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U.S. Attorney Craig Carpenito announced the arrests of four men who were accused of defrauding investors during an investigation of a crypto Ponzi scheme called the BitClub Network. The fraudulent scheme was based on a whopping $722 million cryptocurrency mining scam.
Yes, you’ve been reading it right, seven hundred and twenty two million dollar.
The announcement was also available on the online portal of the Department of Justice where it was revealed that the BitClub Network had fooled its customers and the investors by leading them to believe in massive rates of return in exchange for investments in a supposedly shared cryptocurrency mining pool.
The four men are Matthew Brent Goettsche (37), Jobadiah Sinclair Weeks (38), Joseph Frank (49) and Silviu Catalin Balaci who was arrested later on in Germany. The investigators arrested the first three men on Tuesday and charged them with conspiracy. Craig Carpenito also mentioned that two more defendants, whose names were not disclosed, had not been caught yet and are on the run.
Describing the scheme in detail, U.S. Attorney Carpenito said that the indictment describes the defendants’ use of sophisticated cryptocurrency models to take advantage of innocent investors who did not understand the intricacies of these models. “What they allegedly did amounts to little more than a modern, high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars.”
One of the defendants, Goettsche, called the investors of the BitClub Network “dumb” and “sheep” who did not understand how they were being fooled. Interestingly, two years ago, Goettsche had sent an email to a co-conspirator in which he suggested the BitClub Network would allow them to retire rich.
Offering “Shared” Bitcoin Mining Pool, Falsifying Profit Reports
Bitcoin mining is a lucrative business for many people. It essentially involves the dedication of CPU power to solve complex algorithms. Each time these “puzzles” are solved, the owner of the computer with the CPU power receives newly issued Bitcoin(BTC)trade.
The BitClub Network leveraged this process to aggregate investor money to buy cryptocurrency mining hardware. The owners of the company had assured investors that the profits would be shared as well. However, the group instead started reporting fake profits and defrauded the scheme’s investors.
A scam of this kind of a massive scale begets a harsh sentence. Matthew Goesttsche and Jobadia Weeks have been charged with a maximum sentence of 20 years in prison as well as conspiracy to offer and sell unregistered securities. However, according to the statement, Frank’s role was not as assertive as the other two’s and so he has only been charged with conspiracy to offer and sell unregistered securities. His punishment is expected to carry a maximum of five years prison term.