Three Men Arrested in Connection to the Alleged $722 Million Crypto Ponzi Scheme

This week, the Justice Department announced that three men were arrested in connection to a fraudulent cryptocurrency scheme that lured investors to invest in fake bitcoin mining that raised $722 million.

According to the indictment, the three were charged with conspiracy to commit wire fraud as well as conspiracy to offer and sell unregistered securities. The indictment was unsealed at the US District Court in Newark with the suspects, Silviu Balaci, Matthew Brent, and Jobadiah Sinclair.

A Modern High-tech Ponzi scheme

The suspects are alleged to have been involved in a high tech Ponzi scheme where the victims were lost hundreds of millions of dollars. The BitClub Network which allegedly has been operational since April 2014, has been soliciting for money from investors in the name of purchasing shares of cryptocurrencies mining pools, the shares were never registered with SEC. the group also awarded investors who brought in new clients.

The suspects are alleged to have provided the public with false information claiming that investors could earn from bitcoin mining. They created videos promoting their firm, BitClub Network, in the videos, the accused described the firm as the most transparent however behind the scene, greed, contempt towards the investors and doubt characterized the accused.

The Start of a Ponzi Scheme

Communication among the conspirators shows that they started the Network targeting the famous Multi-Level Marketing investors. In early 2015, Goettsche is alleged to have directed Balaci to increase the daily mining earnings by 60 % which Balaci warned was unsustainable and bordering on a Ponzi scheme but still agreed to the directive. The conspirators are seen describing their investors as dumb and morons who could get ripped.

An Exit Scam

In late 2017, an email from Goettsche to a fellow conspirator was uncovered, with Goettsche suggesting that the BitClub Network significantly drop the mining earnings and he, Goettsche could retire rich.

In another email, Sinclair writes to Goettsche along with another conspirator stating that their selling BitClub Network shares and failing to buy the required equipment for mining was wrong. Five men are accused as conspirators but only three have been arrested. 

The conspirators used the investor money to cater for their lavish lifestyles instead.The conspiracy to commit fraud charge carries a penalty of 20 years in prison along with $250,000. While the conspiracy to sell unregistered securities charge carries a 5-year sentence and $250,000 fine.

Relevant news