This Alleged Bitcoin Scam Looked a Lot Like a Pyramid Scheme

Five men face federal charges of bilking investors of $722 million by inviting them to buy shares in bitcoin mining pools.

Written by GREGORY BARBER – BUSINESS – 12.10.2019 07:48 PM

In emails, the operators of BitClub Network allegedly referred to potential investors as “sheep.”
PHOTOGRAPH: ANDREY RUDAKOV/BLOOMBERG/GETTY IMAGES

The world of cryptocurrency has no shortage of imaginary investment products. Fake coins. Fake blockchain services. Fake cryptocurrency exchanges. Now five men behind a company called BitClub Network are accused of a $722 million scam that allegedly preyed on victims who thought they were investing in a pool of bitcoin mining equipment.

Federal prosecutors call the case a “high-tech” plot in the “complex world of cryptocurrency.” But it has all the hallmarks of a classic pyramid scheme, albeit with a crypto-centric conceit. Investors were invited to send BitClub Network cash, which would allow the company to buy mining equipment—machines that produce bitcoin through a process called hashing. When those machines were turned on, all would (in theory) enjoy the spoils. The company also allegedly gave rewards to existing investors in exchange for recruiting others to join. According to the complaint, the scheme began in April 2014 and continued until earlier this month.

Matthew Brent Goettsche, Jobadiah Sinclair Weeks, and Silviu Catalin Balaci are accused of conspiracy to commit wire fraud and conspiracy to offer and sell unregistered securities. A fourth defendant, Joseph Frank Abel, faces only the latter charge. Another unnamed defendant remains at large. Balaci’s name was redacted from one public version of the indictment, but appeared on another.

The scheme appears to have started as a relatively modest scam and spiraled dramatically in ambition. Internal messages between the conspirators give the impression of growing glee at the ease of taking advantage of investors, referring to “building this whole model on the backs of idiots.” The men allegedly described their victims as “dumb” investors and “sheep.”

“They were not wrong,” Emin Gun Sirer, the CEO of blockchain startup Ava Labs, quipped on Twitter.

In October 2014, a few months after BitClub Network was founded, Goettsche allegedly posted about the need to “fak[e] it for the first 30 days while we get going,” instructing a co-conspirator to do some “magic” on the company’s revenue numbers. They allegedly agreed on a method of cooking the numbers that would include inconsistencies to make sure they appeared real. The tricks swiftly became more daring. Later, Goettsche allegedly suggested the company “bump up the daily mining earnings starting today by 60%.”

“That is not sustainable, that is ponzi teritori [sic] and fast cash-out ponzi . . . but sure,” Balaci responded, according to messages included in the indictment. A September 2017 email from Goettsche allegedly suggested the company “[d]rop mining earnings significantly starting now” so that he could “retire RAF!!! (rich as f&*#).”

The defendants also allegedly sold shares of the company in violation of securities law, traveling around the world with marketing materials that touted the company as “transparent” and “too big to fail.” (The BitClub website now has a disclaimer saying investments are not available to investors in the US or the Philippines.) At one point, one of the defendants appeared to express remorse, referring to selling shares in BitClub without using the money to purchase mining equipment as “not right.”

The identities of the alleged victims are unclear, but there are hints in still-online videos and advertisements that the company had wide reach. In one ad, appearing on the website of Ben Franklin Technology Partners, a nonprofit investment firm affiliated with the Pennsylvania Department of Community and Economic Development, a company calling itself BitClub Network promotes (comment added: page has recently been taken down) “Founder” status for people who agree to purchase shares in four purported mining pools. The going rate was $1,000 per “GPU share,” a unit of measure that isn’t illuminated in the marketing materials. (Ben Franklin did not respond to an after-hours request for comment).

In 2018, a large number of Facebook posts about BitClub Network caught the eye of Japhet Mesa in Zambia. In a Medium post, he described what he saw as signs of a scam. Despite BitClub’s claims of radical transparency, the location of the purported mining rigs appeared to be a mystery, and the individuals behind the company were hard to identify. “Going by the hype around BCN, I was amazed to see the number of people getting into it,” he wrote at the time. “This could be seen by the number of people posting about it on social media, facebook especially.”

