BitConnect founder Satish Kumbhani has been sued by the Securities and Exchange Commission (SEC) regarding allegations that the company had carried out a crypto fraud scheme in 2017 worth $2 billion.
According to the SEC, Kumbhani and a BitConnect promoter named Glenn Arcaro raised $2 billion in investments through an offering that had not been properly registered with regulators. The SEC also alleges that Kumbhani promised investors in the company's "lending program" monthly returns of up to 40% from the company's "volatility software trading bot", despite the fact that there allegedly was no such thing. Investors were also allegedly shown falsified returns showing annual gains of 3,700.
In 2016, BitConnect was founded and created its own digital tokens, known as BtConnect Coins, that users could exchange for bitcoin. However, by January 2018, the value of the BitConnect Coin had fallen 92%. Prosecutors labeled the plan carried out by Kumbhani and the promoters a "textbook Ponzi scheme".
These aren't the first allegations the SEC has brought against BitConnect. This May, the SEC filed suits against five different BitConnect promoters for posting testimonials about investing in BitConnect on Youtube
Arcaro allegedly received $24 million in commission on referrals, according to the recent suit. He was the top U.S. promoter for the company. On the same day the suit was filed, Arcaro pled guilty to a related wire fraud conspiracy charge for which he will be sentenced in November.
BitConnect went defunct in 2018 following a DOS cyber attack and cease and desist letters from at least two states regarding the alleged unauthorized sale of securities. The company also claimed it couldn't operate under the increased scrutiny from regulators.
The SEC suit demands relief in the form of fines, compensation for the fraudulent investments, and other damages.
Kumbhani in an Indian citizen last reported living in Surat, but attempts to locate him have failed so far.
