BitConnect Founder Satish Kumbhani Indicted for Ponzi Scheme
Bob Mason
Fri, February 25, 2022
Key Insights:
BitConnect founder Satish Kumbhani indicted for Ponzi Scheme
In 2021, BitConnect and Kumbhani were sued by the SEC.
Penalties for illegal activity are hefty, with some jurisdictions calling for life sentences.
BitConnect was a proof-of-stake (PoS) platform allowing users to buy Bitconnect Coin (BCC) to earn interest. Users could sell Bitcoin (BTC) for BCC and then lock in the BCC price and earn daily interest over defined lock-in periods.
In September 2021, the SEC filed an action against BitConnect, founder Kumbhani, its top promoter, and his affiliated company. The action alleged that they defrauded retail investors out of $2bn through the fraudulent and unregistered offering of investments.
From early January 2017 through January 2018, the SEC claimed that the defendants siphoned money by transferring funds to digital wallet addresses. The wallets were in the control of Bitconnect, its founder, and top U.S promoter, Glenn Arcaro among others.
Grand Jury Indicts BitConnect Founder
On Friday, the United States Justice Department (DoJ) announced the indictment of BitConnect founder Satish Kumbhani. A federal grand jury indicted Kumbhani with “orchestrating a global Ponzi scheme.”
As per the press release, Kumbhani “misled investors about BitConnect’s Lending Program.” The press release goes on to say: “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 $2.4bn from investors.”
The SEC charges the defendants with violating the antifraud and registration provisions of the federal securities laws.
U.S promotor Arcaro had pleaded guilty to the criminal charges back in September of last year.
Hefty Fines and Lengthy Jail Terms Are on Offer for Crypto Lawbreakers
The SEC and the DoJ have been particularly active in the crypto space.
Earlier this week, BitMEX co-founders Delo and Hayes pleaded guilty to violating the U.S Bank Secrecy Act. Under the terms of their plea agreements, “Hayes and Delo each agreed to pay a $10 million criminal fine representing pecuniary gain derived from the offense.”
In 2021, BitMEX paid a $100m penalty for violating the Commodity Exchange Act (CEA) by offering the trading or processing swaps without approval as a Designated Contract Market (DCM) or a Swap Execution Facility (SEF).
BlockFi also paid a $100m penalty in an SEC settlement this month.
While the sums are sizeable, regulators in South Korea have taken a sterner approach against fraudsters and scammers. In January, news hit the wires of South Korean prosecutors wanting to put crypto criminals away for life. Executives of crypto platform V Global reportedly received hefty jail terms for a $1.7bn fraud. The CEO received a 22-year jail term.
This article was originally posted on FX Empire
BitConnect’s Kumbhani Charged by U.S. in $2.4 Billion Ponzi Scam
David Voreacos
Fri, February 25, 2022,
(Bloomberg) -- BitConnect founder Satish Kumbhani was indicted by a U.S. grand jury on charges he orchestrated a global Ponzi scheme that raised $2.4 billion from investors in a fraudulent cryptocurrency investment platform, according to a Justice Department statement.
Kumbhani, 36, was charged in San Diego with misleading investors about BitConnect’s purported propriety technology, which falsely promised returns based on phony “volatility software” that tracked cryptocurrency exchange markets, prosecutors said Friday. BitConnect used money from new investors to pay earlier ones and also operated as an unlicensed money transmitting business, the U.S. said.
BitConnect closed its exchange in January 2018 after getting cease-and-desist letters from state regulators in Texas and North Carolina. On Sept. 1, the Securities and Exchange Commission sued Kumbhani for raising more than $2 billion in an unregistered offering. That day, BitConnect’s top promoter in North America, Glenn Arcaro, pleaded guilty.
“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors,” said Ryan Korner, special agent in charge of the IRS Criminal Investigation’s office in Los Angeles.
Kumbhani, of Hemal, India, couldn’t immediately be located for comment. His is charged with wire fraud, operating an unlicensed money transmitting business, and three conspiracies: to commit wire fraud; commodity price manipulation; and international money laundering.
“The commodities price manipulation conspiracy is believed to be the first time any cryptocurrency has been alleged to function as a commodity,” according to a statement by prosecutors in the Southern District of California.
If convicted of all counts, Kumbhani could get 70 years in prison but would likely get far less time.
In November, prosecutors said they would sell about $57 million in cryptocurrency seized from Arcaro. This month, a judge approved an amended order for the sale.
David Voreacos
Fri, February 25, 2022,
(Bloomberg) -- BitConnect founder Satish Kumbhani was indicted by a U.S. grand jury on charges he orchestrated a global Ponzi scheme that raised $2.4 billion from investors in a fraudulent cryptocurrency investment platform, according to a Justice Department statement.