Facebook pages based around BitClub Network communities in countries including Malaysia and South Africa remain active, with tens of thousands of members.

The crypto world is rife with scams. The grift reached a fever pitch in 2017, when bitcoin prices spiked and scammers lured victims to invest millions in cryptocoins or blockchain-based products that would never come to exist. Schemes around participation in mining pools are also popular to scammers who sell customers on the narrative of participating in business ventures that effectively amount to printing money. That’s become all the more tantalizing now that mining is mostly out of reach for many stay-at-home miners. (The selling point is that large mining “pools” enjoy greater efficiencies—and thus returns.) In January, a man in Hong Kong was accused of a similar mining pool scam that allegedly included an advertising stunt that involved throwing money off of a skyscraper.

The wire fraud charges carry a maximum of 20 years in prison, while the securities violation allows five. The defendants’ lawyers could not immediately be reached for comment.

The original article written by Gregory Barberand posted on Wired.com.

Article reposted on Markethive by Jeffrey Sloe

Jailed Bitcoin Pioneer Says Price to Top $100,000, 1,350% Higher From $7,400

Ross Ulbricht, the creator of the Silk Road marketplace, which some say was the first real use case for Bitcoin (BTC), still has his mind on cryptocurrencies, despite being held up in jail for two life sentences after he was convicted earlier this decade for the operation of the Silk Road.

The industry pioneer, who many in the cryptocurrency space believe was key in driving Bitcoin’s earliest stages, recently released a series of letters/articles, which was then shared online by his friends and family. In it, he discussed Elliot Wave analysis, which is a form of technical analysis that focuses on “redcurrant long-term price patterns related to persistent changes in investor sentiment and psychology.”

His Elliot Wave analysis of Bitcoin’s long-term market cycles, the details of which can be found at this link, suggest that Bitcoin will reach $100,000 “around or in 2020.”

Bitcoin Analysts Agree With Ross

It isn’t only Ross who expects for Bitcoin to enter the six-digit range.

Speaking to CryptoPotato in a recent interview, long-time investor and tech entrepreneur, Anthony Pompliano, said that he still believes that Bitcoin will hit $100,000 by December 2021, just over two years away:

We will see Bitcoin’s price at $100,000 by December 2021.

The reason: In less than six months’ time, BTCwill see an extremely important event. Known as a “halving” or “halvening,” the number of coins issued per block to miners will get cut in half, effectively meaning that Bitcoin’s inflation rate will be cut in half in layman’s terms.

The math may be on Pompliano’s side.

PlanB, an institutional quantitative analyst interested in BTC, found earlier this year that the market capitalization of BTC can be accurately determined by the stock-to-flow ratio (effectively inflation) of the cryptocurrency.

His model, which is cointegrated to Bitcoin’s price history and fits the BTC price to an R squared of 0.947 (extremely accurate in statistics lingo), suggests that the cryptocurrency’s market capitalization will have a fair valuation of $1 trillion after the halving, or $55,000 per coin.

This has been corroborated by prominent trader Filb Filb, who called a move to $3,000 months prior to the capitulation even seen late last year. Using regression and statistical analysis, Filb found that by analyzing the Internet industry’s historical growth cycles of staggered booms and busts, halvings, and the scarcity of the cryptocurrency market, you can derive this graph seen below. It illustrates that the cryptocurrency could eventually enter the six-digit price region in the coming few years.

Original article posted on the EthereumWorldNews.com site, by Nick Chong.

Article re-posted on Markethive by Jeffrey Sloe

Bloomberg: Bitcoin May Have Hit a Bottom in $6,500 Plunge

Over the past few days, the price of Bitcoin (BTC) has finally started to stabilize, finding itself trading between $7,000 and $7,800 as the cryptocurrency market aims to establish some near-term directionality.

While this consolidation has really been neither bullish or bearish due to its brevity on a macro scale, Bloomberg has suggested that it may be a sign of a bottom.

Has Bitcoin Bottomed?

