As the crypto industry continues to expand rapidly, cybercriminals continue to evolve with it. 2019 has been the year of the scammers. The 2019 crypto Anti-Money Laundering (AML) report states $4.26 billion was lost to thefts, scams, and Ponzi schemes within the first six months. However, the crackdown on the $722 million Ponzi scheme dubbed The Bitclub network, was one of the biggest busts of that year.
Five men – Matthew Brent Goettsche, 37, Jobadiah Sinclair Weeks, 38, Joseph Frank Abel, 49, Russ Albert Medlin, and Silviu Catalin Balaci, were arrested for defrauding investors back in 2019, and recently, one of the five men has pleaded guilty of the charges against him.
Silviu Catalin Bacali, a 35-year-old Russian programmer, who was arrested in Germany, has now pleaded guilty to one count of conspiracy to commit wire fraud along with conspiracy to offer and sell unregistered securities.
Balaci has admitted that he was the programmer that helped Goettsche and Medlin to build the Bitclub network. Similar charges have also been placed against the other conspirators.
According to the prosecutor, the accused have been running a company named The BitClub Network since 2014, where victims have invested money thinking they were purchasing shares in crypto mining pools. The scam was operational till December 2019.
The victims were led to believe that they would be earning from bitcoin mining. The shares were never registered with the SEC.
Communication records among the accused were also discovered where the accused were seen describing the investors as “dumb” and “sheep.”
Three of the defendants allegedly offered investors the option to invest in three different mining pools, but Bacali has admitted that he was completely unaware that the BitClub Network operated multiple pools.
Balaci confessed that he altered the figures that showed the bitcoin mining earnings to make it look like the Bitclub Network was earning more than what was actually being mined. Bacali was supposedly asked by Gottsche to “bump up the daily mining earnings starting today by 60%,” to which he had warned as being “not sustainable” and “ponzi teritori.”
As of now, Bacali has also confirmed that the scheme managed to defraud investors of at least $722 million worth of BTC. He will be facing a maximum of five years in prison along with a fine of $250,000. It is, however, unclear if investors would be able to recover their funds.
The crypto industry continues to be plagued by these criminals and the space isn’t safe enough to drive mass adoption.
Recently, Jack Abramoff, founder of AML Bitcoin and a disgraced Washington lobbyist from former President George W. Bush’s administration, was charged for conducting an illegal token sale via his Nevada-based company called the NAC foundation.
The foundation allegedly raised more than $5.6 million in an ICO for AML Bitcoin from August 2017 and throughout 2018, at a time when ICO’s were a popular investment.