On December 10, 2019, three men were arrested in connection with an alleged $722 million cryptocurrency mining fraud scheme. An additional defendant was arrested following the Department of Justice’s press release, and another remains at large.
From April 2014 through December 2019, Defendants solicited investments in its BitClub Network, a purported bitcoin mining pool that was operated by Defendants. They are charged with exploiting unsophisticated investors with “false promises of large returns for investing in the mining of Bitcoin.” The “complex world of cryptocurrency” allowed Defendants to take advantage of investors, which Defendant Matthew Brent Goettsche referred to as “dumb” investors, “sheep,” and “morons.” Defendants manipulated the daily mining earnings amounts reported to investors in order to attract new investors and to encourage reinvestment of earnings, amassing at least $722 million in ill-gotten gains.
Read more to better understand how others exploit this perplexing concept, what the SEC has to say about the matter, and what the consequences are.