Retrospective: In 2014, Trendon Shavers Was Charged $40 Million Fine for One of the First Largescale Bitcoin Frauds
In 2014 we covered one of the largest crypto frauds up to date. Read our article to learn more about bitcoin frauds history:
The founder of the bogus “Bitcoin Savings and Trust” (BTCST) has been spanked – hard. Trendon Shavers has been fined $40 million for operating a Ponzi scheme in the Bitcoin universe.
According to the complaint filed by the Securities and Exchange Commission (SEC), in July of last year, “From at least September 2011 to September 2012, Shavers, operating under the Internet name “pirateat40,” offered and sold BTCST investments over the Internet, raising more than 700,000 BTC in principal investments from BTCST investors, or more than $4.5 million based on the daily average price of BTC when the BTCST investors purchased their BTCST investments.”
Shavers conned people by promising “investors up to 7% interest weekly based on BTCST’s purported BTC market arbitrage activity.”
However, what Shavers did was take the bitcoin from someone who was newly invested and give it to the investors who had bought-in earlier on, plus taking some for himself. A classic Ponzi scheme.
“Shavers used new BTCST investors’ BTC to pay the promised returns on outstanding BTCST investments and misappropriated BTCST investors’ BTC for his personal use,” the complaint said.
Shavers began the scam on a bitcoin forum with a thread entitled, “Looking for Lenders.” Looking for minimum investments of 50 bitcoins, he claimed that he was in the business of “selling BTC to a group of local people.” He promised 1% daily interest until a user either withdrew their funds or he could no longer be profitable.
The scheme continued until August 2012. During this time, Shavers had increased the minimum investment to 100 BTC, grown the entire Ponzi scheme to over 700,000 BTC, and had misappropriated $147,102 of clients’ money for his own use, which the SEC complaint said included “rent, car-related expenses, utilities, retail purchases, casinos, and meals.”
U.S. Magistrate Judge Amos L. Mazzant found both the Bitcoin Savings and Trust and Shavers guilty, and levied the $40 million fine. At this time, it is uncertain if the judge will also sentence Shavers to prison.
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