The U.S. Securities and Exchange Commission (SEC) recently charged Trendon T. Shavers of McKinney, Texas, the founder of Bitcoin Savings and Trust (BTCST), with defrauding investors by running BTCST as a Ponzi scheme.

The SEC alleges that Shavers sold Bitcoin-denominated investments online using the screen names "Pirate" and "pirateat40." He raised at least 700,000 Bitcoin in BTCST investments, which was worth approximately $4.5 million at the time.

According to the SEC's allegations, Shavers promised investors up to 7 percent in weekly interest based on BTCST's Bitcoin market arbitrage activity -- but the entire activity was a Ponzi scheme in which Shavers used new investors' deposits to make purported interest payments.

The SEC's complaint charges Shavers and BTCST with offering and selling investments in violation of the anti-fraud and registration provisions of the securities laws -- the SEC is seeking a court order to freeze the assets of Shavers and BTCST in addition to permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

"Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws," Andrew M. Calamari, director of the SEC’s New York Regional Office, said in a statement. "Shavers preyed on investors in an online forum by claiming his investments carried no risk and huge profits for them while his true intentions were rooted in nothing more than personal greed."