A Texas man who owes the SEC more than $40 million after admitting to the first bitcoin Ponzi scheme will be arrested and imprisoned for civil contempt unless he quickly provides overdue documents and payments.
Trendon Shavers has disregarded several court orders, Judge Amos L. Mazzant said Monday for the US District Court for the Eastern District of Texas.
“Shavers’s flagrant disregard for the Court’s orders on multiple occasions leads to only one conclusion: Shavers will only comply with the Court’s orders if he is incarcerated,” Mazzant said.
The Securities and Exchange Commission sued Shavers for securities fraud, alleging his investment-solicitation company used investor funds, in bitcoin digital currency, to repay earlier investors and to cover Shavers’ personal expenses. The company, Bitcoin Savings and Trust, allegedly operated in 2011 and 2012.
In 2013, his case established that bitcoin is a form of money and that the investments at issue were securities. The SEC obtained a ruling against him in September 2014.
A year later, in September 2015, Shavers pleaded guilty to criminal fraud charges. Prosecutors said the venture was a first-of-its-kind Ponzi scheme involving bitcoin investments.
Mazzant’s contempt order focuses on the SEC’s effort to enforce the $40.4 million civil judgment. The agency asked for certain financial documents to determine Shavers’ ability to pay the disgorgement award. Shavers testified that he hadn’t paid anything so far and that he was earning about $4,000 per month. The court ordered him to produce the documents and make six $400 payments.
The documents and two of the payments failed to materialize, according to the court. More SEC motions and court orders followed, and Shavers failed to appear for a hearing, Mazzant said.
The judge said he saw “no other way to coerce Shavers to comply” with the orders other than imprisonment.
The SEC and Holland & Knight LLP represent the agency. Shavers represents himself.
The case is SEC v. Shavers, 2022 BL 380264, E.D. Tex., No. 4:13-cv-00416, 10/24/22.