SEC charges Texas man with running Bitcoin Ponzi scheme

Trendon T. Shavers is accused of squandering investors' bitcoins to pay for rent and food
  • (IDG News Service)
  • — 24 July, 2013 01:38

A Texas man was charged on Tuesday in U.S. federal court with allegedly running a Bitcoin Ponzi scheme, allegedly siphoning the virtual currency from victims to pay for rent, food and gambling.

Trendon T. Shavers of McKinney, Texas, ran the Bitcoin Savings and Trust (BTCST), an investment scheme that promised 7 percent weekly returns from bitcoin trades intended to profit from market price differences in the virtual currency, according to a news release from the U.S. Securities and Exchange Commission.

Instead, the 30-year-old Shavers, who went by the "Pirate" and "pirateat40," on the popular Bitcoin Forum -- is alleged to have used bitcoin investments from new investors to pay interest to early entrants to the scheme and cover withdrawals, the SEC said. He has been charged with violating parts of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Exchange Act Rule.

Shavers allegedly collected 700,000 bitcoins from investors, which the SEC calculated was worth more than US$4.5 million based on an average of bitcoin's market price in 2011 and last year. At Wednesday's market price, 700,000 bitcoins would be worth about $66 million.

More than 150,000 bitcoins were transferred to Shaver's personal bitcoin trading account, where he lost money in day trading, the SEC alleged. He also allegedly transferred $147,102 to his personal finance accounts, using the money to pay for rent, utilities, car expenses, food, retail purchases and gambling, the SEC alleged.

Shavers was dogged by accusations of whether his business was a Ponzi scheme. He denied it on the Bitcoin Forum in May 2012, and the scheme collapsed about three months later, according to the indictment.

The case, filed in U.S. District Court for the Eastern District of Texas, marks one of the first criminal prosecutions related to Bitcoin, a virtual currency launched in 2009. Bitcoin is still a very niche payment system, but it has gained steady interest, in part buoyed by wild swings in its price that garnered much media attention.

Various investment schemes promoted on the popular Bitcoin Forum over the years have been viewed with suspicion. Bitcoin transactions are irreversible, similar to using cash, and investors could be out-of-pocket if their funds disappear. Legal recourse against suspected bad actors may be difficult or impossible.

The SEC's announcement came as the agency issued an alert warning that fraudsters may use virtual currencies as part of bogus investment schemes.

"These schemes often promise high returns for getting in on the ground floor of a growing Internet phenomenon," the agency said in an advisory.

Send news tips and comments to jeremy_kirk@idg.com. Follow me on Twitter: @jeremy_kirk

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Jeremy Kirk

IDG News Service
Topics: Criminal, U.S. Securities and Exchange Commission, security, legal
Comments are now closed.

Latest News Articles

Most Popular Articles

Follow Us

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Resources

Best Deals on GoodGearGuide

Compare & Save

Deals powered by WhistleOut
WhistleOut

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?