Four operators of BitClub Network, a suspected $722 million Ponzi scheme masquerading as a Bitcoin mining investment platform, have been arrested in New Jersey after conducting what police called a “high-tech” plot for over five and a half years. Matthew Brent Goettsche, Jobadiah Sinclair Weeks, Silviu Catalin Balaci, and Joseph Frank Abel stand accused of conspiracy to commit wire fraud and conspiracy to offer and sell unregistered securities, while a fourth unnamed suspect remains at large.
Too Good to be True
BitClub Network launched in April 2014 when Bitcoin was a mere $500, purportedly offering regular people the chance to profit from Bitcoin mining. The premise was simple: investors sent in money which BitcoinClub used to buy mining equipment, with those same investors awarded a percentage of the income made from selling the mined BTC. The company also ran a referral scheme which gave rewards to existing investors who could entice new investors in. YouTube videos, Facebook adverts, and even public events convinced thousands to hand over money for a slice of the Bitcoin mining pie.
Rewards Dive as Money Dries Up
While BitClub Network’s business model was theoretically sound, and tempting for investors, police say that messages between the accused from back in 2014 show that not so much as a power cable was purchased by the group let alone an ASIC miner, and that all payments made to investors were taken from later ones – a typical Ponzi scheme. Warnings over BitClub being a potential scam began to pop up in 2018 as rewards began to dive, leaving investors out of pocket.
BitClub Cooking the Books
The group’s increased presence on social media, necessitated by the fact that they were running out of money to pay out earlier investors, led to the authorities taking notice, and then taking action. Police records show that the group aimed to “fak[e] it for the first 30 days while we get going” and “bump up the daily mining earnings…by 60%”, all of which shows that this was not an honest enterprise from day one and that BitClub Network, like so many before them, was nothing but a scam.