In December 2019, the operators of the prominent bitcoin mining company, BitClub Network were arrested and charged with fraud by the US Department of Justice. This piece of writing is aimed at taking you through the rise and fall of this bitcoin mining scam.
What is BitClub?
In simple words, the BitClub Network is a company that claims to have the ability of enabling individuals to make money through Bitcoin Cloud Mining. BitClub was established back in 2014 and since then, it has been in the spotlight for supposedly using MLM strategies to defraud investors.
Before being taken down, BCN claimed on its website to be a “team of experts, entrepreneurs, professionals, network marketers, and programming geeks who have all come together to launch a very simple business around a very complex industry.” These unspecific details in question were aimed at presenting the people behind the company. Their unspecific nature should have been the first warning sign to investors.
The founders of the BitClub Network (BCN) have been anonymous for a long period, a fearful and warning sign. It should be noted that only the convicted sex offender, Russ Medlin, was associated with the Bitcoin Mining Scam. However, recent arrests have brought to light other people who could be perceived as architects of the investment scheme.
Red flags around the BitClub Network
In addition to the lack of sufficient information about the BitClub Network company, the list of red flags surrounding it was quite long:
- It is generally known that earning profits through bitcoin mining is difficult but on BCN, this is almost impossible. For example, an investor wrote on Steemit that he was earning $0.34 daily in 2017 with BCN’s $500 package. It would have taken nine years or more for him to get a return on his investment. But since the contract was only running for 600 days, he was never going to make any profits.
- Investors have to pay $100 to join BCN. They then choose from three packages of $500, $1,000, and $2,000. Considering that you can join other mining pools for free, BCN does not look attractive at all.
- Russ Medlin is a convicted sex offender from the US associated with various BitClub Network YouTube videos and blog posts. He is considered the “Master Distributor” and unofficial “Owner” of the scheme.
- You can only sign up for an account on BitClub if you have a sponsor. This is characteristic of MLM schemes that thrive on referrals.
- Investors are encouraged to reinvest their cloud mining earnings, which is a tactic MLM companies use to stay alive.
- Ofir Beigel, the founder of 99Bitcoins, states that the company used a criminal’s picture under a different name to display a customer testimonial. The photos were later taken down after the misrepresentation was discovered.
- BitClub launched a “digital currency” that had no value outside its platform.
- Many BitClub YouTube videos that were suspicious were deleted after catching attention from reviewers.
The rise of BitClub Network
It is without doubt that the BitClub Network has been aggressively marketed. Moving from Facebook and Telegram groups to Reddit, Bitclub promotions have been allover social media. This can only be attributed to its steep growth. Although the hype surrounding the process of making money with bitcoin is not what it once was, BCN has convinced a lot of people that they could get rich through Bitcoin mining. After five (5) years, a good number of investors, if not all, are reportedly regretting their decisions after having lost thousands of dollars to BitClub. BCN was just as popular in Africa as it was in any other part of the world with social media being the key recruitment tool.
The Fall of BitCub Network
As it is the case with any Ponzi Scheme operators, the law is bound to catchup with them. Note that this is what happened to Matthew Goettsche, Silviu Balaci, Joseph Abel, and Jobadiah Weeks, the alleged operators of BCN. In December 2019, the US District Court prosecutors charged the four with fraud. The arrest revealed that the operators were making millions of dollars while using a small fraction of the money they received from new investors to pay old investors. Interestingly, the leaders of BCN were not shy to state in their correspondence that they were actually out to make profit from “the typical dumb MLM investor.” Note that in in January 2015, Goettsche told Balaci:
“We are building this model on the backs of idiots.”
- If you cannot find clear details about the founders of an investment company, do not invest
- Always do your research before investing in any opportunity
- Always regard with suspicion any investment opportunity that asks for registration fees
- Bitcoin mining is making people money but not as fast as you think
- Anyone who promises returns is most likely lying
- Never invest in something you do not understand