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February 27, 2022 04:34 pm

BitConnect Founder Indicted Over $2.4 Billion Cryptocurrency Ponzi Scheme

From the Hindustan Times:BitConnect founder Satish Kumbhani was indicted by a U.S. grand jury on charges he orchestrated a global Ponzi scheme that raised $2.4 billion from investors in a fraudulent cryptocurrency investment platform, according to a Justice Department statement.Kumbhani, 36, was charged in San Diego with misleading investors about BitConnect's purported propriety technology... BitConnect used money from new investors to pay earlier ones and also operated as an unlicensed money transmitting business, the U.S. said. More details from the San Diego Union-Tribune:Investors around the world, including those in San Diego, were encouraged to buy BitConnect's open-source, decentralized cryptocurrency, called BCC, using Bitcoin for the purchase. Investors would then "lend" their BCC tokens to Bitconnect, which would purportedly invest the proceeds using proprietary technology known as the Trading Bot and Volatility Software. The technology was supposedly designed to trade automatically, and profitably, by buying and selling on the volatility of Bitcoin, according to the indictment. But much of the technology remained a mystery to investors. When someone asked for a demonstration at an event in 2017, Kumbhani was evasive: "So you ask me very hard question," he told one interviewer. He added later, "For privacy reasons we are not disclosing anything..." Prosecutors say the investments weren't being traded as promised but were instead used to pay out earlier investors, typical of a pyramid scheme. The funds would also be used to pay BitConnect's army of promoters, who would market the investment opportunity on social media and at live events. Glenn Arcaro, described by prosecutors as "one of the most prolific and successful" of the bunch overseeing the United States, also formed his own cryptocurrency education course called Future Money. But the course was really a way to funnel potential investors to BitConnect, prosecutors said. Arcaro, a Los Angeles resident, pleaded guilty to conspiracy to commit wire fraud in September for his role in the scheme. After shutting down abruptly, Kumbhani then "directed his network of promoters to fraudulently manipulate and prop up the price" of BCC, "to create the false appearance of legitimate market demand..." according to a press release from the U.S. Department of Justice:Kumbhani is charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering. If convicted of all counts, he faces a maximum total penalty of 70 years in prison.

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