In an article titled “Bitcoin in Wait-and-See Mode as Downward Trend Persists,” Bloomberg wrote that with Bitcoin’s price stabilizing “above its support level of the initial [CME futures] gap created on May 10,” there’s potential that a bottom was marked in the $6,500 range, which the cryptocurrency breached late last month shortly after tumbling under $8,000 after hitting $10,500 in the now-infamous “China pump.”

Bloomberg did note though that the cryptocurrency remains in a bearish descending channel pattern it formed in late June when it reached the year-to-date high near $14,000. “BTC would need to break out of this downtrend in order to regain positive momentum,” Bloomberg wrote, accentuating the importance of the cryptocurrency breaking above the channel.

Though, Mike McGlone, an analyst at the firm, was cited as saying that it is “only a matter of time” before the cryptocurrency breaches through resistance, the most notable of which being the horizontal and psychological resistance at $10,000.

McGlone backed this optimistic quip by looking to a potential rally in gold, which he claims would boost the Bitcoin bull narrative, as such a rally would be caused by macroeconomic turmoil, something analysts say is beneficial for alternative assets as a whole. He also looked to growing levels of adoption in the cryptocurrency space coupled with the idea that the impending halving will act as a negative supply shock for Bitcoin’s market economics.

Other Analysts Agree

Other analysts agree with this positive sentiment.

Per previous reports from Ethereum World News, top trader Cantering Clark recently observed an “uncanny resemblance” between the BTC price action seen over the last few days and the aforementioned accumulation phase. Indeed, as Clark’s two charts seen below show, the Bitcoin price action seen then and now are very similar directionality-wise, with there being drops now where there were drops in late-2018 and such.

“It would make sense that after the first major move up, that the first major correction and following accumulation period would have a fractal resemblance to the larger original,” Clark elaborated, pointing out the intricacies of the potential fractal poised to play out in real-time.

Jonny Moe, another popular analyst, also recently observed that the chart of the leading cryptocurrency has printed a bullish Adam & Eve bottoming and reversal pattern, which was seen in late-2018 and early-2019 when the cryptocurrency was trading in the $3,000s.

Original article posted on the EthereumWorldNews.com site, by Nick Chong.

Article re-posted on Markethive by Jeffrey Sloe

Bitcoin Enters Tight Trading Range as Analysts Watch for Massive Movement

Bitcoin has found itself caught within an incredibly tight trading range over the several days, which is a major change from the massive volatility it has been incurring over the past month.

This bout of consolidation, however, may prove to be short-lived, as analysts are now noting that they expect it to be followed by a massive price movement that could determine how BTC trends going into the new year.

Bitcoin Stuck at $7,300 as Bulls and Bears Remain Deadlocked

At the time of writing, Bitcoin is trading up just over 1% at its current price of $7,380, which marks a slight climb from its daily lows of $7,240 and a slight decline from its daily highs of just over $7,400.

These two prices appear to be the lower and upper boundaries of the cryptocurrency’s current trading range, which has held strong since the start of December.

Bitcoin has been caught in several periods of sideways trading like this in the past, with some extending for multiple weeks. One similarity amongst all these consolidation phases is that they often end with a massive movement, in one direction or another.

Josh Rager, a popular cryptocurrency analyst on Twitter, explained in a recent tweet that he believes the trading range that BTC is currently caught within will result in a massive movement.

“$BTC is currently compressing and the range is getting smaller. Not focused on trading small moves here. The focus now is being on the right side of the next multi-hundred dollar move,” he explained.

As for where analysts expect this movement to lead BTC, HornHairs, another popular cryptocurrency analyst on Twitter, explained that he believes the strong support BTC has found at $7,240 could bolster its near-term price action and send it surging towards $7,600.

“Based on the above thesis I’m willing to punt a long: 1H breaker setup with a stop below the level that has been defended ~$7240 and target at monthly open,” he explained, referencing a chart that shows the $7,600 price target,” he said.

If Bitcoin does break above the upper-boundary of its current trading range, the cryptocurrency may be positioned for significantly further gains, as it could signal that a bullish trend shift is imminent.

