Trendon Shavers, the man who the Securities and Exchange Commission (SEC) said was running a bitcoin Ponzi scheme, has been ordered to pay a $40 million dollar fine by U.S. Magistrate Judge Amos L. Mazzant for his founding of the “Bitcoin Savings and Trust (BTCST)” organization, which was nothing more than a scam for its users.
From a complaint filed by the SEC last year (as noted by Inside Bitcoins):
[blockquote style=”2″]From at least September 2011 to September 2012, Shavers, operating under the Internet name “pirateat40,” offered and sold BTCST investments over the Internet, raising more than 700,000 BTC in principal investments from BTCST investors, or more than $4.5 million based on the daily average price of BTC when the BTCST investors purchased their BTCST investments.[/blockquote]
Shavers’ had promised prospective customers 7% in weekly interest based on arbitrage activity. Shavers had instead given the money from new investors to already-committed investors.
So serious had the scheme gotten that Shavers eventually required a minimum investment of 100 bitcoins, and the entire scheme had inflated to over 700,000 bitcoins-worth.
The SEC reports that Mr. Shavers had personally used client money to pay off his own rent & utilities, pay for car expenses, gambling, and a number of other purchases.
It is unclear whether or not Shavers will be facing time in prison for his wrongdoing.