US SEC accuses BitConnect founder of $ 2 billion cryptocurrency fraud

NEW YORK, Sept. 1 (Reuters) – The leading U.S. securities regulator on Wednesday sued the founder of the now defunct cryptocurrency exchange BitConnect over his alleged role in the fraudulent collection of around $ 2 billion of dollars from thousands of retail investors.

Expanding a civil case announced in May, the United States Securities and Exchange Commission accused BitConnect founder Satish Kumbhani, an Indian citizen, of lying about BitConnect’s ability to generate profits and violating the registration laws designed to protect investors. Read more

In a lawsuit in Manhattan federal court, the SEC also accused promoter Glenn Arcaro and his company Future Money Ltd of fraudulently receiving more than $ 24 million in “referral fees” and other money as main US promoter of BitConnect.

Arcaro pleaded guilty on Wednesday to a related criminal wire fraud conspiracy charge before U.S. trial judge Mitchell Dembin in San Diego. His sentencing is on November 15.

The SEC lawsuit aims to impose fines, recover ill-gotten gains and other remedial measures.

Founded in 2016, BitConnect created a digital token called BitConnect Coin that could be exchanged for bitcoin, the popular cryptocurrency.

The SEC said investors in a BitConnect “loan program” were told that BitConnect was using a “software volatility trading robot” that could generate 40% returns per month, and that they were receiving fictitious returns. showing annualized gains of 3,700%.

But the regulator said investors lost much of their money after BitConnect Coin’s price fell 92% on January 16, 2018.

Prosecutors said BitConnect set up a “manual Ponzi scheme” by paying previous investors with money for new investors.

Kumbhani, 35, has lived in Surat, India, but his whereabouts are unknown, while Arcaro, 44, lives in Los Angeles and has incorporated Future Money in Hong Kong, authorities said.

Efforts to locate Kumbhani have failed. Arcaro’s lawyer did not respond to requests for comment.

The SEC sued five other BitConnect promoters on May 28.

He secured judgments forcing two promoters, Michael Noble and Joshua Jeppesen, and Jeppesen’s fiancee to pay more than $ 3.5 million and 190 bitcoins. The other promoters did not respond to the lawsuit or were not served.

Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis and Richard Pullin

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