Texas man charged with running $4.5 million Bitcoin Ponzi scheme

By on July 25, 2013, 5:30 AM
texas, bitcoin, fraud, scam, sec, ponzi scheme

The Securities and Exchange Commission has charged Trendon T. Shavers with running an illegal Ponzi scheme using Bitcoins. Using the online handle “pirateat40,”authorities claim the Texas man received some 700,000 Bitcoins from various investors through an unregistered fund he created called Bitcoin Savings & Trust.

The SEC alleges Shavers told investors he could make them a seven percent return on their investment through arbitrage. The problem was, however, he never made any trades. Instead, he would use money from new investors to pay the promised dividends to earlier investors. This method allowed him to continue to run his scheme and appear legit to new investors.

Naturally, there was a great deal of skepticism around this program and others like it but for some, the lure of quick money (and sheer greed) was simply too powerful. Officials say Shavers continued to run his program through August 2012 at which time he stopped paying out and shut down shop.

This case is especially noteworthy as it marks the first time the government has intervened in a case where Bitcoin users have lost money. Andrew M. Calamari, director of the SEC’s New York office, pointed out that 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’ haul was worth approximately $4.5 million when he received the Bitcoins but given today’s market price, it would be worth $60 million.




User Comments: 17

Got something to say? Post a comment
hitech0101 said:

Pirateat40 is the part which baffles me rest I have heard before

cliffordcooley cliffordcooley, TechSpot Paladin, said:

Next thing you know Bitcoins will be taxable, to help pay for protection against fraud. This is only the first step.

Nima304 said:

This reminds me a lot of the Bernard Madoff case.

Skidmarksdeluxe Skidmarksdeluxe said:

The only thing I know about Bitcoins is that it's some kind of internet currency so it was only a matter of time before somebody exploited it.

treetops treetops said:

Paypal>bitcoin..?

MilwaukeeMike said:

Oh sure, someone pulls a Ponzi scheme with bitcoins and the SEC gets their undies in a bundle, but the govt does with our social security and it's just business as usual.

1 person liked this | davislane1 davislane1 said:

Oh sure, someone pulls a Ponzi scheme with bitcoins and the SEC gets their undies in a bundle, but the govt does with our social security and it's just business as usual.

So, basically, you're contempt is directed towards the fact that this guy wasn't sued for patent infringement?

MilwaukeeMike said:

So, basically, you're contempt is directed towards the fact that this guy wasn't sued for patent infringement?

It was more sarcasm than contempt, but why would he be sued for patent infringement?

1 person liked this | davislane1 davislane1 said:

@MilwaukeeMike ". . . but the govt does with our social security and it's just business as usual."

The patent for the Ponzi methodology is held by the U.S. gov't; he didn't pay royalties.

treetops treetops said:

So, basically, you're contempt is directed towards the fact that this guy wasn't sued for patent infringement?

lol

MilwaukeeMike said:

@MilwaukeeMike ". . . but the govt does with our social security and it's just business as usual."

The patent for the Ponzi methodology is held by the U.S. gov't; he didn't pay royalties.

Gotcha... and you're right... he should pay royalties

Sniped_Ash said:

Anyone who scams bitheads out of their not-actually-hard-earned bitcoins should be commended, not tossed into the slammer.

captaincranky captaincranky, TechSpot Addict, said:

I'm still waiting to be convinced that Bitcoins 'exist' and have 'value', let alone the fact that it's a crime to scam someone out of imaginary 'money'.

People should probably take their 'Bitcoins', and piss them away in 'Second Life', while forgetting to eat in the meantime. Maybe they'll just melt away into cyber space, and only manifest themselves as spam on All Soul's Night.

I think the internet gets taken way, way, too seriously.

The only fun part is the porn, and they keep threatening to censor that.

alcarin2030 alcarin2030 said:

I'm still waiting to be convinced that Bitcoins 'exist' and have 'value', let alone the fact that it's a crime to scam someone out of imaginary 'money'.

People should probably take their 'Bitcoins', and piss them away in 'Second Life', while forgetting to eat in the meantime. Maybe they'll just melt away into cyber space, and only manifest themselves as spam on All Soul's Night.

I think the internet gets taken way, way, too seriously.

The only fun part is the porn, and they keep threatening to censor that.

The reason Bitcoins "exist" and have "value" is because people invest their time to find them. They are basically a value on people's time and effort.

1 person liked this | cliffordcooley cliffordcooley, TechSpot Paladin, said:

Allot of things have great value, until you try and sell them to someone without imagination.

1 person liked this | captaincranky captaincranky, TechSpot Addict, said:

The reason Bitcoins "exist" and have "value" is because people invest their time to find them. They are basically a value on people's time and effort.
They are basically a waste of people's time and effort.......Fixed!

Face it, shoving your nose up the back of somebody's mystery hard drive looking for Bitcoins, is hardly hunting dinosaur skeletons in Manchuria, or mummies in Egypt.

So far, nobody's been able to sell me Jesus, Alla, Yahway, or any incarnation of God. That said, it's unlikely anyone will ever sell me this.

So spare me, and marshal your limited clock cycles for the great internet currency delusion...., Er, I mean "hunt".

cliffordcooley cliffordcooley, TechSpot Paladin, said:

So, spare me, and marshal your clock cycles for the great internet currency delusion....
I have Folding@Home in my signature. I understand that project. It is strictly a donation project with a goal of finding a cure for disease, by computational methods.

This Bitcoin Mining makes no sense to me, other than deception and fraudulent trading. What are the computational goals and why are they valued? I'm with @captaincranky, this subject of Bitcoin Mining and trading smells of BS. It's basically the same as passing a buck around Paypal. The one that decides to keep the buck is the one who is labeled the thief, unless you can prove you are the owner of the buck.

Everyone that uses Bitcoin from what I can gather, does so because it is not governed. But yet here we are in the first stages of misuse, asking for courts to help in governing. What a load of horse hockey, behind the very concept of using Bitcoins.

Load all comments...

Add New Comment

TechSpot Members
Login or sign up for free,
it takes about 30 seconds.
You may also...
Get complete access to the TechSpot community. Join thousands of technology enthusiasts that contribute and share knowledge in our forum. Get a private inbox, upload your own photo gallery and more.