It’s not that easy to
retire “rich as f*ck” when the police become involved.
The US Department of
Justice (DoJ) has arrested three men in connection to a cryptocurrency Ponzi
scheme that has allegedly defrauded investors out of $722 million.
The emergence of
cryptocurrency including Bitcoin (BTC) and Ethereum (ETH), in just a few short
years, has exploded into an active ecosystem involving alt-coins, Initial Coin
Offerings (ICOs) in which tokens are offered in exchange for money to push
crypto projects off the ground, and everyone and their dog exploring the
underlying blockchain as a potential business transformation tool.
Enthusiasm surrounding
the blockchain, which in itself is a valuable technology that does have business value, has been
matched with consumers and investors seeking to cash in on virtual coins -- but
not every scheme is legitimate.
On Tuesday, three men were charged in
connection to BitClub Network, a cryptocurrency mining scheme that operated
through April 2014 to December 2018.
The BitClub Network
promised investors shares in mining pools, used to generate cryptocurrency, in
return for funds made through wire, cash, checks, and cryptocurrency transfers.
In addition, rewards were offered for the recruitment of new members, of which
a membership fee of $99 was imposed.
However, DoJ
prosecutors say the men arrested -- Matthew Brent Goettsche, 37, Jobadiah
Sinclair Weeks, 38, and Joseph Frank Abel, 49 -- provided "false and
misleading figures" that participants were told were "Bitcoin mining
earnings" -- despite no dedicated mining pools for members existing.
Money obtained by
users was not used to invest in mining equipment or resources. Instead, the
trio allegedly spent the proceeds "lavishly" while quietly mocking
the scheme's participants.
According to law
enforcement, Goettsche told Weeks and Abel the BitClub Network was built
"on the backs of idiots," and also referred to investors as
"sheep."
The trio revealed in
emails that daily earning numbers were tampered with beyond reasonable and
believable rates -- such as a daily earnings increase of 60 percent -- and in
September 2017, Goettsche suggested that the network "[d]rop mining
earnings significantly starting now" so they could "retire RAF,"
or "rich as f*ck."
The DoJ says the Ponzi
scheme earned operators $722 million.
Another complaint
brought forward, this time by the US Securities and Exchange Commission (SEC),
is that the BitClub Network did not register shares sold off with the agency.
SEC believes these shares should be considered securities.
Goettsche and Weeks
are charged with conspiracy to commit wire fraud, whereas all three also face
allegations of conspiracy to offer and sell unregistered securities. Wire fraud
can result in a prison term of up to 20 years and a maximum fine of $250,000.
The SEC charges carry up to five years behind bars and a fine of up to
$250,000.
"What they
allegedly did amounts to little more than a modern, high-tech Ponzi scheme that
defrauded victims of hundreds of millions of dollars," said US Attorney
Carpenito. "Working with our law enforcement partners here and across the
country, we will ensure that these scammers are held to account for their
crimes."
Comments
Post a Comment