and operates an exchange (I guess they could be Japanese…theoretically). Beyond that, why expose a scam that you’re still benefiting from? He indicated he felt no guilt, so it can’t be an act of conscience. In fact, he indicates he’s not guilty he’s cheated them because they are greedy, BUT, his act of manipulating the market value for profit is an act of absolute greed on a scale that outweighs into insignificance the people he’s allegedly defrauding, who merely happen to see an opportunity to benefit from the rising value of bitcoin and choose to pursue it (called investing, not listed as 1 of the 7 deadly sins). Granted bitcoin users were heavily populated by criminals and other dubious agents (and of course, will always have a presence), but in reality, now (the email/article was originally published a couple of years ago) there is an ever increasing number of people who are buying bitcoin for completely legitimate purposes. So, would this alleged exchange owner still feel no guilt manipulating the market value for personal profit? I think it’s actually the authors responsibility to preface some of the content he makes in the article in regards to this, as it’s no longer entirely relevant to the existing reality of the bitcoin world.
    Yes, I own some bitcoin and I believe in its potential as an alternative currency.

  9. John Thompson

    All currency markets can be manipulated if you have billions and trillions to play with. Bitcoin seems to be intended as an alternative to fiat money (bitcoins are limited in supply and cannot be created out of thin air, so I hear from its endorsers). I don’t know the details and what safeguards there are to prevent fraud. Also, I do not know what intrinsic value the bitcoin itself has.

  10. No one on this page seems to understand bitcoin. Laugh out loud.

  11. You have actually stated what it means to value something in terms of currency: “Trust”

    EG. If everyone believed a bar of chocolate was $2 then that is indeed the value of the item at that point in time. If later everyone believed that same item was worth $100 then that is indeed the value of the item.

    The question is whether you’d have incentive to buy that chocolate bar, or start looking for substitutes (eg, candy bar). This is economics 101.

    The keyword here is “everyone” must believe that this is the value. If not everyone believed $100 was the real price and knew that the “real price” is $2, then someone would sell the bars for $50 thereby forcing the $100 seller to match his price. Then someone else would sell for $25 forcing the $50 seller to match the new price and so on…

    until prices meet equilibrium (supply meets demand).

    One real life example is when you’re buying a TV, do you look at the one store? Or do you shop around?

    I’m not sure what the bitcoin scene was like in 2011, but the good thing is that these days there are more than 1 bitcoin exchange.

  12. Hi,

    Bitcoin to me seems not to be a scamm, rather highway robbery. If you buy in Australia they want over $1.50US, but they then only allow you to sell it on XMLGOLD where the most I get is $0.95. So for every bitcoin I buy I lose one third. Wow! I would like to be a bitcoin agent too as its maddness.

  13. All the things you are describing happen all the time on the Oh-So-Revered stock markets! .. Still we believe that the principle of stock markets can be beneficial. It’s not the exchanges that set the price, it is the market. Yes, of course, manipulation is possible, that’s one reason why the more reliable crypto exchanges have chat boxes.

  14. Here in England we have had pyramid schemes from time to time. I lost £5
    thanks to my sister by baling out of Cashchek or similar in the 70’s. Then you hear of others. The Isle Of Wight had one, the media predicted its eventual collapse just as many made money out of others, no real goods or service I remember. And then big losses for ordinary people abroad somewhere. I know my pension fund is a Ponzi scheme, but people would face asassi nation politics if the County plan failed from people with nothing left to lose. So why is Max Keiser saying Bitcoins is so good, any enemy of my enemy is not a satisfactory endorsement. I give up, I will buy extra tinned food and work out. Good Luck to all of you, I really have no idea and evolution will be the end of me.

  15. I have been through all the steps to calculate exactly what is would cost to buy a bitcoin in Australia and sell it overseas – Europe for instance.

    Total cost is 25.4%. So for every $100 I buy of coins I will end up overseas with less than $75.

    In Australia the companies are charging agent fee of 10% to process your buy, their initial prices are well above the international trading prices, the only company that will accept deposits charges 4% just to take your money, and the list goes on.

    However the truly bizarre fact I discovered – MTGOX is the largest bitcoin trader in the world, but you can only sell out your coins through them into money via XMLGOLD and they clearly state that today 5/4/13 they have $65 in their TT bank account. Yep – if you trade your coins in with the largest dealer in the world you can only get your money from the allied company who has $65. Go to their website and check it out – their currency reserve is clearly stated. You can opt for Liberty Reserve – they have $35,000 of this funny money, but Liberty Reserve will gouge you going in and going out into cash, so my 25.4% costs suddenly becomes closer to 40%.

    Bitcoins is a massive tulip bulb delusion. If you are sitting on a bunch of them when the bulb hits the fan you might end up with shreddings and little else.

