35-year-old programmer stole $722 million worth of Bitcoin in 5 years: Those people are stupid

Source: Blockchain Outpost, Author: Joyce

“This whole (fraud) model is built on top of these idiots.”

On July 9, a 35-year-old Bitclub Network programmer admitted that he was running a mining pool Ponzi scheme and defrauded $722 million in Bitcoin from investors.

Mass imprisonment

Silviu Catalin Balaci, a 35-year-old Romanian citizen living in Germany, pleaded guilty via video conference before a U.S. district judge.

Barach was charged with double-entendre conspiracy to commit wire fraud and sale of unregistered securities, along with four other co-defendants who were indicted in December 2019 in connection with the scheme — Matthew Brent Goettsche, Russ Albert Medlin, Jobadiah Sinclair Weeks and Joseph Frank Abel.

Among the other four defendants, Medlin was arrested in June this year on charges of sexually assaulting a minor, and the other three were arrested in December last year on charges of fraud.

Interestingly, Gottes and Weeks requested release in March due to concerns about prison infrastructure or the outbreak of the new coronavirus. However, prosecutors rejected the request because they had a "strong motive to escape."

Bitclub promotional image, source: coinrivet

'Foolish' investors

BitClub Network was a fraudulent scheme. Operators siphoned money from investors by offering them shares in a supposed cryptocurrency mining pool and rewarding them for bringing in new investors. At its peak, it attracted tens of thousands of investors.

As part of the plan, Barachi and Gottes said Bitclub Network would target “dumb” investors, whom they called “sheep,” and planned to “build the entire (scam) model on top of these idiots.”

Bitclub Network told investors they could invest in three different Bitcoin mining pools. However, Baraqi admitted that throughout the scheme, he had no idea that Bitclub Network operated three separate Bitcoin mining pools.

In order to confuse investors, BitClub Network also released fake information about mining machines and mining farms.

Baraci admitted that at Gottes’ request, he altered data shown as “bitcoin mining revenue” to make it appear that Bitclub Network was earning more than it actually mined.

In February 2015, Gotes ordered Barachi to "increase daily mining revenue by 60% starting today." Barachi warned: "This is unsustainable, this is a Ponzi scheme, a Ponzi scheme for quick cashing out..." But Barachi did it anyway.

In September 2017, Gottes suggested in an email that Bitclub Network “significantly increase mining revenue from now on” in order to “retire the RAF!”

In June 2017, Weeks said in an email that it was "incorrect" for BitClub to sell its shares in BitClub but not use the money to buy mining equipment.

Gottes, Weeks, Abel and others also allegedly conspired to sell shares of BitClub Network as securities, even though BitClub Network had not registered those shares with the SEC.

Additionally, Weeks and Abel created videos and promoted BitClub Network in the United States and around the world. In one video, a conspirator claimed that BitClub Network was "the most transparent company in the history of the world that I have ever seen." In another video, Abel assured investors that BitClub Network was "too big to fail."

Barachi confirmed that from April 2014 to December 2019, Bitclub Network took at least $722 million worth of Bitcoin from investors.

The charges to which Barachi pleaded guilty carry a maximum sentence of five years in prison and a fine of $250,000, twice the defendant's economic gain. A sentencing date has not yet been set.

Conclusion

ShapeShift AG CEO Erik Voorhees once said on Twitter that he was grateful to the unsung heroes of the crypto industry: programmers. They work silently and burst out great masterpieces from time to time. We often ignore their existence and importance.

But sometimes, if technological advantages are not used properly, they can become tools of crime.

Reference Links:

https://www.justice.gov/usao-nj/pr/romanian-programmer-admits-he-helped-create-bitclub-network-fraud-scheme-worth-least-722