A 5-man team conned investors in a crypto-mining based Ponzi scheme.

According to US Attorney Craig Carpenito, two men from Colorado and a third from California were arrested on Tuesday for the crypto mining fraud. The other two are still absconding.

Matthew Brent Goettsche, 37, of Lafayette, Jobadiah Sinclair Weeks, 38, of Arvada, and Joseph Frank Abel, 49, of Camarillo, California, will face charges. These include conspiracy to commit wire fraud as well as conspiracy to offer and sell unregistered securities.

Modus operandi

Between April 2014 and December 2019, the defendants operated the fraud under the name and style of BitClub Network. They told gullible investors that BitClub Network generated “bitcoin mining earnings” through its bitcoin mining pool. Further, they induced their targets to buy shares in these crypto mining pools. The scammers also incentivized their victims to recruit new investors.

Further, the perpetrators of the fraudulent pyramid scheme referred to their victims as “dumb,” “sheep,” and “idiots.”

This, therefore, added insult to financial injury.

Goettsche told his co-conspirators to manipulate the figures displayed as “mining earnings” during the currency of the fraud, the Attorney’s Office said.

Whistle-blower in Zambia

According to wired.com, Japhet Mesa in Zambia noted the large number of Facebook posts in 2018 about BitClub Network. Suspecting fraud, he outlined his fears in a Medium post. He said the ownership of the outfit could not be established, and that the location of the company was unknown. “The physical address of the BCN offices and/or mining farms is conspicuously missing on their website,” Mesa said in his post.

Crypto mining fraud: View from law enforcement

“The indictment describes the defendants’ use of the complex world of cryptocurrency to take advantage of unsuspecting investors,” U.S. Attorney Carpenito said in a news release. “What they allegedly did amounts to little more than a modern, high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars.”

“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,”saidJohn Tafur, Special Agent in Charge of the IRS-Criminal Investigation group’s Newark field office.

The scam was “a classic con game” with a crypto twist, he added.

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