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BitConnect’s Kumbhani Charged by U.S. in $2.4 Billion Ponzi Scam


(Bloomberg) — 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.

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Kumbhani, 36, was charged in San Diego with misleading investors about BitConnect’s purported propriety technology, which falsely promised returns based on phony “volatility software” that tracked cryptocurrency exchange markets, prosecutors said Friday. BitConnect used money from new investors to pay earlier ones and also operated as an unlicensed money transmitting business, the U.S. said.

Read More: SEC Sues Five BitConnect Promoters Over $2 Billion Scheme

BitConnect closed its exchange in January 2018 after getting cease-and-desist letters from state regulators in Texas and North Carolina. On Sept. 1, the Securities and Exchange Commission sued Kumbhani for raising more than $2 billion in an unregistered offering. That day, BitConnect’s top promoter in North America, Glenn Arcaro, pleaded guilty.

“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors,” said Ryan Korner, special agent in charge of the IRS Criminal Investigation’s office in Los Angeles.

Kumbhani, of Hemal, India, couldn’t immediately be located for comment. His is charged with wire fraud, operating an unlicensed money transmitting business, and three conspiracies: to commit wire fraud; commodity price manipulation; and international money laundering.

“The commodities price manipulation conspiracy is believed to be the first time any cryptocurrency has been alleged to function as a commodity,” according to a statement by prosecutors in the Southern District of California.

If convicted of all counts, Kumbhani could get 70 years in prison but would likely get far less time.

In November, prosecutors said they would sell about $57 million in cryptocurrency seized from Arcaro. This month, a judge approved an amended order for the sale.

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