US Charges 4 With Running $722M Cryptocurrency Scam

NEWARK, N.J. (CN) — Federal prosecutors unsealed an indictment Tuesday charging four men whose cryptocurrency mining operation operated as a “high-tech Ponzi scheme” that bilked investors out of $722 million.

Matthew Goettsche, 37, was arrested Tuesday in Colorado, while Jobadiah Weeks, 38, was taken into custody in Florida and Joseph Abel, 49, was arrested in California, according to a press release from the U.S. attorney’s office in Newark, New Jersey. After the press release was issued, a fourth defendant, Silviu Catalin Balaci, was arrested in Germany, and the indictment was updated to reflect this.

The Associated Press called it unclear whether the defendants had attorneys who could speak for them.

As alleged in the indictment, the men ran a business called BitClub Network from April 2014 through December 2019 that hawked shares in a supposed cyrptocurrency mining pool to investors. Investors who recruiting new investors were promised rewards.

Mining involves solving mathematical problems via computers to record virtual currency transactions. Miners receive cryptocurrency for their work, but prosecutors say the network was reported false earnings.

“Goettsche discussed with his conspirators that their target audience would be ‘dumb’ investors, referred to them as ‘sheep,’ and said he was ‘building this whole model on the backs of idiots,'” the Justice Department said in a statement.

When Goettsche told one of his co-conspirators to increase the daily earnings by 60% in 2015, according to the indictment, he was told it was unsustainable and “Ponzi territory.” In a Ponzi scheme, a fund uses money from later investors, rather than actual profits, to pay early investors.

Prosecutors say Goettsche and the others lived lavish lifestyles after taking in the equivalent of $722 million from investors around the world. They also allegedly conspired to sell shares that weren’t registered with the U.S. Securities and Exchange Commission.

“The indictment describes the defendants’ use of the complex world of cryptocurrency to take advantage of unsuspecting investors,” U.S. Attorney Craig Carpenito said in a statement. “What they allegedly did amounts to little more than a modern, high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars.”

Goettsche, of Lafayette, Colorado; Weeks, of Avada, Colorado; and Abel, of Camarillo, California, are charged in New Jersey with conspiracy to offer and sell unregistered securities. Goettsche and Weeks face additional charges of conspiracy to commit wire fraud.

If convicted, they could face up to five years in federal prison on the securities conspiracy charge and up to 20 years on the fraud conspiracy charge.

One other person is indicted but this individual remains at large. The person’s name is not known.

%d bloggers like this: