BitConnect’s Founder Missing Following SEC Indictment
Throughout the Bitcoin sector’s 13-year existence, the lack of regulatory norms on money laundering and other criminal activity has been a source of contention. While standards are largely acknowledged to have improved, worldwide regulators and policymakers have expressed worry about the criminal usage of cryptocurrency in recent months.
Over the years the regulators have cracked down on several fraudulent schemes that have gravely hurt the overall legitimacy of cryptocurrencies. The latest in line regarding such incidences has been that of the now missing founder of BitConnect, who has been indicted for a $ 2.4 billion crypto Ponzi scheme.
$2.4 Billion Ponzi Scheme Unfolds
According to the latest report from the SEC, Satish Kumbhani, the founder of BitConnect, was indicted by a San Diego jury for allegedly orchestrating a global cryptocurrency Ponzi scheme that defrauded investors of around $2.4 billion. Kumbhani remains at large at the moment.
Per the Justice Department, the 36-year-old was charged with conspiracy to commit wire fraud, conspiracy to commit commodity price manipulation, operating unregistered money transmitting business, and conspiracy to engage in international money laundering.
BitConnect used incoming investor funds to repay previous investors and also operated as an unregistered money transmission business.
The Story So Far
BitConnect ceased operations in January 2018 following cease-and-desist letters from Texas and North Carolina state regulators. On Sept. 1, the Securities and Exchange Committee prosecuted Kumbhani for allegedly raising more than $2 billion through an unregistered offering. Glenn Arcaro, BitConnect’s primary North American promoter, pleaded guilty on the same day.
Kumbhani persuaded investors to donate to the company’s loan programme, which he described as utilizing proprietary technology called the “BitConnect Trading Bot” and “Volatility Software.” Kumbhani misled investors into believing that he could guarantee returns by trading cryptocurrency based on market volatility.
After a year, Kumbhani discontinued the Lending programme, but was able to steer the price of BitConnect Coin (BCC) to such a degree that it appeared to be lucrative. BitConnect Coin reached an all-time high of $463.31.
BitConnect ultimately paid the early investors with money seized from subsequent investors. BitConnect shut down in 2018, citing negative press, distributed denial-of-service (DDoS) attacks, and regulatory inquiries. Due to the lending platform’s refusal to register, US regulators issued cease-and-desist letters, and BitConnect’s owners stated that these requests “created an obstacle to the platform’s legal continuation.”
BCC then went bankrupt, erasing the value of previous investments. Kumbhani and many of his associates then staged an exit scam, stealing around $14.5 million.
“Arcaro capitalized on the emergence of cryptocurrency markets, enticing innocent investors worldwide to get in early by promising them guaranteed returns, and exploiting the internet and social media to reach a larger pool of victims with greater ease and speed,” said Special Agent in Charge Ryan L. Korner of the IRS Criminal Investigation’s (IRS-CI) Los Angeles Field Office.
“To conceal and further their scheme, Arcaro and his accomplices circumvented reporting regulations by the SEC and FinCEN, U.S. agencies that were created to protect investors and safeguard our financial systems. IRS-CI will pursue and root out these scams to protect investors and bring these financial fraudsters to justice,” he added.
Regulators Continue Cracking Down on Crypto Crimes
In recent times regulators have been very vigilant when it comes to crimes involving the cryptosphere. Just last month, the Department of Justice (DoJ) announced that Heather Morgan and Ilya Dutch Lichtenstein, have been charged with conspiring to launder 119,754 bitcoin stolen when a hacker got into Bitfinex and initiated more than 2,000 illicit transactions.
