SEC Charges BitConnect With $2B Crypto Fraud

The SEC filed an action against BitConnect last week, accusing two of the firm’s executives for defrauding retail investors by offering a digital asset investment program — while fudging the numbers. The company is accused of cheating investors out of an estimated $2 billion.

“We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets,” said Lara Shalov Mehraban, Associate Regional Director of SEC’s New York Regional Office. “We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”

Stemming from a civil case in May, Bitconnect founder Satish Kumbhani is accused of lying about his company’s profits while also violating registration laws that are put in place to protect investors. The charges also extend to Glenn Arcaro and his firm Future Money Ltd, as they’re accused of receiving fraudulent commissions from BitConnect of up to $24 million for acting as their promoter.

According to the SEC, investors were told that BitConnect used a “volatility software trading bot” that promised returns of 40% per month while also being shown false returns depicting 3,700% annualized gains. The commission called BitConnect’s actions a “textbook Ponzi scheme” where they are being accused of paying old investors with new investor money.

Arcaro appeared before a judge last Wednesday, pleading guilty to a related criminal wire fraud conspiracy charge in California. He is to be sentenced on November 15. Kumbhani, an Indian citizen, is reportedly a fugitive.

According to the SEC’s report, two of the five promoters have already settled in a related action for promoting the BitConnect offering. The commission has also obtained judgments that require promoters Michael Noble, Joshua Jeppesen, and Jeppesen’s fiancé to pay over $3.5 million and 190 bitcoin.

The complaints seek injunctive relief, disgorgement plus interest, and civil penalties.

In internet pop culture, BitConnect achieved “meme status” in 2017 when an investor went wild at a BitConnect conference, was captured on video, and was viewed half a million times on youtube. He was not personally named in the SEC complaint.