Trendon Shavers, the McKinney man accused by the Securities and Exchange Commission of running a pioneering Bitcoin Ponzi scheme, hasn't denied that he was running a scam or that he was using investors' cash to finance his day trading and trips to the casino. His main defense is that Bitcoin is not money, is not regulated by the United States, and therefore "is not within the jurisdiction" of the court.
Furthermore, he added in a response to the SEC's motion to freeze his assets. "It's ridiculous for the court to freeze my assets that are required to pay rent utilities, food, etc and be able to pay for an attorney," he wrote. "My wife does not work and cares for our two children."
U.S. Magistrate Judge Amos Mazzant's heart strings are not so easily tugged. On Monday, he approved the SEC's request for an asset freeze and followed up Tuesday with a four-page memorandum explaining why Shavers is wrong.
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It is clear that Bitcoin can be used as money. It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in [Shavers' Bitcoin Savings and Trust] provided an investment of money.
That paves the way for the government to move forward with its case charging that Shavers and Bitcoin Savings and Trust (formerly the much less legal-sounding First Pirate Savings and Trust) defrauded investors of 700,000 Bitcoin in the 10 months it took the scheme to collapse, in violation of federal law.
The irony in all this is that, had Shavers' 446 investors held on to the 700,000 Bitcoin (roughly $4.6 million) they entrusted to him rather than jump at the promise of 7-percent weekly returns, they could have made a ton of money. In the roughly 10-month period between the advent of Shavers' Ponzi scheme and its collapse, the digital currency increased in value by a dozen fold. Surely there's some sort of lesson in that.