A federal grand jury in San Diego indicted BitConnect’s creator on charges of organizing a global Ponzi scheme.
BitConnect is an allegedly fraudulent bitcoin investment platform with a market valuation of $3.4 billion at its peak.
BitConnect Ponzi Scheme
Satish Kumbhani, 36, of Hemal, India, founded BitConnect. He misled investors about BitConnect’s “Lending Program”.
Kumbhani and his co-conspirators promoted BitConnect’s ostensibly exclusive technology as part of this scheme. Two of them are the “BitConnect Trading Bot” and “Volatility Software.” It generates and assures huge earnings and returns. It trades on the volatility of cryptocurrency exchange markets using the money of investors.
BitConnect, on the other hand, operated as a Ponzi scam, rewarding early BitConnect investors with money from later BitConnect investors. Kumbhani and his partners were capable of raising a total of $2.4 billion from investors.
The indictment also claims that after almost a year of operation, Kumbhani unexpectedly closed down the Lending Program. He then commanded his network of marketers to defraud the BitConnect digital currency’s price and pump it up. BitConnect Coin was the name of the cryptocurrency (BCC). They did it to give the impression that there was legitimate market demand for BCC.
Kumbhani and his accomplices also kept the location and control of the fraudulent funds collected from investors a secret. Through BitConnect’s cluster of bitcoin wallets and multiple internationally-based cryptocurrency exchanges, they mixed, cycled, and swapped the funds.
Evasion of US Regulations
Kumbhani skirted US financial industry standards to escape regulatory monitoring and control of BitConnect’s cryptocurrency business. It also included those that the Financial Crimes Enforcement Network (FCEN) was in charge of enforcing (FinCEN). BitConnect, for example, despite operating a money-transfer business through its digital currency exchange, failed to register with FinCEN as required by the Bank Secrecy Act.
Cryptocurrencies become more popular and attract investors from all around the world. Suspected fraudsters like Kumbhani are allegedly using increasingly complicated techniques to scam investors, stealing millions of dollars in the process.
The IRS, on the other hand, will continue its long tradition of tracking the money. They will expose criminal schemes and punish fraudsters accountable for their illegal acts of deception and trickery, whether physical or digital.
Kumbhani’s Criminal Charges
Kumbhani has not only been charged with wire fraud conspiracy. The DOJ accused him of conspiring to manipulate commodity prices and running an unlawful money-transfer activity. He was also involved in a plot to launder money internationally.
He faces to serve sentence of 70 years in jail if convicted on all counts. Any sentence will be determined by a federal district court judge after the U.S. Guidelines for Sentencing and other legal consideration. Kumbhani is still on the loose.
