The Securities and Exchange Commission (SEC) has filed a civil lawsuit against the creator of the bankrupt cryptocurrency exchange BitConnect, accusing him of participating in a $2 billion scam.
The U.S. Securities and Exchange Commission (SEC) stated on May 1 that it was expanding a civil lawsuit, charging Indian resident Satish Kumbhani with unlawfully promoting the unregistered BitConnect offering between January 2017 and January 2018.
Future Money Ltd., a corporation run by Glenn Arcaro, was also charged with fraud, as the CFTC alleges they were given more than $24 million in “referral commissions” and “development funds” while marketing BitConnect from August 2017 to January 2018.
SEC’s Hunt for Bitconnect Organizers
The SEC found that the value of BitConnect Coin decreased by 92 percent on January 16, 2018, which was the day when investors were left in dire straits.
The SEC revealed that Kumbhani, who is believed to live in Surat, India, has no known locations, while Arcaro, who resides in Moorpark, California, and incorporated Future Money in Hong Kong, is 44 years old.
They failed to find Kumbhani. No reply was received from the legal counsel for Arcaro and Future Money in response to our inquiry.
The SEC has also sued five BitConnect promoters for similar violations. The SEC is going for monetary penalties, restitution, and other remedies in its Manhattan federal court case.
How Did the Bitconnect Scam Work?
BitConnect, a digital currency exchange launched in 2016, designed BitConnect Coin, a cryptocurrency that could be traded for Bitcoin, the most prominent cryptocurrency.
Investors in a BitConnect “lending program” were promised returns of 40 percent per month, and informed that the investment would be made via a “volatility software trading bot” that could produce profits of nearly 3,700 percent each year.
Because of its multilevel marketing structure and improbable payments, Bitconnect was accused of being a Ponzi scam. The value of Bitconnect varied significantly as Bitcoin’s price changed, with which its value was bound.
Bitconnect Coin, one of the most successful cryptocurrencies of all time, saw its price fall sharply after traders’ loss of trust. In December 2017, after a pre-ICO price of $0.17, BCC soared to an all-time high of $463; it then fell to $0.40 as of March 11, 2019.
Bitconnect’s outstanding loans were delivered to Bitconnect wallets in the form of BCC at a rate of US$363.62. The value of the exchange crashed shortly after, causing it to lose almost all of its worth.
In January 2018, Bitconnect, a cryptocurrency exchange, and loan platform closed its doors after receiving a cease and desist order from the North Carolina and Texas authorities. The Western District of Kentucky’s U.S. District Court ruled on January 31, 2018, that the assets of Bitconnect should be frozen.
How do you feel about the SEC’s action taken against Bitconnect?