The United States Attorney for the District of New Jersey Craig Carpenito announced in a press release on Tuesday that it had charged five people with defrauding investors for $722 million. Matthew Brent Goattsche, Jobadiah Sinclair Weeks, and Joseph Frank Abel were arrested on Tuesday in Colorado, Florida, and California respectively. Silviu Catalin Balaci was arrested in Germany after the press release. One unnamed defendant remains at large.
As explained in the indictment, the five conspirators collaborated to create BitClub Network (BCN) and get investors to buy shares, claiming the investments were going towards cryptocurrency mining. The conspirators also offered rewards to investors for recruiting new investors. Goattsche, Weeks, Balaci, and the unnamed fifth conspirator are being charged with wire fraud. Goattsche, Balaci, and the unnamed defendant created and operated BCN. Weeks and Abel were in charge of promoting the scheme and traveled all over the world to promote BCN. All five conspirators are charged with conspiracy to offer and sell unregistered securities. The charge of wire fraud carries a maximum of up to 20 years in prison and a fine of up to $250,000. The charge of conspiracy to offer and sell unregistered securities carries a maximum of five years in prison and a fine of up to $250,000.
Carpenito described the investment scheme as “little more than a modern, high-tech Ponzi scheme.” The scheme began in April 2014. Internet communications between Goettsche and Balaci in June 2014 include discussion of how to fake the numbers, the conspirators calling their investors “sheeps” and “idiots,” and instances in which emojis are used when discussing defrauding people. In addition to providing false figures to investors, Goettsche also instructed the other conspirators to manipulate the figures. Promotions for BCN included videos that purported that BCN was “the most transparent company in the history of the world that I’ve ever seen,” and, “too big to fail.”
The Ponzi scheme was centered in New Jersey but defrauded investors all over the world according to John R. Tafur, Special Agent in Charge, IRS Criminal Investigation, Newark Field Office. Unit Chief David W. Feder, Assistant U.S. Attorneys Anthony P. Torntore, Jamie L. Hoxie, of the Cybercrime Unit, and Unit Chief Sarah Devlin of the Asset Recovery and Money Laundering Unit of the U.S. Attorney’s Office in Newark are representing the United States in the case.