At its peak, Bitcoin Savings and Trust -- Trendon Shavers' Bitcoin business that he purported to be an investment operation -- controlled a full 7 percent of all publicly traded Bitcoin.
Operating out of his McKinney home, Shavers, known as "pirateat40" in the Bitcoin community, managed as many as 764,000 Bitcoin at a time, according to federal prosecutors. Promising a return on investment of as much as 1 percent per day, Shavers raised Bitcoin to allegedly fund his day trading habits and pay dividends to his earliest investors. He did not, the feds say, have a special strategy for leveraging Bitcoin markets, he was just running one of the oldest schemes on the books with a new currency.
"As alleged, 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," U.S. Attorney Preet Bharara said in a press release.
Bitcoin Savings and Trust operated from September 2011 to September 2012. Over that year, the feds say, Shavers took lavish trips to Las Vegas using funds from investors. He day-traded invested Bitcoin on the non-infamous Mt. Gox exchange and paid back his friends and early investors when he knew many later investors wouldn't get their (virtual) money back.
As reported last year by the Observer, Shavers has already been sued by the Securities and Exchange Commission for the scheme. In that case, he never denied the details of the charges. Instead, he claimed that Bitcoin wasn't real money, so what he did wasn't subject to SEC action. In August 2013, a federal judge rejected that claim and allowed the SEC to freeze Shavers' assets.
See also: A Federal Judge in McKinney Man's Digital Ponzi Case Rules that Bitcoin Is Real Money Now, he's facing this criminal complaint as well, for securities and wire fraud. Each of the charges carries a maximum 20-year federal prison sentence. The securities charge also includes a possible $5 million fine, while the potential fine for wire fraud is a paltry $250,000.
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