It has been reported that in the U.S, prosecutors have charged three men for being involved in a cryptocurrency fraud scheme that amounted to a $722 million. The scam is being referred to as a “high-tech Ponzi scheme.”
Cryptocurrency Ponzi Scheme
According to the prosecutors, the men involved in the scam have been doing this since 2014. All through the years, they have been operating through the BitClub Network and from here, they solicited cash from unsuspecting investors in exchange for shares in supposed cryptocurrency mining pools. In addition, these investors were then also rewarded if they were successful in recruiting new investors into the system.
Those accused include Jobadiah Sinclair Weeks, 38, Joseph Frank Abel, 49, and Matthew Brent Goettsche, 37. The three were arrested on Tuesday and were charged with conspiracy. This is according to Craig Carpenito, who is a U.S. Attorney in New Jersey. There are also an additional two defendants who are at large, but their names have not been disclosed yet.
According to the statement released by the accused Goettsche, he referred to his Bitclub Network potential investors as being ‘sheep’ and ‘dumb.’ He also added that the entire time they were operating, he was creating the entire business model on the backs of his investors, who he referred to as ‘idiots.’ The prosecutor added that Goettsche also sent his co-conspirator an email in 2017 telling him that BitClub Network was going to allow them to “retire RAF!!!”, meaning – as rich as f*ck.
For the two defendants, Weeks and Goettsche, they are facing charges of conspiracy to commit wire fraud. In addition, all three of the defendants will be facing charges of conspiracy for selling unregistered securities.
According to Carpenito’s statement, immediately after their arrests, the lawyers for the three defendants could not be located. However, it is expected that they will show up in court this week.
Bitcoin Mining
Bitcoin mining has been around for a long time and is a popular process in the Bitcoin market. The process involves “miners” who use specialized software to solve complex algorithms, and in return, they can earn Bitcoin. BitClub Network has claimed that they used the money from investors in order to buy the required computer capacity and mining hardware. They then shared some of the profits with the investors. According to the government, the defendants had actually been reporting fake profits to their investors and defrauded their investors for millions.
Cryptocurrency Fraud
In another case, prosecutors have also brought up a fraud-related case that involves Bitcoin firm OneCoin. In this case, a New York lawyer, Mark Scott, 51, was charged and convicted three weeks ago for laundering up to $400 million from the fraudulent OneCoin cryptocurrency. The prosecutor stated that this scam was also operated in the form of a Ponzi scheme. In this scam, the involved investors were promised unrealistic profits and to keep investors locked in, Scott would simply pay early investors with the money of late investors.
On the 21st of November 2019, Scott, was convicted after he was found guilty of bank fraud and money laundering related conspiracy, after a 3 and a half hour deliberation from jurors. Prosecutors added that Scott had set up a fake investment fund, which he used to process money coming from Ruja Ignatova. Ignatova is a well-known Bulgarian woman and the cofounder of OneCoin Ltd., who disappeared in 2017 after law enforcement started investigating the operations of her company.