Operating a Bitcoin Ponzi scheme is not only morally wrong, but it is also punishable by law. Albeit most countries around the world do not officially recognize Bitcoin as a currency, defrauding other people is a criminal offense. One man in Texas has been sentenced for operating such a Bitcoin Ponzi Scheme, and he will face 18 months in prison.
Bitcoin Savings and Trust Ponzi Scheme Is Over
It is always good to see operators of Ponzi Schemes facing jail time after being arrested by the police. For Trendon Shavers, also known as pirateat40, that sudden change in lifestyle is a direct result of running the Bitcoin Savings and Trust scam. As the name suggests, this particular concept sold Bitcoin-based investments over the Internet.
Hardly anyone will be surprised to find out none of these investments were genuine, netting Shavers 146,000 BTC. Over the duration of this Ponzi Scheme, he collected US$807k from investors, to which he pled guilty on September 21, 2015. Bitcoin Savings & Trust ran for about one full year, between September 2011 and September 2012.
Preet Bharara, the US Attorney For the NY Southern District, stated:
“Applying a modern spin to an age-old fraud, Trendon Shavers used a Bitcoin business to run a classic Ponzi scheme. Shavers raised money in the form of Bitcoins by promising spectacular returns and personal guarantees, when all he was really doing was paying back old investors with new investors’ Bitcoins. Thanks to the FBI and prosecutors in this Office, the first federal securities case involving Bitcoins has ended in Trendon Shavers being sentenced to prison.”
As is usually the case with Bitcoin Ponzi schemes, they attract a lot of investors due to spectacular return on investment rates. In the case of Bitcoin Savings and Trust, investors were promised a 7% weekly return. All of the funds was available for withdrawal at any given time as well, or so Shavers claimed, at least.
In the end, none of the investors’ redemption requests were honored, and he never delivered the interest either. Instead, Shavers used the funds for day trading on his personal exchange account and converted some of it to US Dollar to cover his own expenses. His eighteen-month prison sentence is only part of the punishment, though. Judge Kaplan ordered Shavers to pay over US$2.4m in forfeiture and restitution.
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