Some promises are too good to be true. The Securities and Exchange Commission has charged a Texas man with operating an illegal Ponzi scheme using the virtual currency Bitcoin in place of dollars. Trendon T. Shavers took in 700,000 Bitcoins from investors, the SEC alleges, through his unregistered fund Bitcoin Savings & Trust while operating with the ironic alias “pirateat40.” The Bitcoins were worth $4.5 million at the time but would be worth $60 million on the market today due to the virtual currency’s appreciation.

Shavers told investors he could make them a 7 percent return on their investment by arbitraging the currency, but the SEC claims he never made a trade. Instead, he used the money from new investors to pay dividends to previous investors, the definition of a Ponzi scheme. This allowed him to keep up the appearance of impossibly high returns, the SEC says. There was plenty of suspicion around BS&T and other so-called “high-yield investment programs,” but greed was enough to convince some people to buy in. In August 2012, BS&T stopped paying its investors and then abruptly shut down.

Read the Full Article over at The Verge