A Romanian man arrested in Germany admitted today to conspiring to engage in wire fraud and offering and selling unregistered securities in connection with his role in the BitClub Network, a cryptocurrency mining scheme worth at least $722 million, U.S. Attorney Craig Carpenito announced.
Silviu Catalin Balaci, 35, a Romanian citizen who was living in Germany, pleaded guilty by videoconference before U.S. District Judge Claire C. Cecchi to a superseding information charging him with one count of a dual-object conspiracy to commit wire fraud and to offer and sell unregistered securities. Balaci and four co-defendants – Matthew Brent Goettsche, Russ Albert Medlin, Jobadiah Sinclair Weeks, and Joseph Frank Abel – were charged previously by indictment in December 2019 in connection with the scheme.
According to documents filed in this case and statements made in court:
From April 2014 through December 2019, the BitClub Network was a fraudulent scheme that solicited money from investors in exchange for shares of purported cryptocurrency mining pools and rewarded investors for recruiting new investors into the scheme. Balaci assisted Goettsche and Medlin in creating and operating the BitClub Network and served as a programmer for the BitClub Network.
As a part of the scheme, Balaci and Goettsche discussed that the target audience for the BitClub Network would be “dumb” investors, referred to them as “sheep,” and plotted that they would be “building this whole model on the backs of idiots.”
The BitClub Network told investors that they could invest in three different bitcoin mining pools; however, Balaci admitted that, at no point during the conspiracy was he aware of the BitClub Network operating three separate bitcoin mining pools. Balaci admitted that he, at Goettsche’s behest, changed the figures displayed as bitcoin mining earnings to make it appear that the BitClub Network was earning more than what was actually being mined. For example, in February 2015, Goettsche directed Balaci to “bump up the daily mining earnings starting today by 60%,” to which Balaci warned “that is not sustainable, that is ponzi teritori [sic] and fast cash-out ponzi . . . but sure.”
In connection with his plea, Balaci confirmed that during the course of the scheme, the BitClub Network took at least $722 million worth of bitcoin from investors. The charge to which Balaci pleaded guilty carries a maximum penalty of five years in prison and a fine of $250,000, or twice the pecuniary gain to the defendant or loss to the victims.
„Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”