Lawyer: Trendon Shavers Was Scapegoat for SEC’s Madoff Ponzi Miss

The lawyer representing the man accused of running the first Bitcoin Ponzi says his client was the target of unjustified

The lawyer representing the man accused of running the first Bitcoin Ponzi scheme says his client was the target of unjustified zeal from the US Securities and Exchange Commission (SEC).

Trendon Shavers operated what was allegedly a Ponzi scam involving bitcoins. His Bitcoin Savings & Trust (BTCST) allegedly raised 764,000 bitcoins, worth roughly $4.5 million at the time, from investors. He promised returns of 7% per week, or 3,641% per year, claiming to employ market arbitrage strategies.

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Last year, he was ordered to pay $40.7 million by the SEC and was later arrested. He pleaded guilty to one charge of securities fraud in September this year and faces between 33 and 41 months in prison.

Speaking at the Bitcoin conference in San Diego (Blockchain Agenda) last week, Jason Seibert, who briefly defended Shavers during the SEC action, took strong issue with the way the case was handled.

As reported on Motherboard, Seibert claimed:

“The SEC got railed for missing the Bernie Madoff issue. Shavers [was] the Bernie Madoff of Bitcoin and the SEC wasn’t going to get caught napping.”

The agency subpoenaed Seibert when he stopped paying back investors. The SEC allegedly deposed Shavers for “hours and hours and hours” without an attorney. “He didn’t know what he was answering or why it mattered. The SEC didn’t tell him that his answers could be used in the parallel criminal investigation,” alleged Seibart.

He added:

“Maybe there is somebody in the SEC office that’s trying to make a name for themselves in crypto-currency agencies. People want to be known for things, people want to have value in themselves. You get a motivated SEC attorney post-Madoff who has to show results.”

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It is worth noting that the SEC had taken action against numerous Ponzis after the Madoff scheme was exposed in late 2008 and prior to the collapse of Shavers’ scheme in 2012.

However, Seibart alleges, the involvement of Bitcoin made the case more appealing to the SEC. “This was also when the Silk Road was going on. Bitcoin was big news and now they had a potential Ponzi scheme. A million dollar Bitcoin Ponzi scheme is ‘legal sexy’,” said Seibart.

The Bitcoin community didn’t come to Shavers’ rescue. “The community hated Shavers so much that they didn’t understand [that] even if Shavers did wrong, the SEC was making bad law, expanding the scope of their power,” he said.

‘Bitcoin Isn’t Money’

Seibart further contended that the judges completely misunderstood Bitcoin. Treating bitcoin like money allowed them to prosecute his client.

“There is a definition of money in the US Code of what money is: legal tender issued by US definitions. The SEC doesn’t have jurisdiction over this case because Bitcoin isn’t money, it’s not use-currency,” argued Seibart.

He related one exchange with Judge Mazzant: “Bitcoin is a value transfer protocol. It’s a ledger of value transfer, a record of a transaction of a transfer,” Seibart said.

“But, can’t I buy airline tickets with it?” the judge asked.

Seibart replied: “You can also do that with airline reward miles. Does that mean airline reward miles are money?”

Seibart also argued that his client was genuinely trying to pay back investors but eventually lost control of the situation. “He paid as many people back as he could in the most fair way he could do it, but not everyone got paid back. So people assumed it must be a Ponzi scheme,” he claimed.

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