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DoJ Charges BitClub Promoter for Role in $722 Million Crypto Fraud Scheme

A Californian man has pleaded guilty for his involvement in perpetrating BitClub Network, a cryptocurrency mining scheme estimated to have generated at least $722 million.

BitClub promoter charged with fraud

Joseph Frank Abel pleaded guilty for conspiracy in fraud, and for offering and selling unregistered securities through BitClub Network. The US Department of Justice (DoJ) also charged Abel for subscribing to a false tax return in 2017, allegedly failing to report $1 million worth of earned cryptocurrency. Along with Abel, four other of his accomplices were indicted for their roles in the BitClub Network.

BitClub Network is a fraudulent crypto mining scheme that solicited money from investors in exchange for shares in purported cryptocurrency mining pools. Investors were promised rewards for recruiting new members to the network. The Ponzi scheme was in effect for 5 years, from April 2014 to December 2019 before being shut down. It generated at least $722 million and was advertised digitally by Abel, who was a big-shot promoter for the fraudulent crypto mining network. Based in the US, BitClub Network membership was also marketed throughout Asia, Africa, and Europe.

Through a video conference with the US District Judge Claire C. Cecchi, Abel confessed to soliciting investors and taking their money in exchange for promised shares in BitClub’s crypto mining pools. According to an Internal Revenue Service (IRS) announcement released yesterday, Abel also advised other American investors to use a virtual private network (VPN) to conceal their US-based IP addresses, in an effort to prevent detection from US law enforcement.

The former BitClub promoter is now awaiting his sentencing, set for January 2021. Abel has been fined $250,000 by US regulators and now faces up to five years in prison. As for the tax evasion charge, the fraud count stipulates a maximum penalty of three years of imprisonment and a fine of $100,000.

Ponzi schemes generate billions

Similar cryptocurrency Ponzi schemes that have also been condemned by the DoJ as fraudulent investment scams have generated billions before being shut down. Some of the biggest crypto schemes include OneCoin and BitConnect, which have respectively generated $4 billion and $2.6 billion through money laundering and bank fraud.

Recently, the US Department of Justice sought to reclaim approximately $400 million dollars in a forfeiture money judgment submitted on Monday. Mark Scott, the former attorney for OneCoin founder Ruja Ignatova, was found guilty of money laundering and bank fraud in the multi-billion dollar Ponzi scheme. Currently, law enforcement is asking the US District Court of New York judge to freeze Scott’s assets to recuperate some of the laundered funds. The former lawyer faces disbarment as well.

Victims of BitConnect Ponzi Scheme to Benefit from the Liquidation of $57M Crypto Assets

Tagged as the largest cryptocurrency scam on American soil, the BitConnect fraud scheme siphoned more than $2 billion from investors before going underground in January 2018.

Victims might feel relieved as the U.S. Attorney’s Office for the Southern District of California, and the U.S. Postal Investigative Service has been granted a court order to liquidate Bitconnect’s crypto proceeds.

The cryptocurrencies, including Bitcoin, Litecoin, Ethereum, and Dash, worth approximately $57 million, will be sold at current rates after being seized from Glenn Arcaro, a top American-based BitConnect promoter.

Arcaro pleaded guilty for his participation in the crypto fraud scheme, making BitConnect emerge as the biggest cryptocurrency scam to be ever charged criminally.

The Justice Department acknowledged that Arcaro is scheduled to be sentenced in January 2022 and faces imprisonment of up to 20 years.

The crypto scam never end

Crypto scams continue wreaking havoc as victims lose vast amounts of money. For instance, in 2020, a Romanian programmer confessed to helping create Bitclub Network, a Bitcoin mining Ponzi scheme that siphoned off funds valued at $722 million.

Moreover, Plus Token Ponzi scheme, a global pyramid network, was entrenched on Chinese soil and abroad. It caused a wide-ranging panic in June 2019, after some Korean and Chinese investors could not withdraw Bitcoin funds from their wallets, which was dismissed as a mere hacker attack.

Scammers have also devised ways to impersonate high-profile figures like Bill Gates and Elon Musk, as witnessed in the 2020 Twitter hack involving Bitcoin.

Nevertheless, the relevant authorities are cracking the whip in addressing the crypto scam issue, as evidenced by the liquidation of BitConnect’s crypto proceeds and the looming Arcaro’s incarceration.

Furthermore, the Australian Securities and Investments Commission (ASIC) raised the alarm and banned John Louis Anthony Biggatton, a former Australian BitConnect representative, from offering financial services for seven years.

BitConnect Founder Charged with Orchestrating Global Crypto Ponzi Scheme Worth $2.4B

A U.S. grand jury indicted Satish Kumbhani, the founder of BitConnect, orchestrating a fraud scheme that siphoned approximately $2.4 billion from investors, according to the Department of Justice.

The 36-year-old from Hemal, India, with his co-conspirators, deceived investors’ money to gain substantial profits by taking advantage of the volatility of crypto exchange markets through BitConnect’s “Lending Program.”

Hemal convinced investors that the program was powered by a cutting-edge technology called the “BitConnect Trading Bot” and “Volatility Software.”

In reality, according to the indictment, it was a well-orchestrated textbook Ponzi scheme where earlier BitConnect investors were paid using money from later investors.

Before going underground in 2018, the cryptocurrency scam had hit a peak market capitalization of $3.4 billion, and this was attained through the manipulation of its digital currency called BitConnect Coin (BCC).

Despite being large, Kumbhani was charged with various counts, such as operating an unlicensed money transmitting business and conspiracy to commit wire fraud and international money laundering. If convicted, he could be incarcerated for a maximum of 70 years.

Eric Smith, a special agent in charge of the FBI’s Cleveland Field Office, noted:

“Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space.”

Ryan Korner, a special agent in charge of the IRS Criminal Investigation’s office in Los Angeles, added:

“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars.”

Kumbhani’s indictment comes months after crypto worth $57 million was seized from Glenn Arcaro, a top American-based BitConnect promoter. Victims were to benefit from the liquidation of the crypto assets after a court gave the go-ahead.