Three arrested in $722m crypto mining Ponzi scheme

BitClub Network solicited investment based on fake bitcoin mining earnings


Three men have been arrested in connection with a cryptocurrency Ponzi scheme that fleeced at least $722m (£550m, €650m) out of investors.

BitClub Network, which ran from April 2014 to December 2019, allegedly took money from investors based on fake bitcoin mining earnings. People were also rewarded for introducing new investors.

Matthew Brent Goettsche, aged 37, and Jobadiah Sinclair Weeks, 38, both from Colorado, and Joseph Frank Abel, 49, from California, have been indicted for conspiracy to offer and sell unregistered securities. Goettsche and Weeks have been charged with conspiracy to commit wire fraud.

Two others allegedly involved remain at large and their identities have not been revealed.

Goettsche allegedly described their investors as “dumb” investors, saying he was “building this whole model on the backs of idiots”.

According to a press release from the New Jersey District Attorney's office, Goettsche directed the others to “manipulate the figures” displayed as mining earnings during the five-year conspiracy.

In February 2015, he allegedly directed another conspirator to "bump up the daily mining earnings starting today by 60 per cent". He was told replied: "that is not sustainable, that is ponzi teritori [sic] and fast cash-out ponzi ... but sure."

They are also accused of conspiring to sell BitClub Network shares – which were securities – although BitClub Network had not registered the shares with the US Securities and Exchange Commission.

John R Tafur, special agent in charge, IRS Criminal Investigation, described the crime as a “classic con game with a virtual twist”.

“Today’s indictment alleges the defendants were involved in a sophisticated Ponzi scheme involving hundreds of millions of dollars that preyed upon investors all over the world,” he said. “This was a classic con game with a virtual twist; false promises of large returns for investing in the mining of Bitcoin.”

If convicted, the defendants face a maximum of 20 years in prison and fines of up to $250,000 on the fraud conspiracy count. The charge of conspiracy to sell unregistered securities carries a maximum of five years with a $250,000 fine.

The cryptocurrency industry is increasingly under scrutiny, thanks to new regulations that came into effect in May. Since then, crypto companies have filed 7,100 suspicious activity reports.

RECOMMENDED READING: Crypto industry clamps down on suspicious activity

RECOMMENDED READING: Binance denies reports Shangahi offices were raided by police

RECOMMENDED READING: Silver price analysis (14-20 June): ready for an up-move

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image