Bitcoin "Hedge Fund" Operator Pleads Not Guilty in Fraud Scheme

Mar 25 2015 | 9:36am ET

Trendon Shavers, the operator of digital "hedge fund" Bitcoin Savings & Trust (BS&T), pled not guilty to charges that he ran a bitcoin scam and Ponzi scheme.

Shavers is facing one count of securities fraud and one count of wire fraud in a New York District court. 

According to the indictment, Shavers marketed BS&T as a virtual hedge fund and solicited investments by promising investors significant returns. He allegedly paid out early investors with the investments of new clients, creating a Ponzi scheme structure. Shavers also misled investors into believing that a number of hedge funds were working with his company.

Shavers is facing one count of securities fraud and one count of wire fraud in a New York District court. 

At least 48 of roughly 100 investors lost all or part of their investment with Shavers, according to the indictment. At the height of his operation, Shavers' firm was able to control roughly 7% of all bitcoin that was in circulation. He allegedly used proceeds from his clients to fund his travel, gambling, and other lifestyle habits.

If convicted, Shavers faces up to 40 years in prison and could be forced to pay millions of dollars in penalties and finds. His court hearing will be held this week. 

This is the second trial that Shavers has faced in the last year. In September, a court ordered him to pay $40 million in fines after he was found guilty of securities fraud. He was arrested again in November after new charges were filed by the US Attorney’s Office in Manhattan

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