The BitClub Fraud

By  //  March 24, 2022

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The world of cryptocurrencies (cryptocurrencies, crypto-assets) is full of imaginary investment products. Fake coin, Fake blockchain service, and Fake cryptocurrency exchange. Recently, four people from a company called BitClub Network have been arrested for deceiving $ 722 million from victims in the name of investing in Bitcoin’s mining equipment. You need to know about the technological possibilities that Bitcoin offers.

This case is centered on virtual currencies; it has the characteristics of typical MLM. They urged investors to send money to the BitClub Network to buy mining equipment that issues bitcoins through a process called hashing. Everyone (in theory) should have made a profit by operating this equipment. But instead, the company also allegedly rewarded existing investors who recruited new participants. According to the indictment, the series of plans was launched in April 2014 and continued until early December 2019.

Of the four arrested, Matthew Brent Getcha, Obadia Sinclair Weeks, and Sylvia Catalin Barachi allegedly conspired to conspire against communications fraud and to solicit and sell unregistered securities. The fourth, Joseph Frank Abel, has been accused of the latter only. The fifth person whose name has not been revealed is on the run.

A Fraudulent Mechanism

The plans, which initially seemed to be a small fraud, expanded into big ambitions. According to interactions within the group, the conspirators smiled at the ease with which investors could be ducks and said, “We will build the entire model on top of what we do.” The accused described the victims as “stupid investors” and “sheep.” In response, Cornell University professor and blockchain startup Ava Labs CEO Emin Gun Schiller ironically said on Twitter that “they weren’t wrong.”

In October 2014, a few months after the BitClub Network was founded, Getcha said he needed to “disguise himself for the first 30 days to get going” and instructed his conspirators to manipulate the company’s revenue figures. They agreed to operate inconsistent parts so that the numbers would look correct. These crafts quickly became more daring. Getcha later allegedly proposed that the company “increase daily mining earnings by 60 percent from today.”

According to the exchange contained in the indictment, “It’s not sustainable. It’s a Ponzi scheme [Note: a type of fraud that doesn’t manage an investor’s money and diverts it to another investor as a dividend]. Ponzi cashes fast, but I understand, “Barachi replies. In an email in September 2017, Getcha said that the BitClub Network would “significantly reduce mining earnings from here” and then retired as “RAF!”

Granted “founder” status to some investors

One of the defendants seems to have deeply regretted that it was “incorrect” to sell BitClub shares without buying mining equipment with funds at one point. The identities of the alleged victims are uncertain, but there may be clues to the online video and advertising that the company was using.

According to an ad on the website of Ben Franklin Technology Partners, a non-profit investment company associated with the Regional and Economic Development Department of Pennsylvania, a company called BitClub Network has four mining pools. It advertises that it will give the person who has agreed to invest in the company the position of “founder”. The prevailing price was $ 1,000 per unit of “GPU stake,” which isn’t detailed in marketing material (Ben Franklin Technology Partners hasn’t responded to requests for comment).

In 2018, many Facebook ads about BitClub Network got Zambia’s Jaffe Mesa attention. He posted on Medium, explaining that this was a sign of fraud.

Cryptocurrency scams that are still rampant

Despite BitClub’s claim of complete transparency, the location of what is believed to be mining equipment seems a mystery. And the people behind the company are hard to identify. Nevertheless, “I was surprised at how many people were drawn to the hype about BitClub.

Fraud is rampant in the world of cryptocurrencies, especially in 2017. As a result, bitcoin prices have skyrocketed, and fraudsters have seduced victims to make considerable investments in non-existent cryptocurrencies and blockchain-based products. Scams about participating in mining pools, the platform used to mine cryptocurrencies, were also popular among scammers. So instead, sell ​​to your customers by claiming to participate in a business venture that makes you feel like you’re making money.

These techniques are now intriguing to many. But unfortunately, mining is becoming more difficult for those who want to mine cryptocurrencies at home (the selling point is that joining a large mining platform like a “pool” is efficient and rewarding). In January of this year, a Hong Kong man was charged with a similar mining pool scam. In addition, it is said that he did a flashy promotion by spreading a wad of bills from a skyscraper.

He faced up to 20 years’ imprisonment for communication fraud and five years for securities law violations. He tried to ask the defendant’s lawyer for comment but could not contact him immediately.