Bitcoin Savings & Trust Founder Fined $40 Million for Running a Ponzi Scheme

A touch more than a year after the Securities and Exchange Commission (SEC) charged a Texas resident Trendon T. Shavers and his company Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term Savings & Trust (BTCST) with cheating luring in investors into a Ponzi scheme involving Bitcoin, a Texas federal court judge Amos L. Mazzant mandated the company and it founder to pay disgorgement and penalties totaling to more than $40 million.

According to the evidence submitted by the SEC, the firm cheated investors in it by running a Ponzi scheme with the digital currency by promising to investors up to 7% weekly interest. Mr Shavers alleged that BTCST’s was conducting a sort of Bitcoin market arbitrage and was supposedly selling Bitcoins to individuals who wished to buy it under the radar quickly and in decent volume.

However nothing of the like ever happened - BTCST and its founder was using the Bitcoin deposits from new investors to pay the new ones. Mr. Shavers also day traded in his account on a Bitcoin currency exchange and sold digital currency pertaining to his investors to pay for his own personal expenses.

The disgorgement calculation is based on the average daily price of Bitcoin on August 26, 2012, which is the date when the scheme got exposed.

Judge Mazzano wrote in the statement that "The uncontested summary judgment evidence establishes that Shavers knowingly and intentionally operated BTCST as a sham and a Ponzi scheme, repeatedly making misrepresentations to BTCST investors and potential investors concerning the use of their bitcoins; how he would generate the promised returns; and the safety of the investments."

Mr Shavers and his company BTCST offered and sold Bitcoin-denominated investments online and raised close to 700,000 Bitcoin. Based on the average price of Bitcoin through the period during which the funds were collected the total amount is close to $4.5 million. The value of 700,000 Bitcoins collected by the perpetrator amounts to about $272 million.

At the time of the unveiling of the scheme, Director of the SEC’s New York Regional Office Andrew M. Calamari, stated that “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.”

Shavers sold BTCST investments over the Internet to investors in various states like Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania.

According to the SEC charges, Shavers paid 507,148 Bitcoin in investor withdrawals and alleged interest Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term. He used 150,649 Bitcoin for his personal needs. He sold 86,202 Bitcoin for $164,758. The rest of the funds he lost in his day trading activity. He used the proceeds to pay his rent, utility bills, retail purchases and gambling.