Nev. Businesses Sue Alleged Fraudster Over Cryptocurrency Scheme
Matthew Goettsche defrauded investors between April 2014 and December 2019 in a cryptocurrency scheme that purportedly rewarded them for recruiting new investors, alleged a complaint Friday (docket 1:23-cv-03174) in U.S. District Court for Colorado in Denver.
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Goettsche was named by Gordon Beckstead, a Henderson, Nevada, resident who pleaded guilty to conspiracy to commit money laundering and aiding in the preparation of a false tax return, said the complaint, referencing a March 24, 2022, news release from the U.S. Attorney’s Office for New Jersey.
Beckstead pleaded guilty to his role in laundering funds solicited for BitClub Network, cited by U.S. Attorney Philip Sellinger as a $722 million fraudulent cryptocurrency scheme. U.S. District Judge Claire Cecchi charged Beckstead with conspiracy to commit money laundering and aiding in the preparation of a false tax return, said the news release. As part of the guilty plea, Beckstead admitted conspiring with Denver County resident Goettsche and others to launder funds earned in Colorado via the Bitclub Network, the complaint said.
Beckstead, a certified public accountant at the time, prepared fraudulent tax returns at the direction of Goettsche, said the complaint. Beckstead set up various entities, including real estate in Nevada; Goettsche held assets in Colorado bought with the fraudulent funds obtained through the operation of the Bitclub Network scheme, it said.
In spring 2018, Goettsche directly and indirectly solicited plaintiffs Mina de Oro and The Toy Chest, companies located in Nevada, to participate in a multilevel bitcoin (BTC) mining scheme, the complaint said. Goettsche engaged in private and public solicitations through a website he maintained for a Bitclub offering and via email and the internet, it said.
Goettsche, as the controlling member of Bitclub, made numerous untrue statements to the plaintiffs about the amount of cryptocurrency mining operations in place and at Bitclub-controlling mining operations, said the complaint. Goettsche’s untrue statements included misleading figures and documentation regarding the amount of future profit to be derived from the Bitclub mining operations and fraudulent statements about commissions to be paid for joining the Bitclub scheme and recruiting others to join and invest, it said.
The defendant also made misleading statements about future operations and investments by Bitclub management and “untrue and misleading statements regarding access to funds invested in the Bitclub Offering through an internet-based website,” the complaint said.
At the time the misrepresentations were made to the plaintiffs, Goettsche should have known the risk involved in cryptocurrency mining operations concerning “costs of mining, reduced mining rewards because of competition and volatility" of the BTC and cryptocurrency markets; the illegality of the multilevel marketing scheme; the illegality of the Bitclub offering and failure of Bitclub and Goettsche to register the offering with the SEC and state securities agencies; and that proceeds from the Bitclub offering and scheme “were being converted by Defendant for his personal use rather than the acquisition of promised crypto currency mining equipment.”
Based on Goettsche’s alleged misrepresentations and omissions, each plaintiff transmitted $250,000 in BTC or cash to a Bitclub representative to buy the Bitclub offering and entered into a Bitclub investor contract, the complaint said. Plaintiffs would not have purchased the Bitclub offering or entered into the investor contracts if they had known that Bitclub "Misrepresentations were false” or if they had been aware of Bitclub “omissions,” it said.
Goettsche has breached his obligations to the plaintiffs by refusing to pay dividends, bonuses or other compensation as required by the contracts; repeatedly misrepresenting and concealing “the true nature and status of the Plaintiff’s investments in Bitclub as well as the finances, operations and legal status of Bitclub"; and violating state and federal laws in connection with the offer and sale of the Bitclub offering to plaintiffs and other investors, said the complaint.
Plaintiffs’s claims include violations of 17 C.F.R. section 240.10b-5, regarding the use of manipulative and deceptive devices intended to defraud a person in connection with the sale of securities, and Colorado’s securities law, common law fraud, fraudulent inducement, breach of contract, unjust enrichment, conversion and civil theft. Plaintiffs seek a judgment against Goettsche for treble damages, compensatory, incidental and consequential damages; pre- and post-judgment interest; and attorneys’ fees and costs. Goettsche couldn't be reached for comment.