US SEC charges BitConnect founder with $ 2 million cryptocurrency fraud

NEW YORK, Sept. 1 (Reuters) – The top US securities regulator sued the founder of the defunct BitConnect cryptocurrency exchange platform on Wednesday for his alleged role in fraudulently capturing about $ 2 billion in thousands of retail investors.

Extending a civil case announced in May, the U.S. Securities and Exchange Commission accused BitConnect founder Satish Kumbhani, an Indian citizen, of lying about BitConnect’s ability to generate profits and violating registration laws aimed at protect investors. Read more

In a lawsuit in federal court in Manhattan, the SEC also accused promoter Glenn Arcaro and his company Future Money Ltd of fraudulently receiving more than $ 24 million in “reference commissions” and other sums as a major U.S. developer. of BitConnect.

Arcaro pleaded guilty Wednesday to a conspiracy charge related to criminal fraud before U.S. Magistrate Judge Mitchell Dembin in San Diego. His sentence is on November 15.

The SEC’s lawsuit seeks to impose fines, recover badly earned profits and other aid.

Founded in 2016, BitConnect created a digital token called BitConnect Coin that could be exchanged for bitcoin, the popular cryptocurrency.

The SEC said investors in a BitConnect “loan program” were told that BitConnect used a “volatility software trading bot” that could generate returns of 40% per month and be given fictitious returns. showing annualized gains of 3,700%.

But the regulator said investors lost much of their money after the price of BitConnect Coin plummeted 92% on January 16, 2018.

Prosecutors said BitConnect executed a “textbook Ponzi scheme” by paying previous investors with money for new investors.

Kumbhani, 35, has lived in Surat, India, but his whereabouts are unknown, while Arcaro, 44, lives in Los Angeles and incorporated Future Money into Hong Kong, authorities said.

Efforts to locate Kumbhani failed. Arcaro’s lawyer did not respond to requests for comment.

On May 28, the SEC sued five other BitConnect promoters.

He has obtained sentences forcing two promoters, Michael Noble and Joshua Jeppesen, and Jeppesen’s promise to pay more than $ 3.5 million and 190 bitcoins. The other promoters have not responded to the lawsuit or have not been notified.

Report by Jonathan Stempel in New York; Edited by Matthew Lewis and Richard Pullin

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