The first-ever U.S. securities fraud case involving the virtual currency Bitcoin has resulted in a guilty plea in a New York federal court.

U.S. authorities report that Trendon Shavers, who went by the online name “pirateat40” has pled guilty to one count of securities fraud in connection with an apparent Ponzi scheme involving Bitcoin. He is due to be sentenced on Feb. 3, 2016, and faces a maximum sentence of 20 years in prison along with a US$5 million fine.

In a separate civil action, the U.S. District Court for the Eastern District of Texas entered final judgment against both Shavers and his company, Bitcoin Savings and Trust (BCS&T), ordering him to pay more than US$40 million in disgorgement and prejudgment interest and a civil penalty of US$150,000 related to BCS&T.

According to the indictment and statements made in court between September 2011 and September 2012, Shavers operated a Bitcoin-denominated Ponzi scheme by promising weekly returns of up to 7% to Bitcoin owners who lent their holdings to BCS&T to fund a purported Bitcoin market-arbitrage strategy. In fact, authorities alleged that Shavers largely failed to execute the trading strategy; failed to meet investors’ redemption requests; and failed to deliver the promised returns.

“BCS&T was simply a Ponzi scheme through which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BCS&T investments,” authorities report.

In addition, authorities allege that Shavers used some victims’ money to pay personal expenses. Approximately half of 100 investors lost all or part of their investment in BCS&T.

“Trendon Shavers has admitted that his high-yield Bitcoin investment program yielded high returns for himself rather than his investors. Instead of reaping gains, his investors were largely swindled out of their money in a cyber-age Ponzi scheme. Shavers now awaits sentencing for his crime,” said Preet Bharara, the U.S. attorney for the Southern District of New York.