Texan man pleads guilty in New York bitcoin securities fraud case

Earlier today in New York a man has pleaded guilty to what federal authorities say is the “world’s first bitcoin securities fraud” case.

The 33-year-old resident of McKinney, Texas began his own startup, Bitcoin Savings & Trust, in 2011 and used the site to solicit virtual money from prospective investors online. He promised enormous returns on investment (a whopping 3,641 percent per year) to those who helped fund a stock market campaign, but was really using the money from newer customers to pay existing ones.

Most of the bitcoins collected duly went back to paying initial and older investors, making it the classic Ponzi scheme.

Shavers, who operated under the pseudonym “pirateat40”, said in court today, “I know what I did was wrong, and I’m very sorry”, according to Reuters.

Under a deal struck with the US , Shavers agreed not to challenge any sentence from 33 months to 41 months.

Sentencing was set for February 3.

Shavers started his company, Bitcoin Savings & Trust in 2011 and used it to offer promises of high rewards to investors over the Internet by collecting bitcoins. Because of bitcoin’s volatility as a digital currency, Shavers’ scheme cost investors more like $150 million, leading the SEC to settle on a price point somewhere in the middle to account for the exchange rate fluctuations.

Last year, Mr. Shavers was ordered to pay more than $40 million in a related civil action filed by the Securities and Exchange Commission.

In court papers, prosecutors had also accused Shavers of misappropriating bitcoins to buy a used BMW M5 sedan and a $1,000 steakhouse dinner in Las Vegas, and to go to spas and casinos.

Assistant U.S. Attorney Michael Ferrara said Monday the government’s evidence against Shavers included electronic messages as well as bank records.