Texas Man Charged in Nation's First Bitcoin Securities Fraud Ponzi Scheme

A 32-year-old McKinney, Texas, man has been charged with securities fraud and wire fraud in the nation’s first bitcoin Ponzi scheme, allegedly bilking investors out of $4.5 million in 2011 and 2012.

According to Manhattan U.S. Attorney Preet Bharara, Trendon Shavers operated a company called Bitcoin Savings and Trust, an unincorporated entity that Shavers ran by himself. Shavers allegedly lured investors by promising “absurdly high” interest rates of up to 7 percent per week, or 3,641 percent annually.

Bitcoin Savings and Trust raised approximately $4.5 million from investors from September 2011 to September 2012. Shavers allegedly paid older investors with bitcoin from new investors while also funneling investors’ bitcoin into his own account at the now-defunct Mt. Gox exchange.

Prosecutors said that at least half of Shavers’ investors lost all or part of their money. “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,” Bharara said in a statement. “This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”

The criminal charges against Shavers stem from a U.S. Securities and Exchange Commission lawsuit in Texas, where a federal judge ordered Shavers to disgorge $40.7 million in illegal profits, interest and fines on September 18, 2014.

The Cogdell Law Firm is a boutique law firm focusing on large, complex business and criminal financial-related litigation, including white collar criminal defense, securities fraud, health care fraud investigation, criminal appeals and state criminal defense. When results matter most, contact Dan Cogdell at (713) 426-2244 or info@cogdell-law.com.