SEC Charges a McKinney Man with Running a Bitcoin Ponzi Scheme

Bitcoin, the decentralized online virtual currency, just hit a milestone of monetary street cred: It's allegedly been used in a Ponzi scheme.

The U.S. Securities and Exchange Commission announced today that it has charged Trendon T. Shavers of McKinney for defrauding investors in his Bitcoin company, Bitcoin Savings and Trust. Shavers raised 700,000 Bitcoin worth of investments between 2011 and 2012, the value of which has risen from $4.5 million to $60 million today.

But according to the S.E.C., Shaver was using Bitcoin from new investors to cover the withdrawals and outstanding interest of older ones. And he did the same thing to pay off his personal expenses and trade in his own account. He transferred at least 150,000 Bitcoin and made nearly $165,000 through day trading.

"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 Regional Office, in a statement. "Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed."

Bitcoin exists independent of any bank or government backing, making it a decentralized currency that's largely free of any banking system manipulation. It's traded online in exchange for more traditional currency or for goods and services. The so-called "crypto currency" can now be used for everything from pizza to online dating sites, and it's possible, if unnerving, to live off of it for at least a week.