Crime and politics have followed bitcoin since its inception but not quite in the sense that is being seen today—and, in news more fun, an MMORPG (a massively multiplayer online role playing game) is being developed that uses bitcoin as its core exchange currency.

The SEC has charged a Texan man with running a Ponzi scheme with bitcoins and making a great deal of money—while fraud is difficult with bitcoins at the exchange level, like any other currency it’s still possible to trick people out of their money. BitFantasy is a 2D fantasy-styled MMORPG that shows a lot of promise for fun as well as the possibility to buy/sell/trade virtual items in game for virtual currency (BTC.) Finally,  more VPN providers are looking into accepting bitcoin including PureVPN—recently started taking BTC—and SpiderOak who is looking to run a limited trial accepting the cryptocurrency.

Welcome to the Bitcoin Weekly.

Pirateat40 charged by the SEC with running a Bitcoin Ponzi scheme

Trendon T. Shavers, aka “pirateat40,” has been charged by the U.S. Securities and Exchange Commission (SEC) with raising over $4.5 million worth of bitcoin via an alleged Ponzi scheme. Investors in his website, Bitcoin Savings and Trust, that he founded and operated were promised a 7% interest rate weekly. Not a bad haul for someone investing in a bitcoin website–and apparently the SEC thought this was too good to be true, or at least their complaint says so.

The civil complaint by the SEC, filed in a court in Texas, includes posts by Mr. Shavers in an unnamed bitcoin forum.

From the Wall Street Journal article on the subject,

Mr. Shavers offered and sold the investments from at least September 2011 to September 2012, according to the complaint. Mr. Shavers sold the investments to at least 66 investors, including those in Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina and Pennsylvania, according to the complaint.

The complaint describes Bitcoin Savings and Trust as a “sham and a Ponzi scheme” in which Mr. Shavers used bitcoin raised from new investors to pay the returns on the outstanding investments.

The SEC also accused Mr. Shavers of using nearly $150,000 of the proceeds for personal expenses, including “rent, car-related expenses, utilities, retail purchases, casinos and meals.”

If all of this is true, this does not bode well for Mr. Shavers; and it’s one of the first examples to date of bitcoins being involved in a civil complaint involving fraud on this scale.

The Bitcoin Savings and Trust website has been shut down since late August of last year.

Any form of currency can be used as part of confidence games or frauds, and communities such as that built around the niche and burgeoning economy of bitcoin make for potential victims. The curiosity, fun, and enthusiasm in the culture working to give BTC a future play a role.

“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,” said Andrew M. Calamari, director of the SEC’s New York Office.

BitFantasy MMORPG allows players to trade virtual items for BTC

In a story close to my own heart, CoinDesk is running an article about a fantasy RPG and MMO that allows players to make purchases and trades. BitFantasy is in early beta and is developed by Darren Tarbard who thought it would be a good idea and thought that using bitcoin instead of real world money for intra-player trading  (called RMAH, or Real Money Auction House) would really simplify things.

On the subject of how Tarbard expects BTC to be used in game, he says, “So you can’t buy gold pieces. You can’t even buy items with BTC unless you buy it from another real human player; computer-controlled shopkeepers only trade in gold pieces.”

This is reminiscent of Blizzard’s Diablo III RMAH system; the benefit if using BTC instead of local currency, however, means that BitFantasy doesn’t need to worry about conversions, storing money (other than the virtual kind, that it already does in many ways), and therefore means no worries about all the overhead expected from that.

Darren told CoinDesk: “We expect BitFantasy to be playable by anyone with a modern web browser. This brings significant challenges based on the differences between browsers, particularly mobile, but we think it’s worth it to make it easy for everyone to access”.

From the looks of it, BitFantasy is a 2D top-down tile-based RPG and it’s entering into a market that is saturated with numerous MMORPGs all vying for attention from consumers. Being a game that can be played in a modern web browser also means that it might be easily ported to mobile devices as well as playing on almost any machine. This means that it’s highly accessible–the addition of using bitcoins for the for-money transactions, and in a sense that’s not freemium but instead RMAH, gives it the extra edge of drawing interest from a bitcoin audience.

VPN providers continue on trajectory to accept bitcoin and increase anonymity

With the uptick in news involving personal privacy a la PRISM and NSA spying, virtual private network (VPN) providers are looking to broaden their audience and increase the privacy given to their customers. PureVPN has begun accepting bitcoins as payment while SpiderOak is asking (on reddit) about the plausibility of accepting BTC.

The press release from PureVPN frames the bitcoin acceptance in terms of user anonymity.

“With regard to VPN this is particularly important as Bitcoin allows for anonymous transactions, and anonymity is a VPN’s soul and heart. PureVPN, as an innovator in providing anonymous VPN services, when saw that Bitcoins became an alternative to traditional methods of payment, PureVPN right away embrace the technology and includes Bitcoin in its payment method.”

Interested customers can contact PureVPN and order the service via the web. Prices start at $9.95 a month and a bitcoin payment logo has appeared on the site.

SpiderOak.com is an online storage and VPN provider with an eye for anonymity and user privacy and it recently came to our attention that the company intends to run a trial run of accepting bitcoin from customers. “Just looking for feedback, support or not. A limited trial will start shortly but as a bitcoin supporter I am simply wondering.. Is there any interest? Also. Have questions?” DanielLarsson75 from SpiderOak asked on reddit.

SpiderOak functions on a “zero-knowledge” paradigm, according to the marketing material the servers are set up so that at no point is any plaintext data transferred between client and server; therefore even management cannot breach customer trust just by looking at what’s going on. It also means that external 3rd parties cannot simply waltz in and watch either without decrypting the information flow.

There is no news yet as to when this limited trial will begin, but no doubt it will need customers for SpiderOak interested in their privacy.