A 35-year old Romanian programmer has admitted his involvement in creating the BitClub Network, a fraudulent cryptocurrency mining scheme worth at least $722 million.
Announced on Thursday, the US attorney Craig Carpenito announced that Silviu Catalin Balaci was arrested in Germany and his guilty plea was taken by the US court via video conferencing.
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He has been charged with one count of a dual-object conspiracy to commit wire fraud and to offer and sell unregistered securities.
The official filing detailed that 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. The fraudulent scheme ran from April 2014 through December 2019.
The crypto mining fraud case was highlighted last year when the US authorities nabbed the masterminds – Matthew Brent Goettsche, Jobadiah Sinclair Weeks, and Joseph Frank Abel – all of whom are US residents.
According to the official announcement, Balaci assisted Goettsche and Medlin in creating and operating the BitClub Network and served as a programmer for the BitClub Network.
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The BitClub Network told investors that they could invest in three different Bitcoin mining pools; however, Balaci admitted that the operators were never maintaining three separating mining operations. He even 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.
“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 US Department of Justice noted.
The programmer is now looking at a maximum prison time of five years and a fine of $250,000, or twice the pecuniary gain to the defendant or loss to the victims.