Trendon Shavers pleaded guilty today to operating a Ponzi scheme using the virtual currency bitcoin. The 33-year-old McKinney, Texas native started his own company, Bitcoin Savings & Trust, in 2011 and used it to collect bitcoins from prospective investors over the internet, claiming he would pay investors one percent interest on their investment every three days, or seven percent a week. Instead, Shavers used most of the bitcoins to pay back older investors — a hallmark Ponzi scheme maneuver — while spending the rest on a used BMW M5, a $1,000 Las Vegas steakhouse dinner, and a series of casino outings. Shavers pleaded guilty in Manhattan court to one charge of securities fraud in what is considered the first ever US criminal fraud case related to bitcoin.

Shavers amassed more than 750,000 bitcoins worth around $4.5 million when he stopped paying back investors and abruptly shut down Bitcoin Savings & Trust in 2012, inciting backlash from unpaid investors and eventually a SEC investigation. The SEC charged Shavers in July of last year and later in September ordered him to pay back $40.7 million in a civil lawsuit. Because of bitcoin's volatility as a digital currency, Shavers' scheme cost investors more like $150 million, leading the SEC to settle on a price point somewhere in the middle to account for the exchange rate fluctuations. He was arrested in November, two months after losing his civil case and unable to pay the $40.7 million.

Shavers owed $40.7 million when he was arrested

Shavers, who operated under the pseudonym "pirateat40," said in court today, "I know what I did was wrong, and I'm very sorry," according to Reuters. Prosecutors said Shavers controlled around 7 percent of all public bitcoins at the peak of his operation and misappropriated nearly 150,000 of them, netting himself $164,758. His sentencing is scheduled for February 3, where under the terms of a plea deal he will not be to appeal any sentence at or lower than 41 months in prison.