Things have been pretty quiet on the cryptocurrency front in 2019.
That all changed this week when U.S. Attorney Craig Carpenito filed a 27-page indictment with the U.S. District Court in Newark, New Jersey.
In the indictment, five men were charged with conspiracy to commit wire fraud and conspiracy to offer and sell unregistered securities in connection with a cryptocurrency scam that bilked investors out of an eye-popping $722 million.
From April 2014 to December 2019, these five men allegedly ran a business called BitClub Network, that according to court documents was described as built “on the backs of idiots” by one of the defendants.
“The indictment describes the defendants’ use of the complex world of cryptocurrency to take advantage of unsuspecting investors,” U.S. Attorney Carpenito said. “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.”
“Those arrested today are accused of deploying elaborate tactics to lure thousands of victims with promises of large returns on their investments in a bitcoin mining pool, an advanced method of profiting on cryptocurrency,” Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office said. “The defendants allegedly made hundreds of millions of dollars by continuing to recruit new investors over several years while spending victims’ money lavishly.”
“Today’s indictment alleges the defendants were involved in a sophisticated Ponzi scheme involving hundreds of millions of dollars that preyed upon investors all over the world,” John R. Tafur, Special Agent in Charge, IRS Criminal Investigation, Newark Field Office, said. “This was a classic con game with a virtual twist; false promises of large returns for investing in the mining of Bitcoin. 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.”
According to documents and statements made in court, one of the defendants, Matthew Brent Goettsche, 37, of Lafayette, Colorado, discussed he and his conspirators’ target audience were going to be “dumb” investors, referring to them as “sheep,” and said he was “building this whole model on the backs of idiots.”
Another defendant, Joseph Frank Abel, 49, of Camarillo, California, assured investors that BitClub Network was “too big to fail.”
That’ll be a cool story for them to tell their new roomates as the wire fraud conspiracy charge carries a maximum sentence of 20 years in prison, and the conspiracy to sell unregistered securities charge carries a maximum sentence of another five years in the slammer. Each charge also carries a fine of up to $250,000 if found guilty.