Bitcoin Ponzi Scheme Operator Pleads Guilty To $150M Fraud

JustAnotherOldGuy writes: Bitcoin Savings & Trust founder Trendon Shavers pleaded guilty to fraud over his company's Ponzi scheme, whose victims believed they would earn one percent interest every three days — an annual rate of 3,641 percent. Shavers used new depositors' money to pay the existing depositors, and skimmed enough cream to pay for a car, a $1000 Vegas steak dinner, and plenty of casino gambling. He cost his depositors about $150M and was holding onto $40.7M in Bitcoin when he was arrested. At his peak, he controlled about 7 percent of all Bitcoins in circulation. He netted $164,758 from the scheme. Under a plea deal, Shavers has agreed not to appeal any sentence at or below 41 months in prison. Sentencing before U.S. District Judge Lewis Kaplan is scheduled for Feb. 3. Shavers, who went by "pirateat40" online, was arrested in November, two months after a federal judge in Texas ordered him to pay $40.7 million in a related U.S. Securities and Exchange Commission civil lawsuit.

Comments

Good idea

[DogDude]

It's not a bad idea. If you're going to do a Ponzi scheme, it makes sense to target a population that already has proven too gullible for it's own good: Bitcoin users!

Re:Good idea

[Anonymous Coward]

Explains why Banks are interested in Bitcoin now!

Re:Good idea

[Anonymous Coward]

Yes. Or users of USD, an even more elaborate ponzi scheme.

Re:Good idea

[gstoddart]

The parent is modded flamebait, but honestly .... "an annual rate of 3,641 percent".

If anybody is gullible enough to believe that, they really are clueless.

That's one of those things where if anybody suggests that you should run away, and realize you're being lied to.

That's an awful lot of people who apparently couldn't think through and ask "is this even possible?".

Re:Good idea

[Skater]

I'll say something that gets said every time: They probably weren't clueless. They were probably hoping they were close enough to the ground floor of the scheme to cash in.

Ponzi schemes should be legal.

[140Mandak262Jamuna]

Why are they illegal? What did he do that was not done by the bankers in 2009?

Both used complex instruments that their clients did not understand, derivatives, tranches, bitcoints...

They both talked a lot of mumbo jumbo. But it was clear the bankers did not believe in the crap they were selling. It emerged they were actively betting that their customers are going to lose a ton of money in the same deal they were selling them. They rated the mortgage backed securities in the same class as US T-bill but were willing to pay 1 percent or two above T-Bill rates. If they believed the ratings there could not be this big a spread. It shows not just the bankers but the whole damned corrupt bond trading market knew the ratings given by S&P was crap.

They gambled, gave themselves bonuses when the bets come through, when the bets go bad, they left the public holding the bag.

It is a grave injustice the bankers remain free to wreck havoc in the financial system.

Re: Ponzi schemes should be legal.

[Anonymous Coward]

Why is this makes as troll? WTF is wrong with you moderators!

While he is wrong, the entire scam began in about 2001/2002 of countrywide seeking toxic loans in bulk to other institutions known as CDOs the process have people making minimum wage the ability to buy $200K properties.

How does this differ from a ponzi scheme? It's w worse than a ponzi scheme. You are giving the consumer a false sense of security that they'll be able to make money off their investments. The bankers knew damn well early in the process that the system was broke and was going to fail. The only question was when.