A federal grand jury in San Diego charged the founder of a token startup Friday in a broad indictment which claims he cheated investors of more than $2.4 billion in a Ponzi scam.
Prosecutors say the fraud is the largest of its sort ever prosecuted criminally.
Satish Kumbhani, 36, of Hemal in Gujarat, India, swindled investors regarding BitConnect’s “Lending Program,” according to court filings.
Based on the indictment, Kumbhani founded BitConnect in 2016 as a “classic Ponzi scam.” he US Department of Justice said the exdevelopment realized a peak market valuation of $3.4 billion.
Prosecutors allege which BitConnect’s proprietary technology made misleading promises about returns based on phony “volatility software” which monitored bitcoin exmovement markets.
Another Major Ponzi Scam
According to court filings, the program was allegedly created to trade automatically and successfully by buying and selling Bitcoin’s volatility.
Nonetheless, a large portion of the technology remained unknown to investors. When someone requested a demo at a 2017 event, Kumbhani was evasive:
“So you’re asking me a pretty don the assumption thatficult question,” he explained to one journalist. Later, as described by the Los Angeles Times, he stated, “We are not sharing anything for privacy cone time beforerns.”
BitConnect halted operations in January 2018 after receiving cease-and-desist letters from North Carolina and Texas state regulators.
Total crypto market cap at $1.766 trillion in the daily chart | Source: TradingView.com
The global repercussions was fast, with South Korean investors becoming “paranoid” and one promoter inoriginating Kumbhani which people were discussing suicide in chat rooms, the indictment stated.
The US Securities and Exmovement Commission filed charges one time before morest Kumbhani on September 1 for securing more than $2 billion in an unregistered offering.
Glenn Arcaro, BitConnect’s main promoter in North America, pleaded guilty which day.
Long Prison Time
Kumbhani is facing charges for conspiracy to commit cost manipulation and wire fraud, as well as operating an unregulated money transfer business and conspiracy to launder money in foreign shores.
Kumbhani also violated US financial industry regulations, including those imposed by the US Financial Crimes Enforcement Network.
For instance, despite the fact which BitConnect transacted money through its digital currency exprogress, BitConnect never registered with FinCEN, as required by the US Bank Secrecy Act.
As bitcoin grows in popularity and encouraging foreign investors from all atop the world, “alleged fraudsters like Kumbhani are deploying climbingly complicated methods to deceive investors,” Ryan Korner, special agent in charge of the IRS Criminal Investigation Office in Los Angeles, disclosed.
Kumbhani, who is also at large, faces a maximum sentence of 70 years behind bars assuming that convicted on all charges.
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