A federal judge in Texas has ordered Bitcoin Savings and Trust to pay over $40 million in disgorgement and penalties after the Securities and Exchange Commission accused the virtual currency investment company and its founder of operating a Ponzi scheme.
In his decision, U.S. Magistrate Judge Amos Mazzant ruled that Bitcoin Savings and Trust founder Trendon Shavers knowingly ran his company as a Ponzi scheme, misleading investors about how he would ensure the safety of their investments and raise money for promised returns. While he assured investors up to 1 percent interest daily to be paid every three days at first, or 7 percent interest weekly based on his ability to trade the virtual money, the judge ruled that he used new bitcoins received from investors to make payments on outstanding bitcoin investments. He also diverted some investors’ bitcoins for own his personal use.
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