Tag Archives: BTCST
Federal Judge Rules Bitcoin is Money in Ponzi Scheme Case
Bitcoin is Money, Say Federal Judge
A few weeks ago, we covered the story of Trendon T. Shavers, a Texas man charged by the SEC with running a Bitcoin ponzi scheme. Now labeled the “Bernie Madoff of Bitcoin,” Mr. Shavers founded and operated Bitcoin Savings and Trust (BTCST), and over 700,000 BTC through this investment vehicle, an amount equivalent to nearly $5 million USD at the time of raising, and roughly $70 million today.
One component of Shavers’ attempted defense was to call into question whether Bitcoin is truly a form of money and therefore can be regulated by the SEC. The federal judge ruled with no uncertainty that Bitcoin is money.
It is clear that Bitcoin can be used as money. It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money.
So much for that, Mr. Shavers.
Patrick Murck, general counsel for the Bitcoin Foundation, commented to Wired on the case. “This isn’t that shocking. If anyone wants to run a Ponzi scheme in Bitcoin, they can expect to get busted. If you run a Ponzi scheme anywhere, you’re gonna get busted — and you should. Bitcoin isn’t some sort of silver bullet that somehow ameliorates all the legal concern around your otherwise illegal activity.”
The full ruling by the court is embedded below.
CC image by Joe Gratz
Meet the Bernie Madoff of Bitcoin: SEC Probes Bitcoin Ponzi Scheme
SEC Charges Texas Man in Bitcoin Ponzi Scheme
The SEC has alleged that Texas-based Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold. Today the value of 700,000 Bitcoin exceeds $60 million.
The SEC alleges that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities. In reality, BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments. Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his 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.”
According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Shavers sold BTCST investments over the Internet to investors in such states as Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania. Shavers posted general solicitations on a website dedicated to Bitcoin discussions, and he misled investors with such false assurances about his investment opportunity as “It’s growing, it’s growing!” and “I have yet to come close to taking a loss on any deal,” and “risk is almost 0.” Contrary to the representations made to investors, BTCST was not in the business of buying and selling Bitcoin at all.
Below is the SEC complaint filing.
CC image by Abode of Chaos.
