There is more bad news for Bitcoin, and it is not just that proposed Bitcoin ETF is not going to ever be allowed off the ground. The Securities & Exchange Commission has charged a man in Texas (and his company) with investment fraud in a Bitcoin Ponzi scheme. The only thing that would sound more odd than this is if it was made up, but it is real. The SEC has charged a man named Trendon T. Shavers, who is also listed as the founder and operator of Bitcoin Savings and Trust.

What is so odd is that there are stories about the fraud here going back to last year. It is a puzzle how and why it took so long for the SEC to make formal charges here. They say everything is bigger in Texas, and this seems like a tall-tale that you wonder who would be stupid to fall for it.

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Shavers has allegedly offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40” and the SEC said he raised at least 700,000 Bitcoin in BTCST investments. The SEC said that this is over $4.5 million in total, based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold.

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The SEC said that the value of 700,000 Bitcoin today exceeds $60 million. Shavers allegedly promised investors up to 7% weekly interest based on BTCST’s Bitcoin market arbitrage activity. This activity was said to supposedly include selling to individuals who wished to buy Bitcoin “off the radar” in quick fashion or large quantities.

The SEC filing said, "In reality, BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments. Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses... 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."

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Today's SEC investor alert warns investors about the dangers of potential investment scams involving virtual currencies promoted through the Internet. Shavers has allegedly sold BTCST investments over the Internet to investors in Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania. Contrary to the representations made to investors, the SEC is alleging that BTCST was not in the business of buying and selling Bitcoin at all.

Apparently Shavers had a grand old time out there too with the money. The SEC said, "Shavers suffered a net loss from his day trading, but realized net proceeds of $164,758 from his sales of 86,202 Bitcoin. Shavers transferred $147,102 from his personal account at the online Bitcoin currency exchange to accounts he controlled at an online payment processor as well as his personal checking account. He used this money to pay his rent, utilities, and car-related expenses as well as for food and retail purchases and gambling."

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Honestly, what sounds more stupid here: a Bitcoin Ponzi scheme, or giving real money to someone named Trendon Shavers? Some news is just almost too hard to make up. Here is the SEC's formal investor warning on the matter.

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