$722 Million Bitcoin Biz Was a Giant Ponzi Scam, Leader Admits

A leader of a Bitcoin Ponzi scheme that took in $722 million has pleaded guilty in front of a New Jersey court. 

Joseph Frank Abel, 50, of Camarillo, California, said that he admitted to conspiring to offer and sell cryptocurrencies as part of the BitClub Network, a crypto mining Ponzi scheme worth at least $722 million, US Attorney Craig Carpenito announced yesterday.

Abel’s charges carry a maximum of five years in prison and a fine of either $250,000 or twice the profits lost by his victims. He is due to be sentenced in January 2021. 

Abel is one of four men arrested in connection with the fake mining scheme, which operated from April 2014 to December 2019. He is the second to admit to the charges, after Romanian citizen Silviu Catalin Balaci, 35, pleaded guilty in July. Balaci’s charges carry the same penalties.

The scheme is similar to other classic crypto Ponzi schemes. BitClub would encourage people to invest money, which it promised to invest in Bitcoin mining rigs. These Bitcoin mining machines would generate Bitcoin, and BitClub would send a proportion of these profits back to investors.

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In true Ponzi style, the group artificially inflated the profitability of their Bitcoin miners to string investors along. 

BitClub ran an affiliate program and paid old investors with the money of its latest victims. Those running the scam referred to their victims as "sheep," “dumb,” and that they were “building this whole model on the backs of idiots.” 

In or around February 2015, it is alleged that one defendant, Matthew Goettsche, directed Balaci to “bump up the daily mining earnings starting today by 60%.” Balaci responded: “that is not sustainable, that is ponzi teritori [sic] and fast cash-out ponzi . . . but sure.”

Abel was a “large-scale promoter” of the club, according to the Department of Justice announcement yesterday. He posted videos online about the scheme and gave presentations and speeches about BitClub throughout the US, Asia, Africa and Europe. He allegedly told US investors to use a VPN—a virtual private network that enables its users to browse the Internet anonymously—to evade US authorities.