Federal Grand Jury Indicts BitConnect Founder Over Alleged $2.4B Crypto Scheme

The U.S. Department of Justice today revealed its indictment against Satish Kumbhani, the founder of defunct cryptocurrency platform BitConnect. According to the indictment, Kumbhani and his co-conspirators obtained approximately $2.4 billion from investors in a Ponzi scheme.

Kumbhani is at large.

The government is charging Kumbhani with conspiracy to commit wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering.

The indictment says BitConnect operated as a Ponzi scheme by paying early BitConnect investors with money gathered from newer investors. The government alleges the 36-year-old Kumbhani misled investors about BitConnect's "lending platform," by touting its purported proprietary technology, including a "BitConnect Trading Bot" and "Volatility Software."

According to the indictment, Kumbhani claimed BitConnect's trading bot and volatility software could generate substantial profits; the project supposedly guaranteed returns by using investors' money to trade on volatile cryptocurrency exchange markets.

The indictment alleges that Kumbhani directed his network of promoters to fraudulently manipulate and prop up the price of BitConnect's digital currency, BitConnect Coin (BCC), to create the false appearance of legitimate market demand for BCC.

The Department of Justice also alleges Kumbhani and his co-conspirators concealed the location of the fraud's proceeds by commingling, cycling, and exchanging the funds through a cluster of wallets and internationally-based cryptocurrency exchanges.

Launched in February 2016, BitConnect was heavily promoted on social media and YouTube, and by December 2017, its coin was trading at an all-time high of $463.31, according to CoinMarketCap.com. Today, BitConnect Coin is valued at around $0.67.

BitConnect’s price crash began during the crypto crash of late 2017 to early 2018. In January 2018, Texas and North Carolina issued cease-and-desist notices to BitConnect, demanding that it stop offering its services to residents. When BitConnect announced it was shutting down its lending platform, it offered to pay investors, but instead of cashing out in the Bitcoin that was invested, the platform sent investors BCC.

In September 2021, Los Angeles resident Glenn Arcaro—a promoter of BitConnect who referred others to the program—pleaded guilty in federal court for his participation in what the Department of Justice called "a massive conspiracy involving BitConnect," that misled investors about BitConnect's purported proprietary technology, defrauding investors from the United States and abroad.

Said U.S. Attorney Randy Grossman for the Southern District of California: "The U.S. Attorney's Office and our law enforcement partners are committed to pursuing justice for victims of cryptocurrency fraud."

If convicted of all counts, Kumbhani faces a maximum penalty of 70 years in prison.