Three men who thought they could get away with ripping off unsuspecting cryptocurrency investors have found out that it isn’t as difficult to uncover crypto fraud as they had hoped. The trio has been arrested in the U.S. on charges of perpetrating a fraudulent crypto mining scam that allowed them to steal $722 million, and two more are still being hunted by authorities.
BitClub Network may have looked good to investors on paper, but that’s about as far as things went. From April 2014 to December 2019, the fraudsters operated the scheme and raked in millions by offering substantial returns for investments in what were marketed as crypto mining pools. They presented false data to investors, including fake earnings information that had reportedly been taken in by the pools, in order to attract more interest.
Two of the perpetrators, Matthew Brent Goettsche and Jobadiah Sinclair Weeks, are from Colorado and the third, Joseph Frank Abel is from California. They are charged with conspiracy to offer and sell unregistered securities, according to a press release from the U.S. Department of Justice, and the identities of the other two thieves have not been revealed.
Goettsche reportedly stated that the target would be “dumb” investors, also referring to them on at least one occasion as “sheep.” He added that the entire business model was built “on the backs of idiots” and told his fellow partners to falsify data in order to perpetrate the scam. At one point, he told one of the group to show an increase in mining earnings of 60%, to which the individual cautioned that it was “not sustainable, that is ponzi teritori [sic] and fast cash-out ponzi . . . but sure.”
U.S. Attorney Craig Carpenito asserts in the release, “The indictment describes the defendants’ use of the complex world of cryptocurrency to take advantage of unsuspecting investors,” U.S. Attorney Carpenito said. “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.”
The fraudsters are looking at as many as 20 years for the charge of wire fraud conspiracy and a fine that can reach $250,000. In addition, selling unregistered securities is worth as many as five years behind bars and another fine of $250,000.
Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office, adds, “Those arrested today are accused of deploying elaborate tactics to lure thousands of victims with promises of large returns on their investments in a bitcoin mining pool, an advanced method of profiting on cryptocurrency. The defendants allegedly made hundreds of millions of dollars by continuing to recruit new investors over several years while spending victims’ money lavishly.”
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