{"id":9744,"date":"2022-03-05T10:21:09","date_gmt":"2022-03-05T10:21:09","guid":{"rendered":"http:\/\/egrowonline.com\/?p=9744"},"modified":"2022-03-05T10:21:09","modified_gmt":"2022-03-05T10:21:09","slug":"bitconnect-founder-indicted-in-2-4-billion-ponzi-scheme-has-disappeared","status":"publish","type":"post","link":"http:\/\/egrowonline.com\/?p=9744","title":{"rendered":"BitConnect Founder Indicted In $2.4 Billion Ponzi Scheme Has Disappeared"},"content":{"rendered":"


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BitConnect Founder Indicted in $2.4 Billion Ponzi Scheme Has Disappeared<\/b><\/span><\/h2>\n

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Authorities around the world are still catching up with the fraudsters behind BitConnect, years after they pulled off one of the most famous exit scams in bitcoin history. <\/span>\u2018BitConnect<\/a>\u2018 allegedly operated a fraudulent cryptocurrency<\/a> investment platform where its market capitalization reached $3.4 billion.<\/b><\/span><\/p>\n

In 2016, BitConnect gained a lot of attention on social media thanks to its \u201cLending Program,\u201d which allowed users to lend their Bitcoins in exchange for a BitConnect crypto coin. <\/span>Using investors\u2019 money, the application claimed it would guarantee returns by \u201ctrading on the volatility of the cryptocurrency markets.\u201d<\/b><\/span><\/p>\n

Under this scheme, <\/span>Satish Kumbhani and his accomplices promoted BitConnect\u2019s ostensibly proprietary technology, dubbed the \u2018BitConnect Trading Bot\u2019 and \u2018Volatility Software<\/b>,\u2019 as being capable of generating substantial profits and guaranteed returns by trading on the volatility of cryptocurrency exchange markets with investors\u2019 money.<\/span><\/span><\/p>\n

However,<\/span> as charged in the indictment, BitConnect operated as a Ponzi scheme<\/a>,<\/b> compensating earlier BitConnect investors with money from later investors, according to a news statement from the Department of Justices Office of Public Affairs in the U.S.<\/span><\/span><\/p>\n<\/blockquote>\n

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Before its price plummeting as traders lost confidence, Bitconnect Coin was one of the top 20 most successful cryptocurrency tokens in the world.<\/b> After the ICO, BCC increased from $0.17 to US$463 in December 2017, before falling to US$0.40 on March 11, 2019. As a result, BitConnect released outstanding loans to the Bitconnect Wallet in the form of BCC at US$363.62. However, the internal exchange price and liquidity dropped shortly following that news, resulting in a near-complete loss of value.<\/span><\/span><\/p>\n

Bitconnect was accused of being a Ponzi scheme due to its multilevel marketing strategy and unrealistically large payments. <\/span>Bitconnect\u2019s popularity changed dramatically following the volatility of Bitcoin, to which it was linked. <\/b>As a result of these circumstances, a legal battle unfolded in the United States to bring BitConnect\u2019s founders to justice, with Kumbhani and American citizen Glenn Arcaro at the centre of the battle.<\/span><\/span><\/p>\n

It is noteworthy that the <\/span>debut of BitConnect coincided with the Indian government\u2019s demonetization<\/a> process<\/b>, in which the bigger denominations of the country\u2019s currency (banknotes of 500 and 1000 Indian Rupees) were demonetized in a bid to combat corruption and illicit money flow.<\/span><\/span><\/p>\n

Satish Kumbhani, along with his associate Divyesh Darji, is accused of defrauding unwary investors in India of $12.6 billion (880 billion Indian Rupees) in the aftermath of demonetization.<\/b> Surprisingly, few of these defrauded investors have come forward to file a complaint against BitConnect.<\/span><\/span><\/p>\n

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What is BitConnect?<\/b><\/span><\/p>\n

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Bitconnect, a cryptocurrency investment platform was launched in 2016 to allow users to lend Bitconnect Coin value in exchange for interest payments. <\/span>The star programme was the so-called loan platform, which allowed users to swap Bitcoin for Bitconnect Coin and lock in the coin\u2019s current value for a predetermined amount of time while receiving daily interest.\u00a0<\/b><\/span><\/p>\n

