Bitcoin investment company owner jailed for $1.23 million mass fraud scheme.
Trendon Shavers operated Bitcoin Savings and Trust (BCS&T). Shavers operated his business from his home, offering bitcoin-related investments through the internet. Using the alias “pirateat40”, Shavers raised over 764,000 bitcoins. At the time, these were worth more than $4.5 million for his company.
Using the website Bitcoin Forum, Shavers solicited investment by promising investors that they would receive weekly interest rates of 7% and an annualized interest rate of 3,641%. Investors were asked to commit bitcoins to BCS&T while Shavers pursued a market arbitrage strategy. He informed his investors that his strategy included lending bitcoins to others for a fixed period, trading bitcoin via online exchanges, and selling bitcoins locally via private, off-market, transactions. However, Shavers failed to follow through on his strategy, and was unable to deliver the agreed rates of interest to his investors.
Shavers ran a typical mass fraud scheme that used new investors’ bitcoins to pay previous investors’ interest. At the height of the scheme, Shavers controlled around 7% of all bitcoins in public circulation. He was also accused of misappropriating the funds to purchase a car and a steakhouse diner. Shavers was further accused of using his investors’ funds to pay for visits to spas and casinos.
Shavers was sentenced to 1.5 years in prison and ordered to pay $1,228,660.93 in fines, and $1,228,660.93 in compensation. In a separate civil action, Shavers was ordered to pay more than $40 million in disgorgement and prejudgment interest, and was given a civil penalty of $150,000 relating to BCS&T.