Bitcoin Ponzi Scheme Alleged by SEC in Lawsuit Against Texas Man

July 24, 2013 Leave a comment

Bitcoin Ponzi Scheme Alleged by SEC in Lawsuit Against Texas Man

The U.S. Securities and Exchange Commission sued a Texas man over claims he operated a Ponzi scheme involving Bitcoin, the virtual currency that has recently attracted investors including Tyler and Cameron Winklevoss.

Trendon T. Shavers raised at least 700,000 Bitcoin starting no later than September 2011 through his firm Bitcoin Savings and Trust and improperly used currency from new investors to cover investor withdrawals, the SEC said in a complaint filed today in federal court in Texas.Shavers falsely promised investors as much as 7 percent interest weekly on purported trades, including selling the online currency to individuals who wished to buy it “off the radar,” quickly or in large quantities, the SEC said. Shavers also misappropriated investors’ funds for his personal use, according to the complaint.

“Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws,” Andrew Calamari, director of the SEC’s New York office, said in a statement. “Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed.”

The SEC said the 700,000 Bitcoin that Shavers raised amounted to more than $4.5 million, based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold. Today, the value of 700,000 Bitcoin exceeds $60 million, the SEC said.

Bitcoin is a virtual currency created four years ago that can be used to buy and sell a broad array of items, from electronics to illegal narcotics. The Winkelvoss brothers, who became well-known for their clashes with Mark Zuckerberg over the origination of Facebook Inc. (FB), offered 1 million shares in a trust that would track the price of Bitcoins, according to a filing with the SEC.

No attorney was listed by the SEC. A phone call to a number listed to Shavers wasn’t immediately returned.

To contact the reporter on this story: Joshua Gallu in Washington at jgallu@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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