By Hal M. Bundrick
NEW YORK ( MainStreet)--A high-tech currency was at the center of a low-tech fraud, according to the Securities and Exchange Commission. Trendon T. Shavers is said to have sold more than $4.5 million in bogus Bitcoin investments in 2011 and 2012 through his Texas-based company Bitcoin Savings and Trust (BTCST) in what amounted to little more than a Ponzi scheme. Bitcoin is a digital currency without a central authority, traded, as well as used for purchases online.
The SEC alleges Shavers offered and sold 700,000 Bitcoin-denominated investments through the Internet using the handles "Pirate" and "pirateat40." The value of those investments would exceed $60 million at current Bitcoin exchange rates.
Shavers apparently promised investors up to 7% weekly interest based on Bitcoin market activity, but in a typical Ponzi scheme manner, he used Bitcoin from new investors to make interest payments and to cover investor withdrawals on outstanding BTCST investments. The SEC says Shavers also used the funds to trade Bitcoin in his own account as well as pay for personal expenses."Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws," said Andrew M. Calamari, Director of the SEC's New York Regional Office. "Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed."