The United States authorities have arrested three men for their involvement in a cryptocurrency mining scheme that defrauded investors of $722 million.
According to Tuesday’s announcement by the Justice Department, the three accused are Matthew Brent Goettsche, Jobadiah Sinclair Weeks, and Joseph Frank Abel, two of whom are Colorado residents and one from California.
Announcing the arrest, US Attorney Craig Carpenito said: “The indictment describes the defendants’ use of the complex world of cryptocurrency to take advantage of unsuspecting investors.”
“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.”
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Goettsche and Weeks were charged with conspiracy to commit wire fraud while all three were charged with conspiracy to offer and sell unregistered securities.
A trial will decide the fate
The defendants are facing a $250,000 fine for each charge, and a jail term of 20 years and five years for wire fraud and trading of unregistered securities, respectively.
According to the announcement, the perpetrators ran a scheme called BitClub Network from mid-2014 until their arrest and took money from investors in exchange for shares of purported cryptocurrency mining pools. They also rewarded customers for bringing others to the scheme, similar to a multi-level-marketing (MLM) scheme.
Per the law enforcement, the three accused provided false and misleading figures that BitClub investors were told were “bitcoin mining earnings,” purportedly generated by BitClub Network’s bitcoin mining pool.
“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.