Bitcoin Savings & Trust (BS&T) operator Trendon Shavers has plead not guilty to fraud charges in a New York District court.
If convicted, Shavers faces up to 40 years in prison, as well as millions of dollars in potential fines and penalties. Shavers is charged with one count of securities fraud and one count of wire fraud.
The prosecution alleges that Shavers promised outsized returns to investors but in reality operated a Ponzi scheme by paying early investors with the proceeds from new ones. Shavers, who operated under the username pirateat40, solicited investors for BS&T during 2011 and 2012.
Shavers was found guilty of securities violations in September and was ordered to pay $40m in fines following the conclusion of a trial that began last July.
He was then arrested in November in connection with charges filed by the US Attorney’s Office in Manhattan. Shavers was taken into custody on 6th November and released on bail that same day.
The indictment stated that many of those who Shavers solicited ultimately lost their money, noting:
“In the end, at least 48 of approximately 100 investors lost all or part of their investment in BS&T. At the peak of his scheme, Shavers raised and had in his possession about 7% of the bitcoin that was in public circulation at the time.”
The court hearing, held 23rd March, was presided by District Judge Lewis Kaplan.
Ponzi scheme outlined
A court filing dated 15th March outlines the US Attorney’s Office case against Shavers, who raised more than 764,000 BTC ($188m at press time) from investors during the now-defunct BS&T operating period.
Shavers used both online mediums as well as in-person events to solicit investors. According to the indictment, Shaver misled investors by stating that hedge funds were involved with the company and that it was not a Ponzi scheme.
It was during this time that Shavers allegedly took client funds for personal use, including thousands of dollars worth of bitcoins to trade with on the Japan-based Mt Gox bitcoin exchange and later filter into a personal bank account and money account via the payment processor Dwolla.
The court filing reads:
“Specifically, Shavers transferred about 150,649 bitcoin to an account in Shavers’ name at Mt Gox (the “Shavers Mt Gox Account”). In connection with his trading on Mt Gox, Shavers lost the dollar equivalent of about $434,000 and misappropriated at least the dollar equivalent of about $147,000 of bitcoin for his own personal use.”
According to the document, Shavers spent investor funds on gambling and travel expenses, as well as general living expenses.
The full indictment against Shavers can be found below:
Image via Shutterstock