Satish Kumbhani, the founder of now-defunct crypto platform BitConnect, has been indicted by the US Department of Justice for scamming $2.4 billion from investors through a Ponzi scheme. Kumbhani is being charged with conspiracy to commit commodity price manipulation, conspiracy to commit wire fraud, conspiracy to commit international money laundering, and operation of an unlicensed money transmitting business.
BitConnect operated as a Ponzi scheme. It rewarded early investors with money collected from newer investors. The US government alleged that Kumbhani misled investors by touting the platform’s so-called proprietary technology, including Volatility Software and BitConnect Trading Bot.
The 36-year-old, as per the indictment, directed his promoters to fraudulently manipulate and hike the price of BitConnect’s digital currency BitConnect Coin (BCC). 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. However, instead of giving out in Bitcoin, the platform sent BCC to investors.
Glenn Arcaro, a promoter of BitConnect who had referred others to the scheme, pleaded guilty in September 2021 in a federal court. The Department of Justice had described it as a “massive conspiracy” involving BitConnect.
Kumbhani is at large and faces a maximum penalty of up to 70-years in prison.