The U. S. Attorney for the Southern District of New York, Preet Bharara, has issued several recent statements signaling a steady pursuit of criminal conduct related to bitcoin.  First, on Thursday, November 6, 2014, Trendon Shavers was arrested and charged with one count of securities fraud and one count of wire fraud in connection with what Mr. Bharara describes as the “first federal criminal securities fraud case involving a bitcoin-related Ponzi scheme.”  Notably, this criminal case follows a civil action against Mr. Shavers that was filed by the SEC in July 2013, and allowed to proceed in Texas federal court in August 2013.  According to the criminal complaint filed in New York federal court, Mr. Shavers – who runs a company called Bitcoin Savings and Trust – allegedly raised more than 764,000 bitcoin from investors between September 2011 and September 2012.  Mr. Shavers allegedly told investors that he would engage in a bitcoin market arbitrage strategy (i.e., lending bitcoin to others for a fixed period of time, trading bitcoin via online exchanges, and selling bitcoin locally via private off-market transactions).  In return for the investors’ bitcoin, Mr. Shavers promised up to one percent per day.  According to the U.S. Attorney, however, Mr. Shavers failed to execute the claimed market arbitrage strategy, failed to honor investors’ redemption requests, and failed to deliver the agreed upon rates of interest.
Continue Reading New York Federal Prosecutor Intensifies Scrutiny of Illegal Bitcoin Activity