Federal officials announced the arrest of three men on Tuesday who were involved in a cryptocurrency scam which robbed investors of $722 million.
The three men, Matthew Goettsche, 37, Jobadiah Weeks, 38, and Joseph Abel, 49 had been running a business named BitClub Network since 2014, that supposedly mined for cryptocurrency, selling shares in this mining pool to investors.
This process involves computers running complicated mathematical models that record virtual currency transactions. The miners are paid in cryptocurrency.
Authorities stated that the network reported false earnings and that it was nothing more than a “high-tech Ponzi scheme” where older investors are paid using new investor’s funds instead of actual profits.
Goettsche reportedly told a co-conspirator in 2015 to raise their daily income by 60%. A statement from the U.S. attorney’s office said: “Goettsche discussed with his conspirators that their target audience would be ‘dumb’ investors, referred to them as ‘sheep,’ and said he was ‘building this whole model on the backs of idiots.”
Goettsche and his co-conspirators swindled investors from around the world out of as much as $722 million which they spent on extravagant lifestyles. Additionally, they conspired to sell shares that weren’t registered with the U.S. Securities and Exchange Commission.
Goettsche, Weeks and Abel were indicted in New Jersey on conspiracy to offer and sell unregistered securities which could see them sentenced to five years in jail. Additional charges of conspiracy to commit wire fraud were laid against Goettsche and Weeks and cold face up to 20 years.
Another two people were also indicted but their names have not been released as they are yet to be arrested.