BitConnect founder Satish Kumbhani has been officially charged with defrauding investors on the crypto platform of about $2.4 billion, via an elaborate Ponzi scheme.
The US Department of Justice shared the details of his charges after a federal grand jury indicted Kumbhani. According to the official documents, Kumbhani’s allegations include working with co-conspirators to commit wire fraud.
Additionally, he is being charged with conspiracy to commit market manipulation and for providing unlicensed money transfer services. The grand jury’s allegations against Kumbhani also include a conspiracy to conceal funds obtained from what was an apparent international Ponzi operation.
According to a public statement by the Department of Justice, Kumbhani alongside others deceived investors about BitConnect’s Lending Program. The Indian entrepreneur is said to have promoted the platform as a way to make guaranteed earnings. These profits, Satish assured, would come from trading on the crypto market.
However, the entrepreneur allegedly paid initial BitConnect traders with funds from later investors. A year later, Kumbhani shut down the program. He then allegedly had his promoters manipulate the price of the platform’s native currency Bitconnect Coin (BCC). The goal was to create the illusion of demand for the digital token.
Kumbhani and collaborators kept the profits from the scam hidden. The funds were transferred across BitConnect’s numerous crypto wallets and various crypto exchange platforms all over the world.
Other Details on BitConnect
In late 2021, Kumbhani faced similar allegations with the US Securities and Exchange Commission. The regulatory body filed a suit against Kumbhani and his associate Glenn Arcaro, a BitConnect promoter. In September that same year, the DOJ charged Arcaro with crimes related to the crypto platform to which he pled guilty.
Kumbhani first kicked off BitConnect in 2016, promoting the digital currency massively on various social media platforms. As of December 2017, the token had hit an ATH exceeding $450. However, alongside other cryptocurrencies, its price tanked over the next few months.
BitConnect’s unusual and seemingly shady activities did not go unnoticed. Ethereum founder Vitalik Buterin and popular investor Mike Novogratz were among the platform’s sharpest critics. BCC was labeled a “scammy coin” by many crypto enthusiasts amidst the backlash before its eventual collapse.
BitConnect really seems like a scam. an old school ponzi … bad actors hurt the community. period. #bitcoin #ether
— Mike Novogratz (@novogratz) November 30, 2017
In early 2018, 2 states had issued orders preventing the platform from operating within their borders. Not long after it shut down its lending program and offered to refund investors. However, instead of paying them in BTC, the investors were paid in BitConnect Coin.
The DOJ said in its statement that Kumbhani is still at large, however, field agents from the FBI Cleveland Office and the IRS-Criminal Investigation have continued investigations. If found guilty of all charges the BitConnect Founder will face a maximum penalty of 70 years imprisonment.
Amidst happenings surrounding this case and a curious increase in crypto-related crimes, regulators worldwide are keeping a close watch on the crypto space.