Three Charged in $722 Crypto Ponzi Scheme

Three Charged in $722 Crypto Ponzi Scheme

Three men have been arrested and charged in connection with a cryptocurrency conspiracy which defrauded investors out of at least $722 million.

Matthew Brent Goettsche, 37, of Lafayette, Colorado; Jobadiah Sinclair Weeks, 38, of Arvada, Colorado; and Joseph Frank Abel, 49, of Camarillo, California, have been charged with conspiracy to offer and sell unregistered securities, while the first two are also charged with conspiracy to commit wire fraud.

They sold shares in BitClub Network, a cryptocurrency mining operation they allegedly knew to be unprofitable, and manipulated data on “mining earnings” to convince members to invest further funds.

The scheme ran for over four years, April 2014 to December 2018, generating funds not only from the sale of shares in mining pools used to generate digital currency but also recruitment of new members, who were charged a $99 joining fee.

In email exchanges displayed in the indictment the men allegedly discussed that they were going after "the typical dumb MLM [multi-level marketing] investor” and that “we are building this whole model on the backs of idiots."

The US Securities and Exchange Commission (SEC) is also alleging that the trio didn’t register the shares they were selling with the regulator.

It claims that the men “encouraged US investors to utilize a VPN to obscure their true, US-based IP addresses so that BCN and the defendants could avoid detection and regulation by US law enforcement.”

“The indictment describes the defendants’ use of the complex world of cryptocurrency to take advantage of unsuspecting investors,” said US attorney Craig Carpenito.

“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.”

Source: Information Security Magazine