Founders of world’s biggest crypto Ponzi scheme charged with fraud
BitConnect scammed investors out of $2bn, US authorities say

by Matthew Field

The creators of the world’s largest cryptocurrency Ponzi scheme have been charged by US authorities with defrauding investors of more than $2bn (£1.45bn).

BitConnect was charged by two US prosecutors of operating “a textbook” Ponzi scheme by paying earlier investors with money from later investors. It is believed to be the largest cryptocurrency fraud to be subject to criminal charges.

The US Department of Justice said BitConnect’s US promoter and director, Glenn Arcaro, pleaded guilty to charges brought in California, and now faces up to 20 years in prison.

US attorney Randy Grossman said: “Arcaro and his confidantes preyed on investor interest in cryptocurrency. As a result, a staggering number of individuals lost an enormous amount of money.”

The Department of Justice said Mr Arcaro admitted he earned $24m from BitConnect, which he must now repay to investors.

Separately, the Securities and Exchange Commission filed fraud charges against BitConnect’s founder, Satish Kumbhani, in New York.

Lara Shalov Mehraban, associate regional director of the Securities and Exchange Commission, said: “We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets. We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”

BitConnect was available to trade on major cryptocurrency exchanges. It had an opaque corporate structure, which included a UK based company, BitConnect Ltd, and a US branch. The whereabouts of its founder, Mr Kumbhani, is currently unknown.

The company claimed to use a “trading bot” to generate automated returns for users who bought its cryptocurrency. But the business shut down suddenly in January 2018, causing the price of its coin to collapse to zero and leaving thousands of buyers with nothing.

‘So much money you’ll have a hard time counting it’
The cryptocurrency scam gained worldwide attention when a promotional video for the digital coin went viral as it hosted an event in Thailand.

The video featured the company’s flamboyant spokesperson, Carlos Matos, repeatedly shouting “BitConnect” to an audience that was viewed millions of times.

In the video, Mr Matos tells attendees: “I am saying to so many people who say that this is going to be a con artist’s game. That my wife still doesn’t believe in me. I am telling her, no honey this is real.

“People are going to be making so much money that they are going to have a real hard time counting it. I love BitConnect!”

Mr Matos later said he did not realise BitConnect was a scam and had invested money himself. He has not been named by US authorities.

The $2bn cost of BitConnect ranks it as one of the world’s largest Ponzi schemes, although some way below Bernie Madoff’s $65bn fraud uncovered in 2008.

The value of BitConnect’s token soared in value as the price of Bitcoin skyrocketed in December 2017, before its founders disappeared.

Three years after the firm’s exit scam, US authorities said that after duping investors out of funds, BitConnect siphoned investor funds to digital wallets controlled by its team. It built a network of promoters around the world and rewarded them by paying commissions.

Source: telegraph