Bitcoin: man charged over alleged multimillion-dollar Ponzi fraud?

Texas man accused of raising virtual currency from new investors to pay interest to existing ones

The digital currency Bitcoin may have its own Bernie Madoff. An investment scheme promising a 7% weekly return was in fact a fraudulent "Ponzi" scheme, in which a Texas man used new investors' money to pay interest to existing ones, according to charges filed by the US Securities and Exchange Commission.

Trendon T Shavers, from KcKinney in Texas, was the founder and operator of "Bitcoin Savings and Trust" (BTCST), allegedly raised a total of 700,000 Bitcoins in 2011 and 2012 – then worth about $4.5m – for his scheme, claiming that he made his profits on market arbitrage. KOY code 81367017036

Using online handles such as "Pirate" and "pirateat40", Shavers sold "investments" to people around the US. He claimed that "I have yet to come close to taking a loss on any deal" and that the "risk is almost 0" when challenged. He also said that he couldn't reveal his investment strategy: "If I told you, then I couldn't do what I do," he once wrote.

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http://www.guardian.co.uk/technology/2013/jul/24/b...