Federal prosecutors announced that the founder of the Cryptocurrency investment site BitConnect, Satish Kumbhani has been charged with organizing a global Ponzi scam worth USD 2.4 billion.
Satish Kumbhani (36) of Hemal, Gujarat, allegedly deceived investors about BitConnect’s “Lending Program,” according to court records. According to the Department of Justice, BitConnect’s market capitalization peaked at USD 3.4 billion.
Satish Kumbhani has been charged with organizing a global Ponzi scam worth USD 2.4 billion
On Friday, U.S. Attorney Randy Grossman for the Southern District of California said, “This indictment charges a huge cryptocurrency scheme that deceived investors of more than USD 2 billion.”
Kumbhani is accused of conspiring to commit wire fraud and pricing manipulation, as well as operating unregistered money transferring business and conspiring to launder money internationally. He faces a maximum sentence of 70 years in jail if convicted on all counts.
Kumbhani, who is still at large, and his co-conspirators promoted BitConnect’s putative patented technology, “BitConnect Trading Bot” and “Volatility Software,” as being capable of generating huge profits under the “Lending Program.” They were able to guarantee returns by trading on the volatility of bitcoin exchange markets with money borrowed from investors.
BitConnect, according to the indictment, operated as a Ponzi scheme, compensating early BitConnect investors with money from later BitConnect investors. Kumbhani and his accomplices received around USD 2.4 billion from investors in total.
According to the indictment, Kumbhani unexpectedly shut down the “Lending Program” after about a year of operation, according to a federal grand jury in San Diego. He then instructed his network of promoters to deceptively manipulate and pump up the price of BitConnect’s digital currency, BitConnect Coin (BCC), to provide the illusion of actual market demand.
According to the Department of Justice, Kumbhani and his co-conspirators concealed the location and control of the fraud proceeds obtained from investors by commingling, cycling, and exchanging the funds through BitConnect’s cluster of cryptocurrency wallets and various internationally-based cryptocurrency exchanges.
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