A Texas man accused of operating a Ponzi scheme involving bitcoins pleaded guilty on Monday in what prosecutors say was the first U.S. criminal securities fraud case related to the digital currency.
Trendon Shavers, who authorities said defrauded investors after raising more than $4.5 million worth of bitcoins while operating Bitcoin Savings and Trust, pleaded guilty in Manhattan federal court to one count of securities fraud.
“I know what I did was wrong, and I’m very sorry,” Shavers said in court.
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.
Prosecutors said Shavers, who turned 33 on Monday, raised at least 764,000 bitcoins worth more than $4.5 million based on the average price of bitcoin during the period of the scheme from investors from September 2011 to September 2012. He promised interest rates of 7 percent per week or 3,641 percent a year.
The indictment said Shavers solicited the investments on the website Bitcoin Forum, offering to pay interest to investors who loaned bitcoins to Bitcoin Savings and Trust while he pursued a market arbitrage strategy.
Michael Ferrara, a prosecutor, in court on Monday said Shavers had invested some of the bitcoins with Mt. Gox, the now-defunct Tokoyo-based bitcoin exchange.
But Ferrara said Shavers, who lived in McKinney, Texas, largely instead used new investors’ bitcoins to pay back prior investors.
“In other words, he had the telltale signs of a Ponzi scheme,” Ferrara said.
In court papers, prosecutors had also accused Shavers of misappropriating bitcoins to buy a used BMW M5 sedan and a $1,000 steakhouse dinner in Las Vegas, and to go to spas and casinos.
At the peak of the scheme, Shavers controlled about 7 percent of bitcoins in public circulation, prosecutors said. In total, prosecutors said he misappropriated 146,000 bitcoins and caused 48 investors to suffer losses.
The case is U.S. v. Shavers, U.S. District Court, Southern District of New York, No. 15-cr-00157.
Trump’s Labor Department wants to ‘weaponize’ right-wing discrimination and bigotry
Just in case you wanted to believe that the Trump administration isn’t on a campaign to trample rights for Americans, here comes the Labor Department to shove a grapefruit in your face.
Labor officials have made public a new rule—no Congress, needed, thank you—to allow companies contracting with the federal government who are “religion-exercising organizations” to ignore federal laws protecting the rights of gays, transsexuals, and who knows who else in hiring or workplace practices. Religious employers and companies with “closely held” religious ties now will be shielded from claims of bias in court or other law enforcement actions, says the rule.
Trump warns media ‘treading in very dangerous territory’ for reporting bad poll numbers
President Donald Trump hurled new warnings at the news media for reporting damaging stories and negative poll numbers.
The president's approval rating was measured at 43 percent by two new surveys by NBC/Wall Street Journal and Fox News, and polls continue to show him losing to various Democratic challengers.
Trump insisted Monday that his "new internal polls" show the strongest support he's had so far, and also complained that unfair media coverage kept his approval ratings low -- and he retweeted those claims with a new threat against the media.
The LameStream Media is far beyond Fake News, they are treading in very dangerous territory! https://t.co/J60JgSFhcx
Trump unleashes bizarre stream of gobbledygook when reporter asks him to describe his health care plan
President Donald Trump has vowed multiple times over the past two-and-a-half years to unveil his own replacement plan for the Affordable Care Act, but so far no actual plan has come to light.
As noted by CNN fact checker Daniel Dale, Trump was asked by a reporter in New Hampshire this week to describe his health care plan, and the president responded with a stream of gobbledygook.
"So, we have a great plan coming out," the president began when asked about his plan. "It's going to be -- if we can take back the House because we're not going to get the Democrats to vote for it, because they're doing Medicare for all, which is going to take away your freedom, take away your doctors, take away everything that you should be able to have, and most importantly, it's going to take away -- we have 180 million people right now that have private insurance and they love it, and all of that's going to be taken away. It's absolute craziness."