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SEC Charges Texas Man With Running Bitcoin Ponzi Scheme

Rob WileJul 23, 2013, 21:58 IST

Flickr / zcopleyThe SEC alleges that Trendon T. Shavers, the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments, raising at least 700,000 Btc, or about $4.5 million.

But he didn't even make any money.

Here was the scheme:

The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities. In reality, BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments. Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses.

Today the value of 700,000 Bitcoin exceeds $60 million, the SEC says.

Here's the full complaint »