Trendon Shavers, a 33-year-old from McKinney, Texas who operated a Ponzi scheme using the virtual currency bitcoin, pleaded guilty to securities fraud this week. Shavers started a company, called Bitcoin Savings & Trust, in 2011 which he used to acquire bitcoins from potential investors via the web, telling them he would pay investors one percent interest on their investment every three days or seven percent a week.

Rather, Shavers used the majority of the bitcoins to pay back previous investors, the defining element of a Ponzi scheme. He spent the remaining funds on a used BMW M5, a $1,000 dinner at a steakhouse in Las Vegas, and a number of casino outings.

Shavers pleaded guilty in Manhattan court to one charge of securities fraud in what is being considered the first United States criminal fraud case involving bitcoin.

Shavers acquired more than $750,000 bitcoins worth about $4.5 million when he ceased repaying investors and quickly shut down the company in 2012, causing unpaid investors to demand their money and an SEC investigation to ensue. He lost his civil case against the SEC and was ordered to pay $40.7 million. He was arrested two months later, unable to pay the money.

Prosecutors claim that Shavers controlled about seven percent of all public bitcoins at the peak of his scheme and misappropriated almost 150,000 of them, netting himself $164,758. In court, Shavers stated, “I know what I did was wrong, and I’m very sorry.” He will be sentenced on February 3, 2016.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.