On Sept. 21, a man pleaded guilty before a judge in New York to one charge of securities fraud for an alleged bitcoin scheme. The 33-year-old man admitted that he had misinformed people who had invested their bitcoins in his company, Bitcoin Savings and Trust. According to an assistant U.S. attorney, the man was paying off old investors with money from new investors while only investing a fraction of the bitcoins his company received.
Bitcoins are a form of digital currency that is not connected to governments or central banks. In 2011 and 2012, when the man was allegedly committing the fraud, he reportedly owned 7 percent of all of the bitcoins that were in circulation. The value of the bitcoins owned by Bitcoin Savings and Trust was $807,380.
When the man's company was shut down in September 2012, prosecutors say that about 50 of the 100 investors had lost all or some of the bitcoins that they had invested. A U.S. attorney said that the accused man received high returns from his scheme but paid out little to his investors. According to a plea agreement that was worked out, the man will likely receive a three-year prison sentence when he is sentenced on Feb. 3.
Prosecuting white collar crimes is complex and often involves an investigation process that can take years. A person or corporation that is being targeted for an investigation about insider trading, securities fraud or accounting fraud may want to have representation from an attorney while they are being investigated. With proactive defense representation, some people are able to avoid criminal charges before they are filed.
Source: U.S. News & World Report, "Texas man who possessed 7 percent of all bitcoins pleads guilty in NY to securities fraud," Larry Neumeister, Associated Press, Sept. 21, 2015