BitClub has just informed its members that from now on there will be no more daily payouts from GPU mining. Above that, all GPU miners will be taken offline, because the mining would not pay off anymore. This immediate discontinuation of the activities and payouts would only be temporary until the market conditions have improved again they say. Additionally, new exciting things like Clubcoin and Coinpay may be available soon. Since an improvement in mining will most likely no longer occur, the affected members should be prepared for losses.
Thus the BitClub Network follows the typical trajectory of a collapse of an MLM system. Only recently, the Austrian FMA filed a complaint with the public prosecutor’s office.
BitClub and the usual PONZI pattern
The BitClub announcement itself was not surprising and had long been awaited by many observers such as BehindMLM. Every reasonably well-informed crypto investor had long since figured out that crypto-mining does not yield the revenues to finance MLM systems. In the past, the payouts of Crypto-MLM schemes to their members or investors were mostly financed by two factors:
- Price gains for the already minted cryptos
- Contribution of new members and investors
MLM schemes based on crypto-mining can never and could never survive from the operational activity alone. Even in times when mining was still producing attractive ROIs because of fewer miners and a more attractive difficulty, the payment of commissions to the MLM distributors and their multi-stage structures and would not have gone out of money mathematically. There is no free lunch, never has been, never will be.
This is the nature of a PONZI scheme (HYIP scheme). In view of the collapse of the last crypto-hype, however, fewer and fewer new investors can be found. The consequences are as obvious as they are predictable – the collapse inevitably follows and the money is gone. The excuse of the “bad market environment” is just an excuse. Period!
“Greed Eats Brain” or “Coin Eats Fraud”
For all Hypes, the hypothesis “greed eats brain” applies even to otherwise reasonable people. The experienced network marketing artists and MLM veterans such as the German Joerg WILKE, who is responsible for BitClub Germany, take advantage of this. Recently, the German newspaper DIE ZEIT published an interesting article about the “Free Lunch Mentality” of Joerg WITKE and BitClub.
To keep greed alive, MLM systems like BitClub are constantly announcing new and even more exciting and/or profitable products. In the crypto-area, this is often the announcement of a separate “coin” with which existing members and investors can soon become richer. Since the FIAT money and the recognized cryptocurrencies such as BTC or ETH are no longer available to the scheme to pay the promised ROI’s to the members and investors, they invent their own coin, the value of which the operators of the MLM system can determine themselves.
This approach – the issuance of proprietary cryptographic coins – also has concrete criminal intentions. With their own Coin crypto-MLM artist wants to hide the fraud at the investors, and delay claims from disappointed and angry investors. To keep the hope alive is the name of the game. Typically, the announcement of the “magic coin” is the latest stage before the collapse. The intention typically is to buy those bad actors the time to prepare for the exit and prevent prosecution.
Fraud presupposes criminal intention and financial loss. But those who have no evident financial loss have not been cheated either. That’s what their thinking is. Consequently, operators of Crypto-MLM schemes issue their “magic coin” and sort of compensate their members and/or investors for any loss. The MLM operators’ criminal considerations in this regard are simple – if the “magic coin” does not work, then that is just bad luck but bad luck is not fraud and hence they cannot be prosecuted. Whether they get away with it, time will tell. We from FinTelegram will do our best to prevent that.
The “Supergau” for BitClub members
However, in addition to the potential fraud of investors via MLM systems, investors and active members themselves may also suffer criminal consequences in addition to the loss of their investment.
The problem with crypto-MLM systems goes way beyond the usual rip-off. Many financial market supervisory authorities have long qualified these crypto-MLM systems such as BitClub or USI-Tech as unauthorised sales of financial instruments. Whoever participates as a distributor or member in the distribution of these unauthorized and/or non-registered financial instruments by recruiting family, friends, and acquaintances and mediates such crypto-packages may qualify as a contributor in the criminal sense. This exposes distributors to the risk of being sentenced to fines and imprisonment.
Only recently, the Austrian Financial Market Authority (FMA) filed a criminal complaint with the public prosecutor’s office regarding BitClub. A few months ago, the FMA qualified the distribution of crypto-mining packages as “Alternative Investment Fund (AIF)” subject to licensing obligations.
The supergau for investors/when acting at the same time as a distributor would thus be the total loss of the investment and a criminal conviction.
Also published on Medium.