BitConnect is yet to shed off its bad history despite closing in 2018. The US Department of Justice has indicted one of the founders of the cryptocurrency project for running a Ponzi scheme that involved cryptocurrencies.
BitConnect founder indicted
An official press release from the Department of Justice said that one of the co-founders of the exchange, Satish Kumbhani, was charged with the offences of wire fraud, commodity price manipulation, running an unlicensed money transfer business, and international money laundering.
The charges are linked with operating the BitConnect project. BitConnect was promoted as a lending platform that became a pyramid scheme. At one point, BCC, the token behind this project, ranked among the top 20 largest cryptocurrencies by market capitalization.
By operating BitConnect, Kumbhani managed to solicit almost $2.4 billion from investors. Through the Ponzi scheme, he provided a trading bot service and a trading software promising investors using BitConnect to receive major profits. However, the project operated as a Ponzi scheme because old users were paid using money coming from new users.
Eric B. Smith, the special agent in charge at the FBI Cleveland Field Office, said that the case showed that criminals were shifting towards cryptocurrencies.
“Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emerging cryptocurrency space.”
BitConnect fraud case
The BitConnect case has been under tight scrutiny by US authorities. They have been actively looking for people linked to the case and conducting asset seizures. In May last year, the United States Securities and Exchange Commission (SEC) filed a lawsuit against five individuals linked to the BitConnect project. However, Kumbhani was not among those charged.
The SEC settled with three of these individuals, with the commission receiving more than $12 million in Bitcoin and other cryptocurrencies. Towards the end of 2021, the commission received a judgment against Glenn Arcaro, who violated the Securities Act and the Exchange Act for operating Future Money. This comes as the commission continues to tighten the noose around crypto projects.
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