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BitConnect founder accused of a crypto Ponzi scheme

Satish Kumbhani, founder of the famous crypto exchange, BitConnect, has been charged by the Department of Justice (DOJ) for allegedly defrauding its global investors through its crypto Ponzi scheme called ‘Lending Program’.

As per San Diego-based federal grand jury, Kumbhanin misled its investors by paying them with money from its new investors, obtaining approximately US$2.4 billion in the process.

In 2017, BitConnect coin (BCC) recorded an all-time high price of US$463.31, reaching a peak market capitalization of US$3.4 billion. However, its price collapsed after a few months which caused huge losses to its investors. As a result, Kumbhani promised its investors that they can ‘generate substantial profits and guaranteed returns’ through BitConnect’s Lending Program.

BitConnect’s Lending Program allegedly uses funds from new investors to partially pay back the old investors until the program shuts down abruptly after a year. The DOJ further claims that Kumbhani along with other conspirators faked the market demand of BitConnect’s native coin through market manipulation. 

The DOJ’s indictment also states that the BitConnect founder evaded US regulatory scrutiny and oversight by not registering with the Financial Crimes Enforcement Network (FinCEN). Under the Bank Secrecy Act, BitConnect should register under FinCEN since it is a money transmitting business. 

As per the DOJ press release, ‘Kumbhani is charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business and conspiracy to commit international money laundering.’The case is under the FBI Cleveland Field Office and IRS Criminal Investigation. 

‘As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars,’ stated by Special Agent in Charge Ryan L. Korner of the IRS Criminal Investigation’s Los Angeles Field Office.

If the allegations are true and Kumbhani is found guilty, he will serve a maximum of 70 years in prison. The DOJ suggests that BitConnect investors should register themselves as potential victims and submit a victim impact statement.

Back in September 2021, former BitConnect director and promoter, Glenn Arcaro, pleaded guilty to fraud charges. He is required to pay back approximately US$24 million to the affected investors.

Read more cryptocurrency news and updates at Cryptoshimbun!

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