Kumbhani, 36, was charged in San Diego with misleading investors about BitConnect’s purported propriety technology, which falsely promised returns based on phony “volatility software” that tracked cryptocurrency exchange markets, prosecutors said Friday. BitConnect used money from new investors to pay earlier ones and also operated as an unlicensed money transmitting business, the U.S. said.
BitConnect closed its exchange in January 2018 after getting cease-and-desist letters from state regulators in Texas and North Carolina. On Sept. 1, the Securities and Exchange Commission sued Kumbhani for raising more than $2 billion in an unregistered offering. That day, BitConnect’s top promoter in North America, Glenn Arcaro, pleaded guilty.
“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors,” said Ryan Korner, special agent in charge of the IRS Criminal Investigation’s office in Los Angeles.
Kumbhani, of Hemal, India, couldn’t immediately be located for comment. His is charged with wire fraud, operating an unlicensed money transmitting business, and three conspiracies: to commit wire fraud; commodity price manipulation; and international money laundering.
“The commodities price manipulation conspiracy is believed to be the first time any cryptocurrency has been alleged to function as a commodity,” according to a statement by prosecutors in the Southern District of California.
If convicted of all counts, Kumbhani could get 70 years in prison but would likely get far less time.
In November, prosecutors said they would sell about $57 million in cryptocurrency seized from Arcaro. This month, a judge approved an amended order for the sale.
US Justice Department Indicts BitConnect Founder
Nikhilesh De
Fri, February 25, 2022,
The U.S. Department of Justice announced Friday that a federal grand jury charged BitConnect founder Satish Kumbhani with defrauding investors of some $2.4 billion through its lending scheme.
Kumbhani was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit price manipulation, operating an unlicensed money transmitter and conspiracy to launder funds internationally for "orchestrating a global Ponzi scheme" according to a DOJ press release, which alleged he traded cryptocurrencies using his investors' funds, and repaid earlier investors with the funds he received from later investors.
Kumbhani was already sued by the U.S. Securities and Exchange Commission (SEC) in late 2021 on similar charges, alongside BitConnect promoter Glenn Arcaro. Arcaro pleaded guilty to a similar BitConnect-related charge filed by the DOJ last September.
U.S. Assistant Attorney General Kenneth Polite Jr. said cryptocurrencies are continuing to be used in international crimes in a statement.
“The department is committed to protecting victims, preserving market integrity, and strengthening its global partnerships to hold accountable criminals engaging in cryptocurrency fraud. We thank our partners around the world for their continued efforts," he said.
In a statement, IRS-Criminal Investigation Special Agent in Charge Ryan Korner said malicious actors were increasingly using crypto.
“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,” he said. “However, make no mistake, our agency will continue our long tradition of following the money, whether physical or digital, to expose criminal schemes and hold the fraudsters accountable for their illegal acts of trickery and deceit.”
BitConnect collapsed in dramatic fashion in 2018, shuttering its exchange and lending platforms within a week after receiving cease-and-desist orders from U.S. state regulators. The company attempted to continue raising proceeds through an initial coin offering (ICO).
Regulators in the U.S. and other nations have arrested or sought information from a number of BitConnect promoters in the four years since its collapse.
Nikhilesh De
Fri, February 25, 2022,
The U.S. Department of Justice announced Friday that a federal grand jury charged BitConnect founder Satish Kumbhani with defrauding investors of some $2.4 billion through its lending scheme.
Kumbhani was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit price manipulation, operating an unlicensed money transmitter and conspiracy to launder funds internationally for "orchestrating a global Ponzi scheme" according to a DOJ press release, which alleged he traded cryptocurrencies using his investors' funds, and repaid earlier investors with the funds he received from later investors.
Kumbhani was already sued by the U.S. Securities and Exchange Commission (SEC) in late 2021 on similar charges, alongside BitConnect promoter Glenn Arcaro. Arcaro pleaded guilty to a similar BitConnect-related charge filed by the DOJ last September.
U.S. Assistant Attorney General Kenneth Polite Jr. said cryptocurrencies are continuing to be used in international crimes in a statement.
“The department is committed to protecting victims, preserving market integrity, and strengthening its global partnerships to hold accountable criminals engaging in cryptocurrency fraud. We thank our partners around the world for their continued efforts," he said.
In a statement, IRS-Criminal Investigation Special Agent in Charge Ryan Korner said malicious actors were increasingly using crypto.
“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,” he said. “However, make no mistake, our agency will continue our long tradition of following the money, whether physical or digital, to expose criminal schemes and hold the fraudsters accountable for their illegal acts of trickery and deceit.”
BitConnect collapsed in dramatic fashion in 2018, shuttering its exchange and lending platforms within a week after receiving cease-and-desist orders from U.S. state regulators. The company attempted to continue raising proceeds through an initial coin offering (ICO).
Regulators in the U.S. and other nations have arrested or sought information from a number of BitConnect promoters in the four years since its collapse.
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