BitConnect Mastermind Indicted In U.S. On Charges of Running a Ponzi Scheme

Updated by Ryan James
In Brief
  • The mastermind behind a new BitConnect Ponzi scheme was indicted in the U.S. on Feb. 25, 2022.
  • The Ponzi scheme robbed investors of $2.4B.
  • BitConnect has been notorious for scams since 2018.
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The writing is on the wall for indicted crypto fraudster Satish Kumbhani as a U.S. jury charges him on multiple counts of cryptocurrency fraud, which could land him up to 70 years in prison.

A federal jury in San Diego delivered an indictment, charging the founder of cryptocurrency investment platform BitConnect with operating a Ponzi scheme.

Court documents reveal that the founder, Satish Kumbhani, lied to investors about a product called the “Lending Program.” The lending product supposedly used the “BitConnect Trading Bot” and “Volatility Software” to trade on the volatility of cryptocurrencies. BitConnect operated as a Ponzi scheme, according to the indictment, as the company paid early investors with funds from later investors. Kumbhani and his cohort of co-conspirators siphoned close to $2.4B from investors.

Kumbhani shut down the Lending Program after a year. He then used his network of marketers to manipulate the price of BitConnect’s native digital asset, the BitConnect Coin (BCC), to fabricate a demand for the currency. Funds obtained through fraud were carefully routed through BitConnect’s array of crypto wallets and other international crypto exchanges.

Kumbhani operated BitConnect as a money transmitting business, but never registered the company under the Bank Secrecy Act. The Financial Crimes Enforcement Network (FinCEN) enforces the Act that compels financial institutions to maintain a database of cash purchases of negotiable instruments, file cash transaction reports for transactions exceeding $10K, and report suspicious activity. The suspicious activity could be related to money laundering, tax evasion, or other crimes.

Famous crypto Ponzi schemes

Ponzi schemes are nothing new, and BitConnect has occupied Ponzi territory at least since 2018, although it has been reborn multiple times with different founders. The alleged owner of the original BitConnect, Divyesh Darji, was arrested in 2018.

A few other cases of note have sprung up in the cryptocurrency space. Recently, military police and the Rapid Ostensive Intervention Group in Brazil arrested a South African man, Johann Steynberg for promising returns of up to 10% in the most significant crypto scam of 2020. More than 29,000  BTC passed through the hands of Steynberg’s company, Mirror Trading International.

Another case surfaced in Brazil in 2021, where Federal Police dismantled a Ponzi scheme and seized $30M. The authorities made five arrests, one of which was Gladson Acácio, who allegedly transferred billions of dollars via the pyramid scheme, promising up to 15% in returns.

Gutenberg Dos Santos, a Panamian, was arrested in his home country for the Airbit Ponzi scheme that duped investors into thinking they would earn shares of profits and unrealistically large rates of return. The Ponzi scheme was believed to have generated over $20M since its inception in 2015. Dos Santos was subsequently extradited to the U.S. to face trial and a sentence of between 20 to 30 years.

We are committed to justice, says U.S. attorney

Authorities are adamant that they will continue fighting for cryptocurrency fraud victims. “The U.S. Attorney’s Office and our law enforcement partners are committed to pursuing justice for victims of cryptocurrency fraud,” said Randy Grossman, U.S. Attorney for the Southern District of California. If Khumbani is convicted of all charges, he faces up to 70 years in prison. He is currently on the run.

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