A so-called \u201ctrading bot\u201d calculated the interest payouts. Trading bots were the most controversial part of Bitconnect.co\u2019s system. Users were able to exchange their winnings for Bitcoin due to the liquidity of the BCC cryptocurrency.<\/span><\/p>\n<\/blockquote>\n

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BitConnect, was one of the biggest and most popular projects in the mid-2017 initial coin offering (ICO)<\/a> craze, raising billions of dollars from global investors<\/b> for a protocol that purportedly paid out 10% in interest earnings via its BCC token to investors, with users who \u201creferred\u201d other investors receiving even more benefits.<\/span><\/span><\/p>\n

Bitconnect (also written BitConnect and styled bitconnect, BCC) was an open-source cryptocurrency linked to the high-yield investment programme bitconnect.co, which was a form of Ponzi scheme.\u00a0<\/span><\/p>\n

The coin\u2019s value plunged to below $1 from a prior high of about $500 after the site administrators halted the earning platform on January 16, 2018<\/b>, and reimbursed the users\u2019 BCC investments.<\/span><\/span><\/p>\n

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Who is Satish Kumbhani (founder of BitConnect)?<\/b><\/span><\/p>\n

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Satish Kumbhani from Gujarat, India is the founder of BitConnect, a fraudulent cryptocurrency investment platform. <\/span>Kumbhani conceived and developed BitConnect as a blockchain in 2016, with BCC serving as the \u201cnative token.\u201d\u00a0<\/b><\/span><\/p>\n

He created the Lending Program by creating fraudulent accounts on the first three BitConnect websites. <\/span>Kumbhani sold roughly 5 million BCC of the 28 million BCC coins he produced at the start of the BitConnect Blockchain<\/a> during an ICO from November 2016 to January 2017.<\/b><\/span><\/p>\n<\/blockquote>\n

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Kumbhani marketed BitConnect\u2019s Lending Program to potential investors as a safe, attractive investment with monthly interest rates of up to 40%. A referral programme with commissions for referrals was also developed to aid in the growth of the Bitconnect system. He also hosted parties in Dubai, Santa Clara, and other cities where high-ranking promoters were recognised in person.<\/span><\/p>\n

According to the SEC\u2019s investigation, of the approximately 325,000 Bitcoin investors who paid BitConnect, Kumbhani only moved around 8% of the Bitcoin to any digital<\/a> asset trading platform.<\/b> Kumbhani did not tell investors that they were holding funds in their own hands or moving funds to another account.<\/span><\/span><\/p>\n

A federal grand jury in San Diego indicted Kumbhani on February 25, 2022, for conducting a global Ponzi scheme using BitConnect\u2019s Lending Program. Kumbhani was charged with wire fraud, conspiracy to commit wire fraud, and other multiple charges regarding the same.<\/span><\/p>\n

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Fraudulent Operations of BitConnect<\/b><\/span><\/p>\n

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BitConnect, according to the indictment, was a Ponzi scheme that paid earlier BitConnect investors with money from later BitConnect investors.<\/b> Kumbhani and his associates raised $2.4 billion from investors in total.<\/span><\/span><\/p>\n

The indictment also claims that after almost a year of operation, Kumbhani unexpectedly shut down the Lending Program. Kumbhani then directed his network of promoters to deceptively manipulate and pump up BCC\u2019s price to give the false impression of actual market demand.<\/span><\/p>\n

By merging, cycling, and exchanging the cash through BitConnect\u2019s cluster of cryptocurrency wallets and several globally based cryptocurrency exchanges, Kumbhani and his co-conspirators were able to disguise the location and ownership of the fraud gains collected from investors<\/a>.<\/b><\/span><\/p>\n<\/blockquote>\n

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According to the indictment, Kumbhani breached US financial sector standards, including those implemented by the Financial Crimes Enforcement Network (FinCEN), to escape regulatory monitoring and control of BitConnect\u2019s bitcoin offering. <\/span>BitConnect, for example, despite operating a money-transfer business through its digital currency exchange, failed to register with FinCEN as required by the Bank Secrecy Act.<\/b><\/span><\/p>\n

Following the indictment, one of Kumbhani\u2019s promoters in South Korea had warned that \u201csome individuals here are talking about suicide\u201d and that \u201cplenty of Korean investors invested everything they have.\u201d \u201cWe are getting death threats and the coin will be useless!,\u201d a marketer in Australia wrote.<\/span><\/p>\n

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Timeline of the Case<\/b><\/span><\/p>\n

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