Trendon Shavers of McKinney, Texas, operator of Bitcoin Savings and Trust, was charged yesterday with defrauding investors in what authorities are calling the first federal criminal securities fraud case arising from a bitcoin-related Ponzi scheme. Shavers is charged with misappropriating roughly 146,000 of 764,000 bitcoins, at the time worth over $4.5 million, which he had accrued between September 2011 and September 2012 by promising “absurdly high” interest rates, according to U.S. Attorney Preet Bharara.
Shavers’ criminal case follows on the heels of a September 18 order by a Texas federal judge that Shavers forfeit $40.7 million in illicit gains, interest, and fines in a related civil case brought by the SEC.
Under the online moniker “pirateat40” Shavers is believed to have gained control of seven percent of the bitcoin market by promising investors as much as seven percent weekly interest, or 3,641 percent annualized, based on his ability to trade the currency and the fact that he promised investors that he would return their money any time they requested it. Authorities allege, however, that Shavers used new bitcoins to pay back previous investors, add to his account at the now-defunct Mt. Gox exchange, and fund expenses that included a used BMW M5 sedan, spa treatments, casino visits, and a $1,000 dinner at Gallagher’s Steakhouse in Las Vegas.
Roughly half of the investors in Bitcoin Savings and Trust lost part or all of their investments.
According to Bharara, “Trendon Shavers managed to combine financial and cyber fraud into a bitcoin Ponzi scheme that offered absurdly high interest payments, and ultimately cheated his investors out of their bitcoin investments. This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”
Shavers was charged with securities fraud and wire fraud. He faces a potential maximum sentence of twenty years imprisonment on each count if convicted.
If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.