TL;DR: Bitcoin mining pool BitClub Network associates allegedly bilked thousands of victims out of hundreds of millions of dollars in an elaborate Ponzi scheme. Three men were arrested on charges connected to the operation, and charged with wire fraud and selling unregistered securities, U.S. Attorney Craig Carpenito announced in conjunction with an unsealed, 27-page indictment.

Three Arrested in $722 Million BitClub Network Mining Scheme

“Three men were arrested today in connection with a cryptocurrency mining scheme that defrauded investors of $722 million,” a press release from the U.S. Attorney’s New Jersey office explained, citing U.S. v. Goettsche, 19-cr-00877, U.S. District Court, District of New Jersey. “Matthew Brent Goettsche, 37, of Lafayette, Colorado, and Jobadiah Sinclair Weeks, 38, of Arvada, Colorado, are charged by indictment with conspiracy to commit wire fraud and Goettsche, Weeks, and Joseph Frank Abel, 49, of Camarillo, California, are charged by indictment with conspiracy to offer and sell unregistered securities.”

The FBI charges those indicted, five in total, lured thousands of investors over years by promising returns on a bitcoin mining pool. From 2014 through the present month, BitClub Network “solicited money from investors in exchange for shares of purported cryptocurrency mining pools and rewarded investors for recruiting new investors,” the US Attorney explained. Investors “were told were ‘bitcoin mining earnings,’ purportedly generated by BitClub Network’s bitcoin mining pool.”

One of the men arrested, Goettsche, was particularly prominent in the redacted indictment, referring to investors in less-than-flattering terms and reportedly “directed others to manipulate the figures displayed as ‘mining earnings’ during the course of the conspiracy,” law enforcement officials allege. The indictment recalls conversations about what appears to be classic Ponzi, pump-and-dump chatter. Weeks, another man arrested, apparently had reservations, and “sent an email in June 2017 to Goettsche and another conspirator in which he remarked that BitClub selling shares in BitClub and then not using the money to purchase mining equipment was ‘not right.'”

At present, charges between the men carry up to 20 years in prison for wire fraud conspiracy, and 5 years in prison for selling unregistered securities — both with fines of a quarter-million dollars each.

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