The founder of BitConnect, Satish Kumbhani, has been indicted by the United States for allegedly running a multi-billion-dollar Ponzi scheme. The indictment, issued by a federal grand jury in San Diego, charges Kumbhani with conspiracy to commit wire fraud, wire fraud, commodity price manipulation, operating an unlicensed money transmitting business, and international money laundering.
According to court documents, Kumbhani and his associates deceived investors about BitConnect’s Lending Program and technology. Investors were led to believe that BitConnect’s Trading Bot and Volatility Software could generate significant profits by trading on cryptocurrency exchange market volatility. However, the company operated as a Ponzi scheme, using funds from new investors to pay off earlier ones.
The indictment alleges that Kumbhani and his co-conspirators obtained approximately $2.4 billion from investors. After abruptly closing the Lending Program, Kumbhani allegedly instructed promoters to manipulate the price of BitConnect Coin (BCC) to create false market demand.
To evade regulatory scrutiny, BitConnect was not registered with FinCEN. In a separate case, Glenn Arcaro, a director and promoter of BitConnect, pleaded guilty to participating in a fraudulent investment scheme involving BitConnect. Arcaro admitted to running a pyramid scheme and profiting from investors’ funds.
In November 2021, US authorities seized $57 million in cryptocurrency from Arcaro, with the proceeds set to be distributed to victims of the BitConnect fraud. This case highlights the risks associated with investing in unregulated cryptocurrency schemes and the importance of due diligence before committing funds to any investment opportunity.