    • “Total cost is 25.4%”
      How the heck did you calculate that?… You can send a bitcoin for NO fee, it will just take longer to process, and a standard fee is 0.0005 bitcoin.

  16. ./facepalm

    ok whats the agreed upon value of the us dollar? The euro? What are they backed by gold? Silver?.

  17. I’m not sure who wrote this posting on bitcoin exchanges being a shame, but you obviously don’t understand markets or currencies. An exchange can post whatever price they want on they’re site and erroneously inflate the currency. Who cares, that will make them no less or more money; there is no monopoly, and unless exchanges colluded, volume will shift from one exchange to another to go wherever there is the best rate (it is a free market). The value of the digital currency is not dictated by the exchange, but by the demand of that currency.

    If we were to use the US dollar as an example, the US government can only change the value of it’s currency by creating more or less – something a bitcoin exchange cannot do with any substantial impact. Otherwise, it’s value is only in relation to other currencies: the demand for USD versus EUR, or any other currency pair.

    The rate I am willing to pay to exchange 1 USD into EUR (or bitcoin), is dictated by the market. If you tell me you will give me an exchange rate of X, but I wanted Y, I will not trade. If I do trade, then it implies I thought it was a fair rate. An exchange stating incorrect prices has little meaning. If the rate is high than I want to pay, I go to a different exchange.

    Foreign Exchange Trader.

  18. This post is interesting, but anyone has considered that any exchange in whatever currency you are considering does exactly the same? And furthermore even “official exchange rates” given by central banks are not achieved anywhere, so if central bank gives a prize for a currency, in every exchange office they give you a “slightly” different prize. So if you have dollars you can sell them at whatever prize you want, ie many big companies or big currency holders do this, and there is no law or regulation against. So wich is the issue here? The fact is that today there is no currency backed by any physical item (ie gold, silver, etc), so the value is just an agreement between the players in the game (all of us) and subject to the main market law: demand and offer. So if what that guy does seems unfair, you should consider unfair many other things, wich are of course legal, for example you can sell or buy $ at twice its official prize as long as you find buyers or sellers, and economic history is full of cases like these. And in any case bitcoin is a currency where all transactions are public, not like “legal” currency. When I say at all I mean at all. First I recommend you to read a book about mathematical foundations of economy (there are many, but usually difficult to understand unless you know anything about serious maths, presumably you don’t, at all) and the first thing you should understand is random variable (although stochastic is a better adjective for it than random) and wich are the factors wich decide the prize or value of it considering it is in the background of a market (wich is anything else than a set of random variables subject mainly to the offer/demand law) and then you will understand that bitcoin is a scam as any other currency is. Another point would be if it is legal, it is not of course, it is not legal nor ilegal because there is no central bank wich can do tricks to artificially change it’s value on behalf of the interest of politicians, companies or banks (unfortunately this is the main reason for making something legal or ilegal in too many cases, ie cannabis is ilegal and whisky not? Strange at least). In this sense bitcoin is more fair than other currencies.

    So if in the end what makes people happy is to belive that money is something else than an agreement between all the players, because a central bank regulates it (so the bank tricks the other players and pisses over the idea of free market) ok, but it is not true, just read something about economy (so read on maths) and you will see. The fact is that around begining of 20 century gold (wich in any case had been as useless as notes or coins for centuries except for a few industrial aplications recently discovered, but anyway a piece of bread is much more useful as you can eat it) was no more the value behind money, so all money is nothing more than useless paper or digitally stored information, and of course there is a clear and obvious reason for it if you know something about economy. In fact bitcoin is the first serious attempt towards a real free market economy (of course you should have some knowledge on economy to know what is a market and a very special kind of market called free market and you don’t have obviously). So what this guy is doing with his exchange is fair? Maybe not, but he is free to do so, and his customers should be more aware that there are far better exchanges and they are free to use them. Of course what he is doing, if done by many people can have catastrophic consequences in the future, as is stated in any economy book (please read one, if you can, if you cannot, first read something about probability and then about statistics and then you will understand). But this is a situation very similar to what will happen with $ if China decides to sell the huge amounts of dollars they have tomorrow say for example to buy € or swiss marks, the dollar value will fall to the ground in a matter of days because the offer will be huge, so sellers will be forced to lower the prize more and more to make their offer desirable for a buyer; a chain reaction is called this(nor China nor USA are interested in this scenario right now, but let’s see in the future).

