In a landmark case involving the first-ever federal securities fraud involving bitcoin, a Texas man identified as the operator behind a Ponzi investment scheme has received a sentence of 18 months in prison.
Trendon Shavers, aka “Pirate@40” was sentenced to 18 months in prison for the charge of one count securities fraud due to his bitcoin investment scheme operated as the Bitcoin Savings and Trust (BCS&T).
Furthermore, the 33-year-old Texan also received 3 years of supervised release while being ordered to pay a little over $1.2 million in forfeiture and the same amount again in restitution.
According to a press release posted by the US Department of Justice, statements revealed in open court during the conviction revealed that Shavers solicited investments in BCS&T on the popular Bitcointalk forum Shavers offered investors up to7% returns weekly on their investment, with an annuzalised interest rate of 3,641% every year. He also told investors that they could withdraw their bitcoin from BCS&T at any time.
Altogether, prosecutors alleged that Shavers had obtained approximately 146,000 bitcoins from investors, a figure amounting to $807,380 based on the average price of bitcoin over the duration of the investment scheme. At the time of publishing, that amount of bitcoin is worth approximately $97.5 million.
Prosecutors also said that Shavers controlled about 7 percent of the total number of bitcoins in circulation at the time, during the peak of the scheme.
Shavers, who was arrested in November 2014, plead guilty in September 2015 and showed contrition in court during the sentencing. Reuters revealed that Shavers, who now supports himself as a cook, stated that he “royally messed up” in court.
He also reportedly added:
I don’t think this is something I’m ever going to get over.
In statements, US Attorney Preet Bharara said:
Applying a modern spin to an age-old fraud, Trendon Shavers used a Bitcoin business to run a classic Ponzi scheme. Shavers raised money in the form of Bitcoins by promising spectacular returns and personal guarantees, when all he was doing was paying back old investors with new investors’ bitcoins.
In a related but separate civil action lawsuit from 2014, Shavers was ordered to pay over $40 million in disgorgement and prejudgment interest, along with a civil penalty of $150,000 related to BCS&T, in the months prior to his November 2014 arrest.
In the end, at least 48 of approximately 100 investors who signed up for the scheme lost all or part of their investments made in BCS&T.
Featured image from Shutterstock.
Last modified: May 21, 2020 10:19 AM UTC