Three individuals in the United States have been arrested pending charges over an alleged fraud operation involving a cryptocurrency mining scheme called BitClubNetwork. According to different sources including U.S. authorities as well as the accused, themselves (reportedly), BitClubNetwork is a “Ponzi” and / or “pyramid” scheme.
Whatever you call it, the three core suspects of this scheme: Matthew Brent Goettsche, Jobadiah Sinclair Weeks, and Joseph Frank Abel, have all been apprehended by U.S. authorities.
Summary of Court filed Documents
December 2019: Defendants cease operations of BitClub Network
February 2015: Goettsche ordered a fellow ‘conspirator’
April 2014: Beginning of BitClub Network, as opened by defendants
According to the official press release, the three men operated a “fraudulent scheme that solicited money from investors in exchange for shares of purported cryptocurrency mining pools and rewarded investors for recruiting new investors.
The primary charge is“wire fraud conspiracy”, allegedly conducted by co-conspirators Goettsche and Weeks, which carries a maximum custodial sentence of 20 years and a maximum fine of $250,000.
Abel, along with Goettsche and Weeks, were collectively charged by indictment with “conspiracy to offer and sell unregistered securities”. In total: the three suspects, along with an extended network of co-conspirators have been accused of stealing over $722 million from several investors through their scheme.
“Special agents and task force officers of the FBI’s Los Angeles Division’s West Covina Resident Agency, under the direction of Acting Assistant Director in Charge Delacourt;
special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge John R. Tafur in Newark;
and the IRS Los Angeles Field Office, under the direction of Special Agent in Charge Ryan L. Korner”Press release
Together, they allegedly “conspired” to swindle investors using “false and misleading figures” regarding its bitcoin mining pool AKA its “mining earnings”. This scheme has been described by unnamed co-conspirators as having shifted towards “ ponzi teritori [sic]” and becoming a “fast cash-out ponzi” at points.
Furthermore: the press release accuses Matthew Brent Goettsche (essentially described as the ringleader of the operation) of having described investors as “idiots”, on a separate occasion stating that the company would “[d]rop mining earnings significantly starting now” to evicims as “dumb”, “sheep”, and that he was “building this whole model on the backs of nable him to “retire RAF!!! (rich as f**k)”.
“The indictment describes the defendants’ use of the complex world of cryptocurrency to take advantage of unsuspecting investors…
What they allegedly did amounts to little more than a modern, high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars.
Working with our law enforcement partners here and across the country, we will ensure that these scammers are held to account for their crimes.”U.S. Attorney Carpenito
Cryptocurrency has been widely cited as a means by which fraudulent activities may be taken out, from money laundering to ponzi schemes and other forms of scam through which either a government, business or citizens are targeted.
United States enforcement agencies are pushing back hard against this, with authorities such as the Securities and Exchange Commission (SEC), Financial Crimes Enforcement Network (FinCEN), and various others publishing press releases regarding convictions on a regular basis.
Despite this: regulations surrounding cryptocurrency in the USA are vague at best – with many calling for greater clarification on the matter; including Ripple CEO Brad Garlinghouse and Block.one CEO Brendan Blumer.
“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,…
This was a classic con game with a virtual twist; false promises of large returns for investing in the mining of Bitcoin. IRS Criminal Investigation will continue to work with our law enforcement partners, including the Joint Chiefs of Global Tax Enforcement, to investigate and bring to justice cyber criminals.”John R. Tafur, Special Agent in Charge, IRS Criminal Investigation, Newark Field Office