US: CEO of Bitcoin Platform Charged in Multi-Million Dollar Ponzi Scheme

Published: 23 January 2024

Bitcoin PxHere

U.S. financial authorities describe USI Tech’s Bitcoin trading practices as a textbook Ponzi scheme. (Photo: PxHere, License)

By Henry Pope

A German national was arraigned Friday in U.S. federal court on securities fraud charges that implicate him as the head of a multi-million dollar cryptocurrency Ponzi scheme.

Horst Jicha, 64, founder and CEO of USI Tech, a cryptocurrency mining and trading firm, is alleged to have defrauded investors of approximately US$150 million through a crypto-based Ponzi scheme between mid-2017 and early 2018. Jicha departed the U.S. in early 2018 and did not return until December 2023 when he attempted to go on vacation in Miami, Florida, where he was promptly arrested.

“As alleged, in the early days of crypto, the defendant deployed a multilevel marketing scheme to defraud U.S. investors excited about the crypto market,” said U.S. Attorney Breon Peace.

According to the indictment, USI Tech advertised itself as a European-based cryptocurrency investment platform perfect for entry level investors. Prosecutors, however, argue it was a Ponzi scheme, whose business model relied on victims recruiting others to buy into investments and products sold by Jicha and his co-conspirators.

The company promised profits to investors by either purchasing “BTC Packages” for 50 euros ($54) in Bitcoin each, or by earning commissions by referring others to buy into USI Tech investment packages.

This second point is generally understood to be the modus operandi of every Ponzi scheme.

Jicha reportedly brought the firm to the U.S. in 2017 and began to aggressively market it to entry level crypto investors. To promote the company, he held multiple in-person events across the country, where he guaranteed high returns on investments.

At these events, prosecutors said that he made false claims concerning the legality of the platform’s services.

For example, during a “USA Kickoff” event in Valley Forge, Pennsylvania in August 2017, Jicha and a co-conspirator assured the audience that USI Tech was legal and not a scam or a Ponzi scheme. He further claimed the company’s business practices were greenlit in a letter written by a “top SEC attorney”.

No such letter by a Securities & Exchange Commission official has ever been publicly released, however.

According to financial authorities, Jicha lied to investors when he promised them an average one percent daily return of capital on their investments. Each BTC Package would run for 140 days, after which it would close, having generated a 140 percent return.

These returns could then be re-invested into new BTC Packages, and so the cycle would continue.

To add a sense of exclusivity to USI Tech products, investors who purchased BTC Packages gained access to a paywalled section of the company's website, known as the “back office,” authorities said.

Though the back office showed each investor their respective portfolio details, it did not allow them to withdraw their purported earnings. In fact, USI Tech imposed “strict limitations on how much and how often” an investor could transfer cryptocurrency out of the company’s digital wallets and into their own.

Prosecutors said that by relying on investors to advertise the company’s purported successes to bring in new customers in exchange for commission fees, Jicha sought to insulate himself from legal repercussions, as he could say they misrepresented USI Tech’s business model.

“Too often honest investors fall victim to schemes surrounding emerging financial opportunities. Horst Jicha allegedly advertised a platform that made cryptocurrency investing simple and more accessible to investors, with guaranteed returns,” said FBI Assistant Director-in-Charge Smith. “In reality the platform was just a facade, and when questions arose, Jicha stole millions of his investors’ money and fled the country.”

It all came to a head between late 2017 to early 2018, when multiple U.S. and Canadian securities regulators began issuing cease-trade orders and stated that USI-Tech was not a registered securities dealer.

Rather than accept responsibility, the company blamed its own investors, accusing them of misrepresenting USI-Tech’s products and company practices.

Jicha then shut down all U.S. and Canadian operations overnight and blocked his U.S.-based investors from withdrawing any money out of their accounts, authorities said.

Once the dust had settled in March 2018, tens of thousands of Bitcoin and Ether, collectively worth roughly $150 million, had mysteriously been transferred from the company’s digital wallet to an exchange deposit address controlled by Jicha, prosecutors said.

Around this time, USI-Tech notified investors via their back offices that it intended to repay them through a  “BTC 2.0 Package”. Again, however, investors found that whatever money they put into their accounts were unable to be withdrawn.

“At first, they [investors] were given repeated excuses about technological problems; eventually, USI-Tech stopped responding altogether," the indictment said.

If these allegations against Jicha and USI Tech are true, then this is a common scam practice known as “returning to the well,” where scammers attempt to fool victims who were already hoodwinked into giving them even more money using the same practices.

Jicha himself departed the U.S. around this time and did not return until December 2023, which led to his arrest. He now faces several charges including conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering.