On Tuesday, U.S. prosecutors brought charges against five men who engaged in a cryptocurrency Ponzi scheme to defraud investors of $722 million, NBC News reports. The allegations were presented in a 27-page indictment in a Newark, New Jersey U.S. District Court.
According to reports, three of the five men were part of a wire fraud conspiracy and engaged in a conspiracy to sell unregistered securities. Those men were identified as Matthew Brent Goettsche, 37; Jobadiah Sinclair Weeks, 38; and Silviu Balaci. Joseph Frank Abel, 49, allegedly worked to promote the business around the world.
U.S. attorney Craig Carpenito referred to their activities as “little more than a modern, high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars.”
As NBC describes it,
Prosecutors allege that BitClub Network, which operated from April 2014 to this month, was built on soliciting money from individuals in exchange for shares of purported cryptocurrency mining pools and on rewarding investors for bringing in new clients. The group did not register shares sold with the U.S. Securities and Exchange Commission, the indictment alleges.
The court filings also allege that one of the defendants referred to their target investor as the “typical dumb MLM (multi-level marketing) investor" and another said that their business model was constructed “on the back of idiots.”
The fifth man has yet to be named, as his arrest is still pending. If tried and convicted of the fraud conspiracy charge, the men could be punished with 20 years in prison, as well as a fine as large as $250,000. The unregistered securities violation could result in punishment of 5 years in prison and a separate $250,000 fine.