The founder of cryptocurrency investment platform BitConnect, an Indian national, has been indicted on charges of orchestrating a global Ponzi scheme worth USD 2.4 billion, federal prosecutors said. According to court documents, Satish Kumbhani (36) of Hemal in Gujarat misled investors about BitConnect’s “Lending Program.” BitConnect reached a peak market capitalization of USD 3.4 billion.
Satish Kumbhani has also been charged with conspiracy to commit wire fraud and manipulation in addition to the fraudulent cryptocurrency investment platform. “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.
BitConnect: What are the charges of fraud?
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.
The indictment, which returns by a federal grand jury in San Diego, alleges that after operating for approximately one year, Kumbhani abruptly shut down the “Lending Program”. He then directed his network of promoters to fraudulently manipulate and prop up the price of BitConnect’s digital currency, BitConnect Coin (BCC), to create the false appearance of legitimate market demand for it.
Kumbhani further evaded US regulations governing the financial industry, including those enforced by the Financial Crimes Enforcement Network (FinCEN). For example, although BitConnect operated a money transmitting business through its digital currency exchange, BitConnect never registered with FinCEN, as required under the Bank Secrecy Act.
Kumbhani and his co-conspirators have allegedly concealed the location and control of the fraud proceeds obtained from investors by commingling, cycling, and exchanging the funds through BitConnect’s cluster of cryptocurrency wallets and various internationally-based cryptocurrency exchanges, the Department of Justice alleged. Moreover, Kumbhani also evaded US regulations governing the financial industry, including those enforced by the Financial Crimes Enforcement Network (FinCEN).
If convicted of all counts, he faces a maximum total penalty of 70 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
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