    So if bitcoin is a scam, is not for the reasons on this article, unless all currencies are considered a scam by the same reasons (in fact they are considering that money, even gold, are useless as food). Before talking or posting an opinion be sure to know that what you say is true, and as anybody can verify by just using logic, some maths and some economic theory (maths again) the value of a currency like $ is not controlled or centralized by FED or a central bank or whatever, it’s just barely regulated (doing tricks you cannot do, because if it fully regulated or controlled there will be no economical crisis anywhere, wich goverment would allow it?) and the main force behind prize fluctuation is offer/demand law, exactly as with bitcoin. So please before talking, think, and think that thinking is difficult, so read those who are more clever or wise than you before (yeah I know maths and logic are hard and most brains soft) and you will see that you are wrong, just a person missleaded by fear, lazzyness (maths are hard and you probably won’t read anything about because it requires logical mind you probably don’t have, because your article is ilogical) and prejudice.

  19. And you think he isn’t just messing…….Why would he reveal himself??? Why wouldn’t he just carry on shoveling money in?……

    I say “I’m santa”
    You write an article saying something like “Hey guys, this is going to blow your mind, i have proof that santa exists”.

  20. The ONLY difference between BitCoin and other currencies, is that it is not a sovereign currency. That is why BitCoin and the Euro will fail, neither of them are soveriegn currencies. In all other regards it is the same as any other currency, used by crooks, banks and governments. Its called money and its something we all want. That’s its value.

    • Euro is not a sovereign currency?.

      • Euro does not belong to one country, so it’s very debatable whether it can be called “sovereign”.
        I don’t see why a currency would fail simply because it’s not controled by a country. Many currencies have failed and lost all of their value, but gold is still valuable ( regardless of its usefulness as a metal ).

      • Actually, I think the reasons why gold is still an “unofficial” currency are exactly what bitcoin is all about :
        – Its finite
        – No government can screw it.

  21. I stopped reading at “pyramid scheme”. Those who compare bitcoin to a pyramid scheme have either no idea what bitcoin is, or no idea what a pyramid scheme is.

  22. Main Problem is not what’s described in the article. It’s bigger:
    Any exchange/wallet operator could just run away with the money. Deposit is for some exchanges instantaneous, withdrawal takes 7 days. Do the math… Do to increased trading, an exchange operator could run away with 7 days of cash before anyone would notice anything. And just close shop.

    If you have bitcoins left, you will run somewhere else to withdraw for cash (and a lot of people will try to run for the exit then).

    If you though you had cash (or were waiting for it), it will be gone.

    • There are plenty of situations where one can “run away with the cash”.
      Also, bitcoins are easier to trace than bills.

  23. “I’ve said it before and I’ll say it again; their are 3 main users of Bitcoin:

    The Money cleaners/tax evaders.
    Those involved in non-legal activities.
    The Greedy.”

    this a very shortsighted view of things in my opinion.

    • Name more if you can.

      • Those who love free market, and do not believe in artificial currency manipulation/creation.
        If governments were doing their job I wouldn’t have much interest in bitcoin.

        • “do not believe in artificial currency creation”. You know what Bitcoins are right?

          I’ll give you the free market lovers. But they are hard to find, few in number, and easily mistaken for greedy speculators. Also, what legal goods can I buy with Bitcoin that I can’t buy with regular currencies?.

          • Yes I know what bitcoins are, you can’t just pull them out of your arm like you can print bills, which is what I mean by “artificial creation”.
            Free market lovers are not that rare, and they are probably quite rich on average… And it doesn’t matter at all what you mistake them for.
            You can buy anything with any currency ( including bitcoin ) as long as you can convert. I use euros in everyday life but I keep as few euros as I can.

          • Bitcoin price at $150 right now from $250 USD just a few hours ago.

            Still confident?.

          • Yes, since it was just a correction. Gold goes through similar fluctuations. Bitcoin is still finding equilibrium.

          • How can a deflationary currency have a stable equilibrium?.

  24. Bitcoin is the Wikipedia of money. And you do know what happened to Wikipedia, even after all the bashing by mainstream encylopedias, scholars, and pundits.

  25. I think bitcoins have a very very good future. How can a currency trading at 50 times the US dollar not be at least considered here. The doom on it may be contrarian. The gaming industry is going to get into it. And it is easy.

  26. I don’t think you realize that people are able to exchange bitcoins at any price the participants agree upon, saying the prices are unfair because the seller can change them isn;t a very good reason to call bitcoins worthless, because if a person raises the price, then the buyer simpler buys from another seller. The only people that wouldn’t are idiots, or know it is a trustworthy source and that the seller will actually transfer the bitcoins, making the extra couple dollars worth it.

  27. I day trade bitcoins. I earn very good money doing this. The price is determined by the last EXCHANGE between two parties. Meaning each person, the buyer and seller agreed on a price. The exchange has no control over the price and does not actually sell bitcoins. The value of bitcoins are valued on the open market like any other commodity. The market has fairly valued the vallue of a bit coin based on it’s economic ecosystem. The wild swings and bubbles and because of the growth potential of such a technological currency. I use bitcoins as a means of moving wealth cheaply and effectively across the internet. It really increases my ability to conduct business over the internet internationally.