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Bitcoin Savings and Trust founder sentenced to prison for 18 months

In a first U.S. securities fraud case involving a Bitcoin Ponzi scheme, a Texas-based man has been sentenced to 18 months in prison.

Trendon T. Shavers, going by the alias “pirateat40”, was the founder and operator of Bitcoin Savings and Trust (BCS&T), which offered and sold Bitcoin-based investments through the Internet. Preet Bharara, the United States Attorney for the Southern District of New York, said that Shavers fraudulently obtained approximately 146,000 Bitcoin in BCS&T investments, which amounted to approximately $807,380 based on the average price of Bitcoin over the duration of the scheme. 

“Applying a modern spin to an age-old fraud, Trendon Shavers used a Bitcoin business to run a classic Ponzi scheme.  Shavers raised money in the form of Bitcoins by promising spectacular returns and personal guarantees, when all he was really doing was paying back old investors with new investors’ Bitcoins. Thanks to the FBI and prosecutors in this Office, the first federal securities case involving Bitcoins has ended in Trendon Shavers being sentenced to prison”, Bharara said.

Shavers pled guilty on September 21, 2015, to one count of securities fraud before U.S. Magistrate Judge Sarah Netburn.  The recent sentence was imposed by U.S. District Judge Lewis A. Kaplan. He has been sentenced to 18 months in prison, 3 years of supervised release, and a $100 special assessment. In addition to the prison sentence, Judge Kaplan ordered Shavers to pay $1.23 million in forfeiture, and the same amount in restitution.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Daniel S. Goldman and Michael Ferrara are in charge of the prosecution.   

In a separate civil action, the U.S. District Court for the Eastern District of Texas entered final judgment against both Shavers and BCS&T in September 2014, ordering him to pay over $40 million in disgorgement and prejudgment interest, and a civil penalty of $150,000 related to BCS&T.

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