The first ever criminal fraud case in the U.S involving cryptocurrency has been finally closed with the sentencing of Texan Trendon Shavers.
A Manhattan court sent him to sixteen months in jail time as well as $1.23 million in restitution to his victims. The judge in the case did not accept the claim that Shavers just “messed up”, called his behaviour a “class Ponzi scheme”, and told him: “You defrauded innocent people. You did it, in the last analysis, for personal gain.”
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Between September 2011 and September 2012, Shavers’ Bitcoin Savings & Trust (BTCST) allegedly raised 764,000 bitcoins, worth roughly $4.5 million at the time (and over half a billion USD at current Bitcoin exchange rates), from clients that trusted him to invest the funds for them. Soliciting on Bitcoin Forum he promised returns of 7% per week, or 3,641% per year, claiming to employ market arbitrage strategies.
However, according to the American criminal authorities, he in fact used new investors’ money to pay back prior investors. Some funds were allegedly invested on MtGox, at one point the world’s largest bitcoin exchange, which collapsed in February 2014. He also allegedly spent funds on lavish personal items and expenses such as a BMW M5 and casino visits. At least 48 investors reportedly suffered losses worth about $1.23 million at the time, but considerably more than that as Bitcoin soared in value since 2012.
Shavers was fined $40.7 million by the US Securities and Exchange Commission (SEC) in September 2014, was arrested in November 2014 and was forced to sign a plea deal with his prosecutors in September 2015 after originally pleading not guilty back in March 2015.