Bitcoin Ponzi scheme: Texas man sued for 'sham' worth $65m
Trendon Shavers took in 'at least' 700,000 Bitcoins by offering a 7% interest rate with 'zero risk'
Wednesday 24 July 2013
A Texas has man has been charged by the Securities and Exchange Comission for allegedly running a Bitcoin Ponzi scheme. By promising investors returns from a weekly interest rate of up to 7 per cent Trendon Shavers raised “at least” 700,000 Bitcoins between 2011 and 2012. This sum was worth $4.5 million at the time and more than $65m at today’s rates.
Shavers advertised his ‘Bitcoin Savings and Trust’ bank as profiting from a Bitcoin market arbitrage strategy – supposedly making money by buying and selling the currency to take advantage of fluctuating market prices.
The SEC have accused Shavers of advertising his services online under the handles ‘Pirate’ and ‘pirateat40’. Using the classic Ponzi strategy of taking money from new investors to cover the interest payments to existing investors, Shavers allegedly told his clients that the “risk is almost zero.”
Shavers also transferred more than 150,000 Bitcoins to his personal account in order to conduct day trading (where he lost money) and pay for his accommodation, car, food and general shopping.
Issuing a warning to investors to approach schemes involving virtual currencies with as much scepticism as they would for more traditional investments Andrew Calamari, the Director of SEC’s New York Regional Office said in a statement: “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.”
“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.”
The case is one of the first criminal prosecutions related to Bitcoin, and the debate is still continuing as to whether the virtual currency, launched in 2009, is in need of official regulation.
In the US the Commodity Futures Trading Commission (CFTC) announced they would be discussing whether the currency was covered by their rules back in May, but have yet to make any formal announcements.
Arsenal strengthened their grip on a top-four finish with a straightforward 3-0 win over Hull City.
Life & Style blogs
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
Nigel Farage fatigue? Half of voters ‘immune’ to Ukip’s appeal
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
Refugee facing deportation from Sweden saved by fellow passengers refusing to let plane leave
- 1 Easter egg hunt horror as mother finds dead body under deck of house
- 2 'Natural' energy drink banned for containing erectile dysfunction drug
- 3 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 4 Loch Ness Monster found on Apple Maps?
- 5 How We Met: Alison Moyet & Emma Kennedy: 'I knew we'd be friends because she was happy to make a prat of herself'
iJobs Gadgets & Tech
£150.00 per week: QA Apprenticeships: This company is a company that specializ...
£153.75 per week: QA Apprenticeships: This company is an innovative outsourcin...
£150.00 per week: QA Apprenticeships: We've been supplying best of breed peopl...
£150.00 per week: QA Apprenticeships: We provide business administration softw...