Original article posted on the EthereumWorldNews.com site, by Cole Petersen.

Article re-posted on Markethive by Jeffrey Sloe

Bitcoin Price Set to Reclaim $8K But a Rising Wedge Is Worrying Bulls

Image courtesy of CoinTelegraph

Bitcoin price (BTC) is taking a bit of a breather after breaking flipping the $7,600 resistance to support during the morning trading hours of Nov 29.

While the current technical setup is exciting, bulls will need to supply significant enough volume for the price to break to the upside of the rising channel, above the $7,800 resistance and the 61.8% Fibonacci retracement level.

Crypto market daily performance. Source: Coin360

Buyers stepped in on Friday morning, pushing Bitcoin price from $7,430 to $7,880 before pulling back to $7,750. Currently, Bitcoin trades in a rising wedge and the price remains capped below the resistance at $7,800.

Today’s upside move brought the price above the midpoint of the long term descending channel and the moving average convergence divergence (MACD) on the daily and 6-hour time frame suggests that additional upside is in store.

At the time of publishing the MACD line is crossing above the signal line and the histogram has flipped from negative to positive. Since the move to $7,400, many traders have set their short term targets at $8,000 to $8,100

BTC USD weekly chart. Source: TradingView

On the weekly timeframe, the volume profile visible range (VPVR) and previous price action history show that $7,800 to $8,200 zone will be difficult to overcome but a positive note is that the MACD histogram appears to be in the early stages of an uptrend as selling pressure lessens.

The weekly relative strength index (RSI) has also sharply reversed course and now aims for 46. Another positive sign is that Bitcoin’s price has recovered back above the 100-week moving average.

As mentioned earlier, Bitcoin price has already recovered to the descending channel midpoint and traders who opened positions at $6,540 will look for Bitcoin price to reach $8,000 before taking partial profits and leaving the remainder in play with the hope that the digital asset will set a weekly higher high at $8,550.

Bullish scenario

BTC USD 6-hour chart. Source: TradingView

It appears that Bitcoin has flipped the $7,600 resistance to support and over the short-term as price consolidates Bitcoin could pull back to the bottom trendline of the descending wedge at $7,658. This point also lines up with the descending channel midpoint and a high volume node on the VPVR.

On the 6-hour timeframe, the Stochastic RSI and relative strength index (RSI) look ready to roll over but a bounce off the $7,600 support could set Bitcoin price above the $7,800 resistance and toward the main trendline of the rising wedge. Meanwhile, the VPVR shows minimal overhead resistance of $8,069. This $8,069 level lines up with the main trendline of the rising wedge and also the 61.8% Fibonacci retracement level.

If bulls interpret a cross above the 61.8% Fibonacci retracement level as a bullish signal, a high volume breakout could push Bitcoin price above the 200-day moving average (DMA) to $8,700 which is quite near the main trendline of the long-term descending channel.

Such an occurrence would be very bullish for Bitcoin and likely lead analysts and crypto Twitter to call for a sky-high pre-halving bull run price estimates again.

Bearish scenario

Rising wedges patterns can lead to price reversals. They are marked by the loss of momentum as the asset’s price rises to higher highs but with shorter candles and a decline in trading volume as the price contracts within the triangle. As the Stochastic RSI and 6-hour RSI rollover, selling pressure at the $7,800 resistance and profit-taking at $8,000 (the 61.8% Fib retracement) could all be signals that the pattern will break to the downside.

It will take a high volume spike from bulls to break out of the rising wedge and above the overhead resistances mentioned above. If Bitcoin price does reverse below the rising wedge, the price could find support at $7,500 and $7,178.

The views and opinions expressed here are solely those of the author (@HorusHughes) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Original article posted on the CoinTelegraph.com site, by Horus Hughes.

Article re-posted on Markethive by Jeffrey Sloe

Bitcoin at $6,600: What Are Analysts Thinking as BTC Trades at Lowest Price Since May?

