Crypto · Sherman, Texas · 2014

The Bitcoin Trust Promised Weekly Returns Its Business Couldn’t Produce

How an online high-yield investment scheme defrauded early cryptocurrency holders

1. Online Solicitations

Trendon T. Shavers operated an online entity named Bitcoin Savings and Trust starting in 2011. Using the online moniker pirateat40, he solicited investments across digital discussion forums. He promised prospective investors extraordinarily high weekly returns. These solicitations targeted early participants in the cryptocurrency community.

The operator promised high returns via online forum posts.

2. Arbitrage Claims

Shavers claimed to generate profits through currency market arbitrage activities. He asserted he sold bitcoin to buyers seeking transactions outside normal exchange channels. Investors were assured their funds carried minimal risk and high profitability. In reality, no such arbitrage operations were ever conducted.

False claims of market arbitrage sustained investor confidence.

3. Ponzi Structure

The enterprise operated as a classic Ponzi scheme utilizing incoming digital funds. Shavers used bitcoins received from new investors to pay purported returns to older participants. He also diverted funds for personal day trading accounts and living expenses. Operating logs confirmed that investor deposits paid prior withdrawals.

New investor deposits covered outgoing payments for older participants.

4. Massive Inflow

The scheme amassed hundreds of thousands of bitcoins over its operational lifespan. At its peak, the platform controlled a significant fraction of public coin circulation. Participants across multiple states transferred funds into the digital investment vehicle. The rapid accumulation drew scrutiny from federal financial regulators.

The platform gathered massive amounts of digital currency from participants.

5. SEC Civil Action

The Securities and Exchange Commission filed a civil enforcement action in July 2013. Regulators charged Shavers with running a fraudulent digital currency Ponzi scheme. The federal court subsequently issued asset freezes against the operator. Legal proceedings established liability for securities law violations.

Federal regulators initiated civil enforcement actions against the operator.

6. Final Civil Judgment

A federal district court in Texas entered final judgment against Shavers in September 2014. The court ordered him to pay over $40 million in disgorgement and civil penalties. The judgment permanently enjoined future violations of federal securities laws. Financial penalties reflected the massive scale of investor losses.

The court ordered multi-million-dollar monetary penalties in civil proceedings.

7. Criminal Indictment

Federal prosecutors subsequently pursued criminal charges against Shavers in New York. He was arrested following the civil judgments and pleaded guilty to securities fraud. Prosecutors detailed how he misappropriated funds for personal luxuries and gambling. The criminal case proceeded independently of the prior regulatory penalties.

Criminal charges led to a guilty plea in federal court.

8. Prison Sentencing

Shavers received an eighteen-month federal prison sentence in July 2016 after pleading guilty. That criminal case followed a separate SEC civil action and judgment concerning Bitcoin Savings and Trust. The proceedings found that the promised returns were not coming from the business described to investors. The civil judgment and criminal sentence were separate outcomes, not two descriptions of a single payment order.

The scheme produced both a civil judgment and a criminal sentence.