Jobadiah Sinclair Weeks, Colorado whiz-kid entrepreneur turned Bitcoin evangelist, has pleaded guilty to tax evasion and conspiracy to sell unregistered securities, in what federal investigators have described as one of the largest cryptocurrency frauds ever devised, one that bilked tens of thousands of small investors out of more than $720 million.
The plea, entered November 5 in federal court in New Jersey, is the third deal the government has reached with former promoters and principals of the BitClub Network, which promised high returns to customers who purchased shares in a cryptocurrency "mining pool." The money was supposed to go toward acquiring and operating stacks of high-speed computing equipment, to be used in carving out new blocks of transactions in the Bitcoin blockchain. But the federal indictment says the BitClub hucksters made exaggerated claims about mining capability they didn’t have, paid out inflated earnings to early investors in order to rope in more suckers, and took huge rake-offs for themselves, much of it in the form of commissions from a multi-level marketing (MLM) setup that paid huge bonuses for recruiting new members.
Although he was not one of the founders of BitClub, Weeks was one of the most visible promoters of the operation, singing its praises at conferences and in videos. As detailed in "Bros and Cons," our BitClub cover story, Weeks made a fortune in MLM products at an early age and became a role model for some cryptocurrency enthusiasts dazzled by his tales of instant wealth, his libertarian activism and his lifestyle as a "perpetual traveler" who chronicled his exotic travels on his website and mused about starting his own country. "We're basically selling machines that print money," he told potential BitClub investors.
Among themselves, though, the BCN promoters were singing a different tune. Internal communications obtained by prosecutors indicate that company founder Matthew Goettsche, a 2005 graduate of the University of Colorado, referred to the company's target market as "sheep" and "the typical dumb MLM investor." "We are building this whole model on the back of idiots," Goettsche told a computer programmer. In other exchanges, Weeks appears to be advising clients on how to circumvent U.S. securities regulations and deriding those who worried about whether their mining-pool windfall would be taxable.
Arrested last December, Weeks has spent most of 2020 in jail in New Jersey, his globe-trotting on hiatus. He was denied bail despite his lawyers' pleas that he was at high risk of contracting the coronavirus in detention. A fresh charge of tax evasion was recently filed, with prosecutors claiming that he'd failed to file a return for the years 2015 to 2018, encompassing "at least" $18 million in unreported income and $7 million in outstanding taxes.
After pleading to the tax count and the conspiracy charge, Weeks faces up to ten years in federal prison and an amount of restitution still to be determined. But he was also granted release until sentencing upon posting of a $2 million bail, secured by properties his family owns in Arvada, Buena Vista and Coaldale, and a tract of land in Washington.
Two other BitClub defendants, Joseph Frank Abel and Silviu Balaci, have recently entered guilty pleas in the case. Goettsche and former BCN exec Russ Medlin, who was arrested on child sex charges in Indonesia a few months ago, still face a possible trial in the case.