The US Securities and Exchange Commission (SEC) has charged crypto lending platform BitConnect and its top executives with a $2 billion cryptocurrency fraud. According to a September 1 release, the federal regulator has named BitConnect’s founder Satish Kumbhani and the company’s top U.S promoter Glenn Arcaro and his firm Future Money in its complaint.
American regulators have sued BitConnect for fraudulently raising $2 billion from investors through unregistered offerings. As per a complaint filed at District Court for the Southern District of New York, BitConnect ran a fraudulent “Lending Program” from 2017 to January 2018 that offered securities that weren’t registered with SEC.
The SEC alleges that BitConnect conned its customers by touting 40 percent monthly returns through a proprietary “volatility software trading bot” when no such facility existed. Instead, the defendants funneled investors’ funds to digital wallet addresses controlled by them and their top promoter Arcaro.
BitConnect had raised 325,000 Bitcoins through the entire Ponzi scheme, which were estimated to be worth $2 billion at the time (now over $15 billion).
According to the Department of Justice (DoJ), BitConnect’s former director and promoter Glenn Arcaro pleaded guilty to fraud charges in a federal court yesterday. He has been ordered to return $24 million to investors impacted by the company.
Reports suggest that Arcaro was operating a pyramid scheme called “Bitconnect Referral Program,” which earned him 15% profit on each investment into BitConnect’s lending program. He had amassed $24 million through his illicit activities.
In a September 1 announcement, the DoJ noted that “BitConnect operated a textbook Ponzi scheme by paying earlier BitConnect investors with money from later investors.”