SEC charges BitConnect founder with cryptocurrency fraud
(Reuters) — The U.S. Securities and Exchange Commission Wednesday sued the founder of the now-defunct cryptocurrency exchange platform BitConnect over his alleged role in fraudulently raising about $2 billion from thousands of retail investors.
Expanding a civil case announced in May, the SEC charged BitConnect founder Satish Kumbhani, an Indian citizen, with lying about BitConnect's ability to generate profits and violating registration laws meant to protect investors.
In a lawsuit in Manhattan federal court, the SEC also charged promoter Glenn Arcaro and his firm Future Money Ltd. with fraudulently receiving more than $24 million in “referral commissions” and other sums as BitConnect's top U.S. promoter.
Mr. Arcaro pleaded guilty Wednesday to a related criminal wire fraud conspiracy charge before U.S. Magistrate Judge Mitchell Dembin in San Diego. His sentencing is Nov. 15.
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 "lending program" were told BitConnect used a “volatility software trading bot” that could generate returns of 40% per month and were given fictitious returns showing 3,700% annualized gains.
But the regulator said investors lost much of their money after the price of BitConnect Coin sank 92% on Jan. 16, 2018.
Prosecutors said BitConnect ran a “textbook Ponzi scheme” by paying earlier investors with new investor money.
Mr. Kumbhani has lived in Surat, India, but his whereabouts are unknown, while Mr. Arcaro lives in Los Angeles and incorporated Future Money in Hong Kong, authorities said.
Efforts to locate Mr. Kumbhani were unsuccessful. Mr. Arcaro's lawyer did not respond to requests for comment.
