Virtual Bank Founder Must Pay $40M For Bitcoin Ponzi Scheme

By Jeff Sistrunk (September 18, 2014, 7:47 PM EDT) -- A Texas federal judge on Thursday ordered Bitcoin Savings & Trust and its founder to pay more than $40 million in disgorgement and penalties, ruling that the U.S. Securities and Exchange Commission showed they defrauded investors by running a Ponzi scheme involving the bitcoin virtual currency.

U.S. Magistrate Judge Amos L. Mazzant found that BTCST and founder Trendon T. Shavers violated federal securities laws by selling bitcoin-demominated investments through the Internet, while using bitcoin from new investors to make purported interest payments on outstanding investments. The defendants did not file a response to the SEC's March summary judgment motion.

The SEC's...

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