The founder of a cryptocurrency investment company was indicted on charges of orchestrating a $2.4 billion Ponzi scheme.
A federal grand jury charged BitConnect founder Satish Kumbhani on Friday with conspiracy to commit wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering.
“This indictment alleges a massive cryptocurrency scheme that defrauded investors of more than $2 billion,” said U.S. Attorney Randy Grossman for the Southern District of California in a Justice Department press release.
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Kumbhani currently lives in India outside of the Justice Department’s jurisdiction.
The Justice Department claims that BitConnect misled investors by claiming that it could provide significant profit through its platform. The company claimed that its unique software, BitConnect Trading Bot and Volatility Software, would generate considerable profits and guaranteed returns by trading on volatile cryptocurrency exchange markets. In reality, The company operated as a Ponzi scheme by paying early investors with the funds provided by later investors.
The indictment also claims that Kumbhani directly manipulated his company’s own cryptocurrency, BitConnect Coin, to make it appear more legitimate than it was.
If found guilty on all counts, Kumbhani could face up to 70 years in prison.
Founded in 2016, BitConnect received significant social media attention at its launch, which allowed the firm to increase the value of the BitConnect Coin significantly. The coin was traded at its all-time high in 2017 at $643.31 a token, according to CoinMarketCap.com. The currency is now valued at $0.67 a token.
The company shut down in 2018 after the Texas State Securities Board issued a cease and desist order to the company over its lack of transparency and misleading statements.
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BitConnect promoter Glenn Arcano pleaded guilty to similar conspiracy charges in September.
The company became a meme due to the very peculiar announcement video released during the company’s First Annual Ceremony in Thailand in 2017 featuring Carlos Matos, an overly enthusiastic investor hyping up the currency and yelling its name several times.