Once again, bears have managed to wrest control of the crypto market from bulls, plunging Bitcoin (BTC) to $6,600 earlier today. This comes after Bitcoin bulls were afforded a glimmer of hope as the cryptocurrency jumped 8% from the Friday low of $7,400.

With the leading digital asset now trading at its lowest price point since May of this year — and is trading down some 6% in the past 24 hours — what are analysts thinking? Do they even think that Bitcoin’s long-term, secular uptrend remains intact after this brutal downturn?

Bitcoin to Find Support… Soon

While the consensus on the exact support level isn’t clear, many analysts agree that the leading cryptocurrency is approaching a very key price zone that may “make or break” Bitcoin’s medium-term prospects of upside.

As analyst Byzantine General recently pointed out in a recent tweet, this zone/level is the 21-month simple moving average, which sits in the mid-$6,000s at current. This has been the point at which BTC has bounced in two previous bull market retracements. Of course, the sample size of bull markets is small, though the chart below shows that the 21-month moving average has been a significant level for BTC to hold above.

The 21-month moving average somewhat lines up with the most important price point in 2018: $6,000, which is where BTC traded at throughout much of the price action last year, and thus acts as a so-called Point of Control in technical analysis terms.

Some analysts believe that if the cryptocurrency can hold above $6,000 in the coming weeks and months, a bullish technical trend should begin to form, catalyzing the next leg of the bull run higher, which should be aided by fundamental events like the introduction of institutional players and the block reward reduction, slated to act as a negative supply shock for this market.

Watch $5,000

While $6,000 is likely to hold, where’s the next level to watch if things go south… real south? $5,000, according to a number of analyses anyway.

An analyst going by Mac remarked that $5,100 will be the ultimate bottom of this recent downtrend because there exists a key confluence of support levels at that level: the double-month volume-weighted average price, a “price inefficiency fill” level, and the 200-week moving average.

Original article posted on the EthereumWorldNews.com site, by Nick Chong.

Article re-posted on Markethive by Jeffrey Sloe

Is the SEC Right in Blocking a Bitcoin ETF? Top Crypto Bull Thinks So

For the longest time, the U.S. Securities and Exchange Commission (SEC) has been skeptical of Bitcoin exchange-traded funds (ETFs). This comes in spite of the fact that many investors in this industry believe that such a vehicle would catalyze mass inflows, kicking off BTC’s largest bull run yet.

Case in point, the SEC, a financial regulator that presides over ETFs, last month issued an extensive order, which came out to 112 pages long, that denied a cryptocurrency ETF applications from Bitwise Asset Management, who asserted this industry is ready for an ETF.

SEC Right to Deny Bitcoin ETF?

Thomas Lee of Fundstrat Global Advisors, widely deemed to be one of Bitcoin’s biggest bulls, recently wrote on Twitter that his firm thinks that “the SEC is doing its job pretty well,” referencing its attempts to stave off Bitcoin ETF launches.

Speaking at the Blockshow conference in Singapore last week, he elaborated by saying that the current cryptocurrency market is too small to get its own fund. He claimed that for an ETF to be approved by the SEC, the underlying Bitcoin market will need to be much bigger, at least 16 times larger than the current size. More specifically, he remarked that BTC trading at $150,000 would be a point at which “BTC can cope with the daily demand of an ETF.”

Do We Even Need a Crypto ETF?

Sure, an ETF covering this market would be important, but not everyone is convinced these products are needed for cryptocurrencies to succeed.

Speaking on a CNBC “Fast Money” segment last week, Brian Kelly of BKCM argued that a Bitcoin ETF isn’t essential for continued development and growth in this budding space. While many may take this statement as blasphemous, Kelly went on to back up his comment, drawing attention to the fact that there are other up-and-coming on-ramps.

The industry investor looked to Fidelity and TD Ameritrade — two giants in the American finance realm — adding that “ultimately you’re going to be able to buy Bitcoin in a regular brokerage account, or it’s going to look like a regular brokerage account. So I’m less concerned that you need a bitcoin ETF at this point in time.”

Original article posted on the EthereumWorldNews.com site, by Nick Chong.

Article re-posted on Markethive by Jeffrey Sloe