12/12/19

US: Five Men Charged with Running $722M Cryptocurrency Ponzi Scheme.

As published on thehill.com, Thursday December 12, 2019.

Three men on Tuesday were arrested in Newark, N.J., on charges of defrauding investors of $722 million in a cryptocurrency mining scheme, the U.S. Attorney’s Office for the District of New Jersey announced.

The indictment alleges that Matthew Brent Goettsche, Jobadiah Sinclair Weeks and Joseph Frank Abel operated a fraudulent scheme to solicit cryptocurrency mining investments from April 2014 to December 2019.

Two additional defendants, whom the U.S. attorney's office did not identify, are still at large.

The three allegedly attracted investors in the venture, BitClub Network, with “false and misleading” data that it presented as “bitcoin mining earnings.”

Goettsche said in private communications that the scheme was aimed at “dumb investors” and said he was “building this whole model on the backs of idiots,” according to the U.S. attorney’s office.

In some communications, Goettsche actively directed a co-conspirator to “bump up the daily mining earnings.”

The recipient responded “that is not sustainable, that is ponzi teritori [sic] and fast cash-out ponzi ... but sure.”

The indictment charges Goettsche and Weeks with conspiracy to commit wire fraud and all three with conspiracy to offer and sell unregistered securities.

U.S. Attorney Craig Carpenito said that what the three “allegedly did amounts to little more than a modern, high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars.”

A special agent working on the case in Newark called the scheme a “classic con game.”

“This was a classic con game with a virtual twist; false promises of large returns for investing in the mining of Bitcoin,” John R. Tafur, special agent in charge for the Newark IRS criminal investigation field office. “IRS Criminal Investigation will continue to work with our law enforcement partners, including the Joint Chiefs of Global Tax Enforcement, to investigate and bring to justice cyber criminals.”