BTCST and founder Trendon T. Shavers violated federal securities laws by selling Bitcoin-denominated investments through the Internet and misappropriating client funds. The judgment regarding the issue came from the US Magistrate Judge Amos L. Mazzant who found Shavers guilty of running a Ponzi scheme.
This was one of the first high profile miscreants of the Bitcoin industry wherein Trendon T. Shavers ran the fraudulent Ponzi scheme which operated under the name of Bitcoin Savings and Trust (BTCST). The judgment says that the company is now liable for a $40 million fine in the form of disgorgement and penalties.
BTCST and Shavers jointly defrauded investors by running a Ponzi scheme
The judgment was delivered after the US Securities and Exchange Commission showed that BTCST and Shavers jointly defrauded investors by running a Ponzi scheme involving the Bitcoin virtual currency. This is going to be another setback for the Bitcoin industry which saw Silk Road and later on Mt. Gox biting the dust.
Judge Amos L. Mazzant found that BTCST and founder Trendon T. Shavers violated federal securities laws as they sold Bitcoin-denominated investments through the Internet. At the same time they used Bitcoin from new investors to make purported interest payments on outstanding investments.
There were two angles in the case; one was from the SEC which brought it in front of the judge that he violated the federal securities laws and the second was that he perpetrated the scheme from mid 2011 until August 2012 when the scheme disintegrated. He falsely promised investors up to 7% interest weekly based on BTCST’s purported BTC market arbitrage activity.
Mr Shavers should pay $40 million and face criminal prosecutions as well
He had told investors that BTC market arbitrage wherein selling BTC to individuals who wished to buy BTC “off the radar,” quickly, or in large quantities, would help them make attractive returns. After hearing the arguments, the court held that Mr Shavers should pay $40 million and face criminal prosecutions as well.
The SEC told the court that the BTCST was a sham and a Ponzi scheme wherein Mr. Shavers used new BTCST inv
estors’ BTC to pay the promised returns on outstanding BTCST investments and misappropriated BTCST investors’ BTC for his personal use. The agency held Mr. Shavers and BTCST jointly responsible for the offense.
To contact the reporter of this story: Deepak Tiwari at firstname.lastname@example.org