Tech
California man pleads guilty to $722 million cryptocurrency fraud
A California man has pleaded guilty to a cryptocurrency mining fraud worth at least $722 million, which prosecutors said amounted to a “high-tech Ponzi scheme.”
Joseph Frank Abel, of Camarillo, admitted to conspiring to offer and sell unregistered securities and to making false tax returns as part of the BitClub Network, the United States said in a statement released Thursday.
Legitimate Bitcoin mining is a process by which “miners” can earn newly issued Bitcoins by using special software to solve complex algorithms. The BitClub network is alleged to have solicited money from investors in exchange for shares cryptocurrency mining pools and rewarded them for recruiting even more investors, according to the U.S.
The alleged scheme operated from April 2014 to December last year, U.S. Attorney Craig Carpenito in New Jersey said in the statement. Abel, 50, promoted it to investors around the world, the government said. He and four co-defendants were charged last December. One of them, Silviu Catalin Balaci, pleaded guilty in July.
Ponzi schemes have been rife in the cryptocurrency space, with projects like BitConnect, OneCoin, and others costing investors billions of dollars. Particularly during the initial coin offering boom of 2017 and 2018, many people invested in projects that didn’t have a known team or even a product behind them. Federal and state agencies and prosecutors launched a major crackdown in 2018.
The alleged conspirators may have seen investors as easy targets. One referred to potential BitClub Network customers as “sheep,” saying he was “building this entire model on the backs of idiots,” prosecutors said in December. In September 2017, the government said, he emailed a co-conspirator suggesting, with a profane acronym, that BitClub would allow them to “defund the RAF!!!”
Abel is scheduled for sentencing on January 27.
The case is US v. Goettsche, 19-cr-00877, United States District Court, District of New Jersey (Newark).