A Texas man ran a Ponzi scheme through the virtual online money system called Bitcoin, pocketing some of his investors' proceeds for his personal expenses and gambling, U.S. securities regulators charged on Tuesday, warning that the rise of such digital currencies could lead to more frauds.
The Securities and Exchange Commission said in a statement that Trendon Shavers, 30, of McKinney, Texas, and his company Bitcoin Savings & Trust used money from new investors to cover withdrawals by other investors and his own expenses.
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He raised at least 700,000 Bitcoin, or $4.5 million, from investors in multiple states, the SEC said. Attempts to reach Shavers or find a representative were unsuccessful. The agency is moving to freeze Shavers' assets and seeking other relief, including financial penalties.
Bitcoin, which is not managed by any one company or government, is a relatively new phenomenon that exists through an open-source software program. Users can buy Bitcoin through exchanges that convert real money into the virtual currency.