NEW YORK (AP) — A Texas man who carried out what authorities said was the first federal bitcoin securities fraud to be prosecuted was sentenced on Thursday to 18 months in prison.
Trendon Shavers, 33, was sentenced in Manhattan federal court by Judge Lewis A. Kaplan, who said Shavers committed a serious crime but had earned leniency through the honest work he's done since his 2014 arrest. Federal sentencing guidelines had called for a prison term of nearly three years.
The judge also ordered $1.2 million, the amount lost by 48 investors, to be forfeited and an equal amount of restitution.
He said Shavers, of Prosper, Texas, carried out a "classic Ponzi scheme" after offering potential investors high interest rates to turn over bitcoins, a virtual currency that operates outside government regulation. Authorities say that at the peak of the scheme Shavers possessed about 7 percent of all bitcoins in public circulation.
Shavers told the judge he "royally messed up."
"I don't think this is something I'll ever fully be able to get over, but I'm going to try to make things right," Shavers said.
Prosecutors said Shavers caused about half of 100 investors to lose all or part of their bitcoin investments from September 2011 to September 2012. According to court documents, Shavers used about $220,000 in bitcoins and money from investors to cover his rent, car payments, groceries and other family expenses.
Assistant federal defender Sabrina Shroff had urged the judge to sentence Shavers to probation so that he could continue his work for a Texas family. She said his crime arose as he tried to rescue his failing business.
U.S. Attorney Preet Bharara said in a release that Shavers promised investors "spectacular returns and personal guarantees, when all he was really doing was paying back old investors with new investors' bitcoins."
"Applying a modern spin to an age-old fraud, Trendon Shavers used a bitcoin business to run a classic Ponzi scheme," he said.
Prosecutors said Shavers offered investors up to 7 percent weekly to invest in his business, Bitcoin Savings and Trust, which offered and sold bitcoin-based investments through the internet.
Shavers pleaded guilty to one count of securities fraud in September.