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A Texas man pleaded guilty to defrauding people out of $4.5 million in what the U.S. said was a first-of-its-kind Ponzi scheme involving investments in the virtual currency bitcoin.

Trendon Shavers, 33, founder of Bitcoin Savings and Trust, raised at least 764,000 bitcoins by promising investors a return of as much as 3,641 percent, prosecutors said. Instead, he used bitcoins from new investors to cover payments owed to earlier clients, while also paying for his own Las Vegas gambling and spa treatments, according to the U.S.

At the peak of his scheme in 2011 and 2012, Shavers held about 7 percent of all bitcoins in circulation, prosecutors said.

“I know what I did was wrong and am very sorry,” Shavers said at a court hearing before U.S. Magistrate Judge Sarah Netburn in Manhattan on Monday.

Shavers’s case came as the U.S. intensifies its scrutiny of bitcoins. Prosecutors also won the conviction of Ross William Ulbricht for running Silk Road, an online bazaar where people anonymously used the digital currency to buy heroin, phony passports and hacking services. He was sentenced to life in prison.

Assistant U.S. Attorney Michael Ferrara said Monday the government’s evidence against Shavers included electronic messages as well as bank records. Federal investigators determined Shavers invested some of his victims’ funds with Mt. Gox, a digital currency exchange based in Japan, according to Ferrara.

Mt. Gox filed for bankruptcy in Japan in February 2014 after disclosing it couldn’t account for about 850,000 units of the virtual currency.

“The evidence would show the money he received from Investor B was used to pay Investor A — in other words, he had the tell-tale signs of a Ponzi scheme,” Ferrara said.

Shavers faced as long as 20 years in prison on the securities fraud charge. He is scheduled to be sentenced by U.S. District Judge Lewis Kaplan on Feb. 3. Under a deal struck with the U.S., Shavers agreed not to challenge any sentence from 33 months to 41 months. He also agreed to pay a $5 million fine.

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