Feds Arrest Three Men For Alleged $722 Million Cryptocurrency Ponzi Scheme
Criminal authorities arrested three men today on charges that they ran a massive Ponzi scheme that raised over $700 million from thousands of victims who thought their investment in the BitClub Network (“BCN”) was funding cryptocurrency mining pools. Matthew Brent Goettsche, 37, of Lafayette, Colorado, Jobadiah Sinclair Weeks, 38, of Arvada, Colorado, and Joseph Frank Abel, 49, of Camarillo, California, were arrested while two additional defendants remain at large and have not yet been identified. Goettsche and Weeks were charged with wire fraud conspiracy and conspiracy to sell unregistered securities while Abel was charged with conspiracy to sell unregistered securities. The wire fraud conspiracy charge carries a maximum prison term of 20 years while the conspiracy to sell unregistered securities charge carries a maximum five-year term.
According to the indictment, the trio formed BCN in or around April 2014 and touted the company as a way to profit from cryptocurrency mining. Potential investors were told they could pay a $99 membership fee and then given the option of investing in three different mining pools offering varying levels of profit payout. Investors were also told that BCN would use their funds to purchase bitcoin mining equipment, sustain mining pools, and engage in cryptocurrency mining. For example, BCN stated on its website that it “use[s]our leverage and massive purchasing power to strategically buy mining hardware at the lowest prices and share in all the profits produced." According to authorities, BCN ultimately raised approximately $722 million from thousands of investors.
But the indictment quotes at length from various conversations between the defendants to allege that many of the representations made to investors were false. This includes excerpts from an October 2014 chat in which Goettsche and an unidentified defendant discussed posting fake mining statistics to jumpstart investor interest, a January 2015 discussion in which Goettsche promised a $50,000 bonus to devise a way to show purported “proof” of a BCN mining pool when in fact BCN did not have a mining pool, a February 2015 conversation in which Goettsche proposed bumping up the “daily mining earnings” to 60% to make members “think its due to strong growth,” and a June 2017 message from Weeks cautioning that BCN could not tell investors it was using their money to fund mining operations when the reality was the funds were not being used as promised.
A copy of the indictment is below: