Romanian programmer pleads guilty in $722M BitClub Ponzi scam

A Romanian programmer has pleaded guilty in connection with his role in creating BitClub Network, a digital currency block reward mining scam that defrauded $722 million from investors. He now faces five years in prison and a fine of $250,000.

Silviu Balaci was arrested in Germany where he had been residing, the U.S. Department of Justice revealed in a press release. He pleaded guilty, via video conference, to one count of dual-object conspiracy to commit wire fraud. He also entered a guilty plea for conspiracy to offer and sell unregistered securities.

His sentencing date is yet to be set.

Balaci was one of the key operators of BitClub Network. The company solicited investment from U.S. citizens for purported shares in a digital currency block reward mining operation. BitClub, which operated from April 2014 to December 2019, also acted as a multi-level marketing scam where it rewarded investors who recruited new members.

Balaci allegedly took care of the technical work, with fellow defendants Matthew Goettsche and Russ Albert Medlin attending to marketing and other business matters. According to the DoJ, Balaci is on record referring to potential investors as ‘dumb’ and claiming that they were “building this whole model on the backs of idiots.”

Balaci further changed the figures the company displayed on its website, at Goettsche’s request, to show that the company was earning way more than it actually was. In one incident in February 2015, Goettsche asked Balaci to bump up the daily profits by 60%. While he warned that the figure wasn’t sustainable and that it was “Ponzi territory,” he still executed the order.

Balaci confirmed to U.S. District Judge Claire C. Cecchi that BitClub indeed made away with $722 million worth of digital currencies from its investors.

Balaci’s guilty plea comes three weeks after the other BitClub co-founder, Russ Albert Medlin was arrested. Medlin was arrested by Indonesian police and charged with sexually assaulting minors. The police acted on tip-offs from his neighbors in the capital Jakarta who had noticed several minors leaving his house.

Medlin face 15 years in prison if he is convicted in Indonesia for breaking the country’s Law on Children Protection. However, as CoinGeek reported, the Indonesian police expect an extradition request from the U.S. for the fugitive.

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