Recently, it has come to light that the Securities and Exchange Commission (SEC) has charged a man and the company he runs with fraud. The man, who hails from Texas, allegedly defrauded investors via a Ponzi scheme. While Ponzi schemes are certainly not anything new on the fraud front, this one was particularly unique in that it involved the virtual currency known as Bitcoin. This currency can be used online just like real money in the real world.
The alleged fraudster is Trendon T. Shavers. He founded and operated Bitcoin Savings and Trust, which offered and sold bitcoin investment “opportunities.” The man is said to have raised over $4.5 million via his scheme. Shavers would promise investors a huge interest rate, typically as much as 7%, on Bitcoin market arbitrage activity.
Unfortunately for these unknowing investors, Shavers would use the Bitcoin funds that they offered up to make interest payments and to pay for any withdrawals from investors on outstanding investments. Shavers is also accused of diverting the Bitcoin funds for personal day trading and exchanging invested Bitcoin funds for dollars, which he would then use for his own purposes.
The SEC was very concerned about these fraudulent actions and issued an alert warning investors about scams similar to these. The SEC warns against any investing ventures, like Shaver’s, that promise big returns with no risk. Nothing is foolproof in the investment world, and anything that claims to be so is dishonest at best, according to the SEC.
The SEC has also made it clear that just because the fraudster used Bitcoin does not protect him from punishment. Any currency, including virtual currency, can be used illegally and dishonestly. In fact, the risk for fraud is particularly great with newer currencies, such as Bitcoin, because of the fact that it is largely new and unregulated.
As of now, the SEC is warning people to be careful of any new investment opportunities that pop up related to Bitcoin or any other online currency. Many people who perpetrate Bitcoin scams pose as experts and use their supposed “knowledge” to lure people into thinking they know a lot about this new currency and have “inside information” into how to garner great profits by investing with it. It is important for all people to be aware of crimes like this in order to protect themselves from falling victim to similar schemes and scams in the future.