Bitcoin Ponzi Schemer sentenced

Trendon T. Shavers

According to the feds, "Preet Bharara, the United States Attorney for the Southern District of New York, announced that TRENDON T. SHAVERS, a/k/a “pirateat40,” was sentenced today to 18 months in prison for one count of securities fraud stemming from his involvement in a Bitcoin-related Ponzi scheme.  SHAVERS was the founder and operator of Bitcoin Savings and Trust (“BCS&T”), which offered and sold Bitcoin-based investments through the Internet.  In total, SHAVERS fraudulently obtained approximately 146,000 Bitcoin in BCS&T investments, which amounted to approximately $807,380 based on the average price of Bitcoin over the duration of the scheme.  SHAVERS pled guilty on September 21, 2015, to one count of securities fraud before U.S. Magistrate Judge Sarah Netburn.  Today’s sentence was imposed by U.S. District Judge Lewis A. Kaplan.

U.S. 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 really doing was paying back old investors with new investors’ Bitcoins. Thanks to the FBI and prosecutors in this Office, the first federal securities case involving Bitcoins has ended in Trendon Shavers being sentenced to prison.”

According to the Indictment, other public records, and statements made today in open court:

From at least in or about September 2011 up through and including in or about September 2012, SHAVERS operated a Ponzi scheme.  Specifically, SHAVERS solicited investments in BCS&T on the “Bitcoin Forum” – a public, Internet-based forum where, among other things, Bitcoin[1] investment opportunities were posted.  SHAVERS’s offer to investors was straightforward:  investors who lent Bitcoin to BCS&T would be paid up to seven percent interest weekly – an annualized interest rate of 3,641% per year – and investors could withdraw their investments in BCS&T at any time.  SHAVERS claimed that the Bitcoin invested by BCS&T investors would be used to support a Bitcoin market-arbitrage strategy, which included (i) lending Bitcoin to others for a fixed period of time; (ii) trading Bitcoin via online exchanges; and (iii) selling Bitcoin locally via private, off-market transactions – i.e., “over-the-counter transactions.”  SHAVERS also personally guaranteed to cover any losses in the event of a market change.  In truth, SHAVERS largely failed to execute the claimed market arbitrage strategy, failed to honor all of his investors’ redemption requests as well as his personal guarantee, and failed to deliver the agreed-upon rates of interest.

In the end, BCS&T was simply a Ponzi scheme through which SHAVERS used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BCS&T investments.  In addition, SHAVERS diverted investors’ Bitcoin for day trading in his own account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses.  At the peak of the scheme, SHAVERS raised, and had in his possession, about seven percent of all the Bitcoin that was in public circulation at the time.  In the end, at least 48 of approximately 100 investors lost all or part of their investment in BCS&T.

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SHAVERS, 33, was sentenced to 18 months in prison, 3 years of supervised release, and a $100 special assessment. In addition to the prison sentence, Judge Kaplan ordered SHAVERS to pay $1,228,660.93 in forfeiture, and $1,228,660.93 in restitution.

On September 18, 2014, in a separate civil action, the United States District Court for the Eastern District of Texas entered final judgment against both SHAVERS and BCS&T, and ordered SHAVERS to pay more than $40 million in disgorgement and prejudgment interest, and a civil penalty of $150,000 related to BCS&T."

I think he got a good deal, notwithstanding the fact that he made a lot of money in this matter. Others have seen much more time for same amount he stole. To see what he can expect in federal prison aka hell on earth, go here...https://www.amazon.com/PRISON-expect-Federal-Bureau-Prisons-ebook/dp/B011GTWLOG