DoJ to auction $56 million in confiscated cryptocurrency from Bitconnect

abdelaziz Fathi

The United States Marshals Service (USMS), a federal law enforcement agency within the U.S. Department of Justice, will auction $56 million worth of cryptocurrency the authorities seized from Bitcoin pyramid scheme 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.

For those wishing to partake, bidders must verify their identity by providing ‎a copy of a government-issued photo ID, as well as additional confirmation proofs.

‎US authorities have accrued millions of dollars from sales of seized Bitcoin ‎in recent years. Authorities forfeited almost 70,000 bitcoins confiscated from the ‎Silk Road marketplace on the darknet in 2020.

The auctions are intended to be anonymous, but ‎a leaked list of bidders in a previous sales revealed ‎that interested parties included staff from ‎various investment funds, banks and ‎founders of blockchain-related startups.‎

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 $14.5 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 the 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.

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