Four Individuals Charged in $722 Million BitClub Network Cryptocurrency Ponzi Scheme

On December 10, 2019, the U.S. Attorney’s Office for the District of New Jersey announced  that three men were arrested in connection with a $722 million cryptocurrency fraud relating to the BitClub Network. Matthew Goettsche and Jobadiah Weeks were charged with conspiracy to commit wire fraud, and Matthew Goettsche, Jobadiah Weeks, and Joseph Abel were charged with conspiracy to offer and sell unregistered securities. After the release of the Department of Justice (DOJ) press release, a fourth individual, Silviu Balaci, was arrested in Germany.

BitClub Network

The BitClub Network team allegedly solicited investments in the BitClub Network by using inflated figures to lure in investors, who Goettsche allegedly referred to as “dumb,” “sheep,” and “idiots.” In February 2015, they decided to “bump up the daily mining earnings starting today by 60% even though they were aware that they would then be committing fraud by starting a Ponzi scheme. In September 2017, Goettsche emailed a conspirator in which he suggested that the BitClub Network “drop mining earnings significantly” so that they could retire rich.

The cryptocurrency fraud is being called “a modern, high-tech Ponzi scheme” by U.S. Attorney Craig Carpenito. So, what happened? The defendants allegedly founded the BitClub Network, enticing investors by promising large returns for investing in Bitcoin mining. In reality, according to the DOJ, the BitClub Network was “a fraudulent scheme that solicited money from investors in exchange for shares of purported cryptocurrency mining pools and rewarded investors for recruiting new investors,” combining a Ponzi scheme with one of the hallmarks of a pyramid scheme. The defendants failed to register BitClub Network shares with the Securities and Exchange Commission (SEC), even though the offerings were securities under federal law. This alleged scam took place between April 2014 and December 2019.

To attract investors, Jobadiah Weeks and Joseph Abel travelled around the country touting the benefits of the BitClub Network,. They also crafted marketing videos. In one video, according to the New York Times, a conspirator promised BitClub Network members that a $3,599 investment could yield—at minimum—a $250,000 return over three years. In another video, one conspirator gushed about the BitClub Network in a video, asserting that that the BitClub Network was “the most transparent company in the history of the world that I’ve ever seen.” Unfortunately, it was not—and BitClub Network investors allegedly paid the price.

For more information about the dangers of investing in cryptocurrency, see our article “Beware of Investing in Cryptocurrencies.” Scammers often hide behind technology that investors have trouble understanding and instead ride a wave of hype in order to snare vulnerable or unsophisticated investors. According to U.S. Attorney Craig Carpenito, the defendants allegedly “use[d] the complex world of cryptocurrency to take advantage of unsuspecting investors.”

If you believe you have fallen victim to a cryptocurrency scam like the BitClub Network, there is nothing to be ashamed of. Sophisticated fraudsters take advantage of the hype surrounding new technologies and prey on the hopes of investors. If you believe you lost money in a cryptocurrency scam like the BitClub Network, don’t hesitate to seek out a securities attorney. Call (877) 238-4175 or email to contact the securities attorneys of Fitapelli Kurta.