This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

SEC Busts Bogus Bitcoin Bank

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.
[Read: <a target="blank" data-add-tracking="true" href="http://www.mainstreet.com/article/career/employment/employers-get-new-approach-matching-personalities-jobs"><em>Employers Get a New Approach to Matching Personalities to Jobs</em></a>]

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."
[Read: <a target="blank" data-add-tracking="true" href="http://www.mainstreet.com/article/smart-spending/technology/get-floored-real-estate-whats-wurken"><em>Get 'Floored' in Real Estate: What's wURKEN?</em></a>]

The alleged Internet-based scam reached far beyond the state of Texas with sales to Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania. The SEC says Shavers promoted the scheme on a Bitcoin Internet forum telling prospective investors "I have yet to come close to taking a loss on any deal," and "risk is almost 0."

The SEC alleges that Shavers, who lives in McKinney, Texas, paid 507,148 Bitcoin in investor withdrawals and purported interest payments. He transferred at least 150,649 Bitcoin to his personal account at an online Bitcoin currency exchange. While Shavers suffered a net loss from his day trading, he realized net proceeds of $164,758 from his sales of 86,202 Bitcoin. Shavers transferred $147,102 from his personal account at the online Bitcoin currency exchange to accounts he controlled at an online payment processor, as well as his personal checking account. The SEC says he used this money to pay his rent, utilities, and car-related expenses as well as for food, retail purchases and gambling.
[Read: <a target="blank" data-add-tracking="true" href="http://www.mainstreet.com/article/moneyinvesting/credit/debt/debt-stresss-prevents-1-3-americans-vacationing"><em>Debt Stress Prevents 1 in 3 Americans From Vacationing</em></a>]
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $126.44 0.00%
FB $87.28 0.00%
GOOG $523.40 0.00%
TSLA $280.02 0.00%
YHOO $39.38 0.00%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs