Founder indicted over billion cryptocurrency ponzi

founder indicted over billion cryptocurrency ponzi

This created a false appearance of legitimate market demand for the coin. Kumbhani and his co-conspirators have been alleged of hiding the fraud’s proceeds by commingling, cycling, and exchanging. The Department of Justice said the fraudsters achieved this through a cluster of wallets and internationally-based crypto exchanges.

BitConnect was heavily marketed on social media and YouTube when it launched in February 2016. BCC, the platform’s native coin, was trading at an all-time high of $463.31 by December 2017. But today, this coin is merely valued at $0.67. Reports highlight BCC’s price crash during the crypto crash of late 2017 to early 2018. Texas and North Carolina gave cease-and-desist notices to BitConnect in January 2018 calling for a stop of the platform’s services to the states’ residents. BitConnect announced it was shutting down and even offered to pay back investors.


The FBI Cleveland Field Office and Internal Revenue Service’s Criminal Investigation Department are investigating the case.

On 1 September 2021, The Securities and Exchange Commission (SEC)announcedthat it has filed an action against BitConnect, an online crypto lending platform, its founder Satish Kumbhani, as well as its top U.S. promoter Glenn Arcaro and his affiliated company Future MoneyLtd. (Collectively known as Defendants). All the values mentioned in this piece are in US Dollars (USD).

The SEC charged Defendants with lying about BitConnects’s ability to make a profit, violating the anti-fraud and registration laws put in place to protect retail investors.

This indictment alleges a massive cryptocurrency scheme that defrauded investors of more than $2 billion,” said U.S. Attorney Randy Grossman. “The U.S. Attorney’s Office and our law enforcement partners are committed to pursuing justice for victims of cryptocurrency fraud.” Grossman thanked the prosecution team and law enforcement partners around the world who assisted with this investigation.
Assistant U.S. Attorneys Daniel C. Silva, Mark W. Pletcher, Lisa Sanniti, and Carl Brooker, in partnership with Trial Attorney Kevin Lowell of the Criminal Division’s Fraud Section, lead this ongoing investigation.

“Crime, particularly crime involving digital currencies, continues to transcend international boundaries,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division.

Founder indicted over billion cryptocurrency ponzio

Wire fraud is a type of federal crime that involves a scheme to defraud another person or party by means of electronic communications. It can take many forms including telemarketing fraud, internet scams, phishing, or fraudulent schemes that use television or radio.

If convicted on all of the above counts, he could face up to 70 years in prison. A federal district court judge will determine any sentence after considering the U.S.

Sentencing Guidelines and other statutory factors.

Currently, the whereabouts of Kumbhani is unknown and, thus far, the efforts to locate him have been unsuccessful.

Lucie, Florida, with conspiracy to commit wire fraud, conspiracy to commit securities fraud and conspiracy to commit international money laundering. If found guilty, he faces a maximum sentence of 45 years.

In a review of the cryptocurrency mining platform, crypto blogger Peter Obi noted that the combination of MCC’s $50 monthly fee for membership and its steep 3% withdrawal fee meant that investors were unlikely to make a profit unless they referred other investors.

He pointed out that such a referral process was “particularly worrying” because it was consistent with other past crypto scams.

Indeed, a number of crypto leaders have been accused by authorities of running Ponzi schemes in recent years.

Gensler pushed for increasing regulatory oversight in order to curb security breaches in crypto.

What Happened?

According to the formal complaint filed by the SEC, “from early 2017 through January 2018, Defendants conducted a fraudulent and unregistered offering and sale of securities in the form of investments in a “Lending Program” offered by BitConnect.” The complaint alleges that, in order to induce investors to deposit funds in their Lending Program, BitConnect falsely represented, amongst other things, the fact that BitConnect would use a volatility software trading bot that would use users’ funds to generate high returns.

BitConnect operated between 2016 and 2018, shutting down after receiving cease-and-desist orders from state regulators, including Texas and North Carolina.

Kumbhani siphoned investors’ funds off for their own benefit by transferring those funds to digital wallet addresses controlled by them, Mr. Arcaro, and others. The complaint further states that the defendants deceived their investors by establishing a network of promoters around the globe, paying them commissions for their promotional efforts, and then concealing a substantial portion of these rewards from the investors.

Currently, the whereabouts of Mr.

Kumbhani is unknown and, thus far, the efforts to locate him have been unsuccessful. The complaint seeks injunctive relief, disgorgement plus interest, and civil penalties against him and the other defendants.

Why Merkle Science

Fuelled by the increased focus on consumer and investor protection, the U.S.

regulatory bodies are looking to strengthen their crypto regulatory regime.

Capuci claimed that the bots operated in “very high frequency, being able to do thousands of trades per second” and promised investors daily returns.

“As he did with the Mining Packages, however, Capuci allegedly operated an investment fraud scheme with the Trading Bots and was not, as he promised, using MCC Trading Bots to generate income for investors, but instead was diverting the funds to himself and co-conspirators,” wrote the DOJ in its indictment.

MCC seemed to have all the workings of a pyramid scheme. Capuci recruited affiliates and promoters to lure investors.
In return, he promised the promoters a number of lavish gifts, including Apple watches, iPads and luxury vehicles.

Currently the FBI’s Miami Field Office is investigating the case. The DOJ has charged Capuci, who is from Port St.

We thank our partners around the world for their continued efforts.”

“Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space,” said Special Agent in Charge Eric B. Smith of the FBI’s Cleveland Field Office. “Dressing up a tried-and-true fraud scheme with a new twist and basing it overseas will not deter the resolve and dedication of the FBI to meticulously investigate and bring such fraudsters to justice.”

“As cryptocurrency gains popularity and attracts investors worldwide, fraudsters are utilizing increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars,” said Special Agent in Charge Ryan L.
Korner of the IRS Criminal Investigation’s (IRS-CI) Los Angeles Field Office.

[Update 28.12.2022]

On February 25, 2022, the U.S. Department of Justice (DOJ) announced that a federal grand jury has indicted BitConnect’s founder, Satish Kumbhani, for orchestrating a $2.4 billion Ponzi scheme. “Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space,” said Special Agent in Charge Eric B. Smith of the FBI’s Cleveland Field Office. “Dressing up a tried and true fraud scheme with a new twist and basing it overseas will not deter the resolve and dedication of the FBI to meticulously investigate and bring such fraudsters to justice.”

According to the court documents, Kumbani misled investors about BitConnect’s Lending Program.

As alleged in the indictment, however, BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors. In total, Kumbhani and his co-conspirators obtained approximately $2.4 billion from investors.

The indictment further alleges that, after operating for approximately one year, Kumbhani abruptly shut down the Lending Program.

Kumbhani then directed his network of promoters to fraudulently manipulate and prop up the price of BitConnect’s digital currency, a commodity known as BitConnect Coin (BCC), to create the false appearance of legitimate market demand for BCC.

Since November [2021], the [SEC] has been consulting with [Indian] financial regulatory authorities in an attempt to locate Kumbhani’s address.”

A federal grand jury in San Francisco indicted the 36-year-old Kumbhani on Feb. 25, according to the Department of Justice (DOJ). Court documents stated that the BitConnect founder, who hails from Hemal in the westernmost Indian state of Gujarat, is “orchestrating a global Ponzi scheme.”

Kumbhani and his co-conspirators were accused of misleading investors through BitConnect’s Lending Program that promised “substantial profits and guaranteed returns” by using investors’ money to trade in crypto exchange markets.

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