US authorities have arrested five people accused of a Ponzi scheme based on cryptocurrencies called BitClub Network. The Romanian Silviu Cătălin Balaci was accused of fraud and the sale of unregistered securities, along with the Americans Matthew Brent Goettsche, Jobadiah Sinclair Weeks and Joseph Frank Abel. The name of the fifth defendant has not yet been made public.
The BitClub network worked from April 2014 until this month and promised profits of over 60% per day from the investment in crypto mining equipment. In total, they managed to accumulate over $ 722 million in a business model that closely resembles a Ponzi or MLM scheme.
Specifically, the five convinced investors to participate in money in alleged cryptocurrency mining pools, especially Bitcoin. They also offered significant bonuses for attracting others into the scheme.
BitClub Network, a scheme built on the back of idiots
Behind the scenes, they seemed to combine greed, disdain for investors and, at times, doubt about backing the scheme, according to prosecutors.
In February 2015, Goettsche directed Balaci to “increase daily mining profits from today by 60%,” according to the indictment. The Romanian warned
“That is not sustainable, that is, we enter the territory of ponzi. “
According to documents gathered by prosecutors, Balaci told Goettsche at the launch of the company that their target audience will be “the typical MLM (multi-level marketing) investor”. Later, Goettsche told Balaci that their business model is “built on the back of idiots” and that “providing evidence of mining … just means convincing fools.”
Weeks and Abel conducted extensive promotional campaigns for the BitClub Network, which included seminars in several US states.
If convicted, the five defendants are liable to up to 20 years in prison and fines of up to $ 250,000.
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