BitConnect finally charged by the SEC for $2 billion Ponzi scheme
BitConnect became widely known as an internet meme after its first annual ceremony in Thailand. During the event, New York-based investor Carlos Matos screamed repeatedly “BITCONNET!!!”
The Securities and Exchange Commission has finally filed an action against BitConnect for defrauding retail investors out of $2 billion in a fraud that included an unregistered offering of investments.
Founder Satish Kumbhani and its top U.S. promoter and his affiliated company are also being charged in connection with the “Lending Progam” offered by BitConnect from early 2017 through January 2018.
The SEC alleges investors were induced to deposit funds into the purported Lending Program that purportedly used a proprietary “volatility software trading bot” that would generate exorbitantly high returns.
Instead, the BitConnect executives siphoned investors’ funds off for their own benefit by transferring those funds to digital wallet addresses controlled by them. The global network of promoters were rewarded for their promotional efforts and outreach via commissions, most concealed from investors.
Lara Shalov Mehraban, Associate Regional Director of SEC’s New York Regional Office, said: “We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets. We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”
The SEC previously reached settlements with two of the five individuals it charged in a related action for promoting the BitConnect offering.
In a parallel action, the Department of Justice announced the same day that Glenn Arcaro pleaded guilty to criminal charges.
Mr. Arcaro admitted to having conspired with others to exploit investor interest in cryptocurrency by fraudulently marketing BitConnect’s proprietary coin offering and digital currency exchange as a lucrative investment.
He further admitted that he earned no less than $24 million from the BitConnect fraud conspiracy, all of which, according to court documents, he must repay to investors.
The maximum penalty for the charges of conspiracy to commit wire fraud and criminal forfeiture is twenty years in prison, a $250,000 fine or twice the gross gain or loss from the offense, whichever is greater, forfeiture and restitution.
BitConnect became widely known as an internet meme after its first annual ceremony in Thailand. During the event, New York-based investor Carlos Matos screamed repeatedly “BITCONNET!!!”, drawing the authorities’ attention to the Ponzi scheme.