BitConnect victims to receive $17 million restitution

abdelaziz Fathi

A federal court in California ordered today $17 million in restitution to be paid to roughly 800 victims from over 40 different countries who lost their money to the infamous BitConnect scheme.

The Department of Justice (DOJ) described Bitconnect as “a massive fraudulent cryptocurrency investment scheme.”

Bitconnect went down in history as the biggest heist in the cryptocurrency world. The scheme is alleged to have collected nearly 325,000 BTC (worth more than $6 billion at today’s prices). The now-defunct cryptocurrency platform was a Ponzi scheme founded in 2016, which fraudulently lured investors with promises of exorbitantly high returns.

Little is known about BitConnect founders, but the hoax that devastated the lives of thousands of retail investors is widely believed to have started in India.

BitConnect shut down its lending operation, which was the heart of the infamous platform, in 2018. However, the scam was notorious enough to warrant a regulatory action from the SEC regulator and the FBI.

Their promoters in the U.S. and elsewhere were allegedly rewarded through commissions that were mostly “concealed from investors,” the SEC said.

Like with all Ponzi schemes, the scam worked perfectly until victims started to become skeptical. Once they tried to withdraw their deposits or earnings, BitConnect could not sustain their operations and went bust.

Just before the scam broke out, regulators tried to catch up with the “get-rich-quick” scheme through cease and desist orders.

This wasn’t the first action against BitConnect by the SEC. The watchdog has previously reached settlements – worth nearly $12 million – with two individuals charged with promoting the scam in the U.S.

In September 2021, Glenn Arcaro, the top US promoter for BitConnect, pleaded guilty to conspiracy to commit wire fraud. Separately, in February 2022, the founder of BitConnect, Satish Kumbhani, was indicted for his central role in the multibillion-dollar fraud.

As part of Arcaro’s plea, he admitted to earning $24 million from the scam, all of which will be repaid to investors in restitution or forfeited to the government.

The United States Marshals Service (USMS), a federal law enforcement agency within the U.S. Department of Justice, also auctioned $56 million worth of cryptocurrency the authorities seized from BitConnect.

The DoJ said this liquidation of proceeds – forfeited as part of a civil forfeiture case targeting a US promoter of BitConnect – is the largest single recovery of a cryptocurrency fraud by the United States to date.

The government will maintain custody of the seized proceeds in cryptocurrency wallets.  Pursuant to a future restitution order by the court, it intends to use these funds to provide restitution to the victims.

Read this next

Chainwire

Kadena Announces Annelise Osborne as Chief Business Officer

Kadena, the only scalable Layer-1 Proof-of-Work blockchain, expands its leadership team by onboarding Annelise Osborne as Kadena’s new Chief Business Officer (CBO).

Fintech

TNS brings full-stack market data management to EMEA

“We are also delighted to have Ben Myers join our London-based TNS Financial Markets team as Head of Strategic Sales for EMEA, to bolster our presence in the region.”

Chainwire

Velocity Labs and Ramp Network facilitate fiat to crypto onramp on Polkadot via Asset Hub support

Velocity Labs is proud to announce a fiat to crypto onramp using Ramp Network through the integration of Asset Hub. Through it, Ramp will be able to service any parachain in the Polkadot ecosystem.

Executive Moves

INFINOX hires Mayne Ayliffe as Global Head of HR

“I look forward to working with our teams around the world to develop a strategic HR agenda that supports high performance and is centred on human motivation.”

Fintech

Sterling to provide risk and margin support for fixed income

“Firms must have the tools to effectively manage their risk across all asset classes. As yields rise, we see more exposure from clients in the fixed income space. We understand their need to measure and mitigate risk in a highly regulated environment.”

Retail FX

FXOpen launches HK share CFDs: Tencent, Alibaba, Xiaomi, Baidu

Hong Kong share CFDs will be commission-free for a limited period of time.

Retail FX

IronFX Celebrates an Award-Winning Start to 2024 with a Series of Industry Recognitions

IronFX, a global leader in online trading, has embarked on 2024 with a spectacular display of accolades that highlight its commitment to excellence and innovation in the competitive financial services sector.

Industry News

FIA urges CFTC to regulate use cases rather than AI itself

“We urge the CFTC to refrain from crafting new regulations that generally regulate AI because this approach presents certain well-known pitfalls. By approaching the issue from the perspective of AI as a technology, rather than the use case for the technology, corresponding regulations would likely necessitate a definition of AI. We anticipate that any attempt to properly define AI would be very challenging and require considerable resources.”

Education, Inside View

The Power of Public Relations in Finance: Shaping Perceptions & Building Reputation

It’s safe to say that the finance industry has faced its share of reputation crises over the years, from the 2008 financial collapse to the many scandals around irresponsible lending, political corruption, and even Ponzi schemes. 

<