The founder of BitConnect, Satish Kumbhani, has been indicted by the United States for his alleged involvement in a multi-billion-dollar Ponzi scheme. The indictment, issued by a federal grand jury in San Diego, includes charges of wire fraud, commodity price manipulation, operating an unlicensed money transmitting business, and international money laundering.
According to court documents, Kumbhani and his co-conspirators misled investors about BitConnect’s Lending Program and proprietary technology. Investors were led to believe that BitConnect’s Trading Bot and Volatility Software could generate significant profits and guaranteed returns by trading on cryptocurrency exchange market volatility. However, the indictment states that BitConnect operated as a Ponzi scheme, using funds from new investors to pay off early investors.
Kumbhani and his associates allegedly swindled approximately $2.4 billion from investors before abruptly shutting down the Lending Program. They then allegedly manipulated the price of BitConnect’s digital currency, BitConnect Coin (BCC), to create the illusion of market demand for the cryptocurrency.
To evade regulatory oversight, Kumbhani failed to register BitConnect with FinCEN. In a separate case, BitConnect director Glenn Arcaro pleaded guilty to his involvement in a fraudulent cryptocurrency investment scheme. Arcaro admitted to running a pyramid scheme through the BitConnect Referral Program, earning millions of dollars in the process.
US authorities seized $57 million in cryptocurrency from Arcaro in November 2021, with the proceeds set to be distributed to victims of the BitConnect fraud. The actions taken by law enforcement underscore the seriousness of cryptocurrency fraud and the commitment to holding perpetrators accountable for their actions.