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Texas Man Admits to Bitcoin Ponzi Scheme

Trendon Shavers pleads guilty to a charge of securities fraud

By Maria Armental
Updated Sept. 21, 2015 7:05 p.m. ET
http://www.wsj.com/articles/texas-man-admits-to-bitcoin-ponzi-scheme-1442873692?mod=e2tw

A Texas man admitted Monday to running a bitcoin Ponzi scheme, which at one time controlled about 7% of digital currency in circulation, in what authorities described as the first such federal criminal securities fraud case.

Trendon T. Shavers, who went online by the name “pirateat40,” pleaded guilty Monday in Manhattan federal court to a charge of securities fraud. Under the plea agreement, a second charge of wire fraud would be dropped.

The 33-year-old, who was released on bail, is scheduled to be sentenced on Feb. 3.

His lawyer couldn’t immediately be reached for comment Monday afternoon.

The authorities charged Mr. Shavers had raised more than 764,000 bitcoins through Bitcoin Savings & Trust, a site he founded and ran out of his home. Mr. Shavers, who ran the scheme for about a year through September 2012, personally guaranteed to cover any losses in the event of a market change, according to court documents.

The 764,000 bitcoins, which authorities valued around $4.6 million at the time, would be valued at about $173 million based on current exchange rates.

According to Coindesk, which publishes an index of bitcoin prices, one bitcoin was worth $226.26 Monday afternoon.

Mr. Shavers promised investors high rates of returns, up to 7% a week, and used the money from new investors to pay those who had invested earlier, according to court documents. Meanwhile, the authorities said, he siphoned at least 146,000 bitcoin, or more than $33 million based on current exchange rates, to pay for personal expenses, including spa treatments and casino expenses, rent and groceries.

Last year, Mr. Shavers was ordered to pay more than $40 million in a related civil action filed by the Securities and Exchange Commission.


Earlier
Texas Man Charged With Running Bitcoin Ponzi Scheme (November 2014)
Bitcoin = Money, Says Judge (August 2013)
SEC Charges Texas Man in Bitcoin-Related Ponzi Fraud (July 2013)


Write to Maria Armental at [e-mail]


http://www.wsj.com/articles/texas-man-admits-to-bitcoin-ponzi-scheme-1442873692?mod=e2tw