Satish Kumbhani, the founder of BitConnect crypto exchange, has been charged with defrauding investors worldwide by allegedly deceiving them through a “Lending Program” and robbing them of $2.4 billion.
A federal grand jury in San Diego specifically indicted Kumbhani with directing the alleged Ponzi scheme via BitConnect’s “Lending Program,” according to the DOJ:
“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.”
During the buzz in 2017, BitConnect (BCC) hit an all-time high of $463.31 in trading price, with a market value of $3.4 billion, according to the DOJ. However, as shown in the graph above, prices plummeted in a matter of months, resulting in significant losses for investors.
About the Indictment
Under the BitConnect’s “Lending Program,” Kumbhani, who lives in Gujarat, India, allegedly promised investors “significant income and assured returns.”
According to the indictment, Kumbhani used fresh investor cash to partially repay existing investors before abruptly shutting down the program, committing a classic Ponzi scheme.
The DOJ further claimed that Kumbhani and his accomplices manipulated the market to create bogus demand for BCC. The money was allegedly hidden and transferred through “BitConnect’s cluster of bitcoin wallets and different internationally-based cryptocurrency exchanges.”
Former BitConnect promoter Glenn Arcaro pled guilty to fraud charges relating to his role in the now-defunct crypto exchange and lending platform in September 2021, corroborating the DOJ’s claims.
Kumbhani allegedly violated US regulations by failing to register with the Financial Crimes Enforcement Network (FinCEN), as required by the Bank Secrecy Act, according to the indictment.
Overall, the DOJ press release stated that “Kumbhani is charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unregistered money transmitting business, and conspiracy to engage international money laundering.”
The FBI Cleveland Field Office and IRS Criminal Investigation are presently investigating the situation (CI). If found guilty on all counts, Kumbhani faces a maximum sentence of 70 years in jail. Furthermore, the DOJ advises all BitConnect investors to register as potential victims.