The accused operator of the first high profile bitcoin Ponzi scheme, Trendon Shavers, has pleaded not guilty. Arrested last November, he faced up to 40 years in prison, plus fines.
Operating under the alias “pirateat40” in the online forum where he recruited investors, his Texas-based Bitcoin Savings and Trust amassed 764,000 bitcoins. The funds under his care, at the time, comprised a significant proportion of the entire float of bitcoins. He disappeared from the public eye in August 2012 and is accused of transferring 150,649 BTC to a MtGox trading account and misappropriating over $600,000 worth for personal use.
Understanding the Gaps in Forex TradingGo to article >>
According to court documents, U.S. Attorney Preet Bharara charged, “Trendon Shavers managed to combine financial and cyber fraud into a Bitcoin Ponzi scheme that offered absurdly high interest payments, and ultimately cheated his investors out of their Bitcoin investments. This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”
From 2011 to 2012, he allegedly promised investors a return of 7% weekly, claiming an ability to exploit some form of arbitrage in the bitcoin markets. He also claimed involvement with hedge funds to convince investors of his trustworthiness. At least 48 out of 100 lost part or all of their holdings, according to charges.
Last September, he was fined by the Securities and Exchange Commission (SEC) more than $40 million for the alleged scheme.