Justice Department leaders plan to drop charges against the alleged mastermind of a cryptocurrency Ponzi scheme that prosecutors said defrauded investors of $722 million, reversing course on a 2019 indictment that was nearing trial.
The deputy attorney general’s office in Washington recently ordered the New Jersey US attorney’s office to dismiss the prosecution with prejudice, although final terms are still being hashed out before the parties inform the court, said two people familiar with the matter. The reprieve for a Colorado man who, according to court filings, once described his model as built “on the backs of idiots,” comes during President Donald Trump’s retreat on crypto industry enforcement.
Matthew Goettsche created and operated an advanced crypto mining operation, BitClub Network, that rewarded investors for recruiting new members. Prosecutors were scheduled to take him to trial in October, before Goettsche’s lawyers informed the judge July 8 that they’d reached an “agreement in principle to resolve the pending charges.”
Facing counts of conspiracy to commit wire fraud and to sell unregistered securities, Goettsche assembled a team of lawyers with connections to the Trump administration to lobby DOJ for relief, said the individuals, who spoke anonymously about internal deliberations.
The men urging the department to abandon the case included Bradford Cohen, a Florida lawyer who’s supported Trump since appearing as a contestant on his reality show, “The Apprentice,” and Brett Tolman, a conservative criminal justice advocate who has helped clients secure Trump pardons, the people said.
“DOJ routinely evaluates cases that have been pending for more than a few years. This particular case had been pending for 7 years now, and the government is recovering a substantial amount owed to investors,” said Emily Covington, a department spokesperson, in a statement. “DOJ’s decision here had nothing to do with any alleged pressure by Goettsche’s attorneys.”
Goettsche’s lawyers didn’t respond to requests for comment.
After the indictment was obtained in the first Trump administration, three co-defendants pleaded guilty. Goettsche’s case dragged on for years due to prolonged plea negotiations and discovery review of about 2 million electronic records.
His defense team tried to convince prosecutors to drop the indictment last year when Trump ally Alina Habba was serving as New Jersey US attorney, but Habba supported the case continuing, one of the people said. Settlement discussions, which included efforts to recover as much of victims’ money as possible, broke down in December, according to court filings.
Prosecutors submitted a letter to the court in February, signed by then-Deputy Attorney General Todd Blanche, stating a jury trial was necessary after it became clear that a resolution was no longer possible.
“The Indictment concerns a global fraudulent scheme based on false promises that the victims’ hundreds of millions of dollars in investments would be used to generate returns from cryptocurrency mining,” Blanche and others wrote.
But after further advocacy from Goettsche’s team earlier this year, senior DOJ official Aakash Singh convened a meeting in Washingtonlast month between the defense and prosecutors to discuss a resolution, the two individuals said. Singh, an associate deputy attorney general overseeing US attorney’s offices, is known as a brash enforcer of Trump’s agenda.
The mediation culminated in the deputy attorney general’s office decision that New Jersey’s new US attorney, Robert Frazer, would back away from criminal charges while still seeking to recoup a portion of investors’ losses, the people added.
The development marks the latest in a much wider corporate pullback led by Blanche, now the acting attorney general whom Trump nominated for the permanent post. Trump and Blanche have been scrutinized for scaling back digital currency prosecutions—or in the president’s case, pardoning crypto fraudsters—while both stand to benefit from personal investments in the industry.
‘Dumb’ and ‘Sheep’
During an alleged mining scam spanning 2014 to 2019, Goettsche referred to potential BitClub Network investors as “dumb” and “sheep,” according to chats with colleagues cited by prosecutors in the indictment.
In September 2017, Goettsche sent an email to a co-conspirator in which he suggested BitClub Network would allow them to “retire RAF!!! (rich as f*ck),” prosecutors said.
Bitcoin mining is a process through which “miners” can earn newly issued bitcoin by using special software to solve complex algorithms. BitClub Network claimed to pool investor money to buy mining hardware and computer capacity and then distribute the profits, according to the government. The group instead reported fake profits and defrauded its investors, prosecutors said.
In June, several weeks before the DC meeting, a separate group of Goettsche defense attorneys filed a motion to dismiss the charges, arguing the prosecution violated his constitutional right to a speedy trial.