If someone convinces you to invest with him by promising returns of 7% weekly, and that he’s never lost money and there’s no risk, you should be incredibly concerned about giving him your money, regardless of whether it’s a dollar or a Bitcoin. But the operator of a Bitcoin-based Ponzi scheme in Texas was able to rake in millions based on completely empty promises — and now has to pay it all back.

In July 2013, the Securities and Exchange Commission filed a lawsuit [PDF] in federal court against Trendon T. Shavers, the founder and operator of Bitcoin Savings and Trust (BTCST).

According to the complaint, Shaver managed to raise around 732,000 Bitcoin (which is worth around $290 million today, though the exchange rate changes wildly) between Feb. 2011 and Aug. 2012, by convincing people in Bitcoin forums that he was some sort of hotshot investor in the virtual currency who sold to individuals looking to buy Bitcoin “off the radar” quickly and/or large quantities.

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But BTCST turned out to be an illusion, with Shavers using new investors’ Bitcoin to make payments to other investors, while also taking some for himself to invest and play with.

And like all Ponzi schemes, it had to come crashing to the ground eventually. Some investors did manage to make money, but many others lost their investments.

Earlier this week, Reuters reports that the District Court judge in the case determined that “The collective loss to BTCST investors who suffered net losses.. was 265,678 Bitcoins.” At today’s exchange rate, that’s more than $106 million.

The court also calculated that Shavers’ operation brought in $38.6 million in illegally gained profits. With interest, she came up with the total penalty of $40.7 million for the scammer.

As a result of this case, the SEC issued a warning [PDF] to investors to be on the lookout for Ponzi schemes trying to take advantage of interest in, and ignorance of, virtual currencies. However, much of the advice given by the Commission is no different from what it, or common sense, would tell you to be mindful of — guaranteed high returns, promises of no or little risk, difficulty in cashing out of your investment, complex or secretive strategies and fee structures, and the use of word-of-mouth from other investors to attract new investors.

These are all red flags that, if people had been aware of them in 1920, we wouldn’t all know the name of one Charles Ponzi.

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