US Justice Department Indicts BitConnect Founder

The U.S. Department of Justice announced Friday that a federal grand jury charged BitConnect founder Satish Kumbhani with defrauding investors of some $2.4 billion through its lending scheme.

Kumbhani was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit price manipulation, operating an unlicensed money transmitter and conspiracy to launder funds internationally for "orchestrating a global Ponzi scheme" according to a DOJ press release, which alleged he traded cryptocurrencies using his investors' funds, and repaid earlier investors with the funds he received from later investors.

Kumbhani was already sued by the U.S. Securities and Exchange Commission (SEC) in late 2021 on similar charges, alongside BitConnect promoter Glenn Arcaro. Arcaro pleaded guilty to a similar BitConnect-related charge filed by the DOJ last September.

U.S. Assistant Attorney General Kenneth Polite Jr. said cryptocurrencies are continuing to be used in international crimes in a statement.

“The department is committed to protecting victims, preserving market integrity, and strengthening its global partnerships to hold accountable criminals engaging in cryptocurrency fraud. We thank our partners around the world for their continued efforts," he said.

In a statement, Internal Revenue Service Criminal Investigation Special Agent in Charge Ryan Korner said malicious actors were increasingly using crypto.

“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars,” he said. “However, make no mistake, our agency will continue our long tradition of following the money, whether physical or digital, to expose criminal schemes and hold the fraudsters accountable for their illegal acts of trickery and deceit.”

BitConnect collapsed in dramatic fashion in 2018, shuttering its exchange and lending platforms within a week after receiving cease-and-desist orders from U.S. state regulators. The company attempted to continue raising proceeds through an initial coin offering (ICO).

Regulators in the U.S. and other nations have arrested or sought information from a number of BitConnect promoters in the four years since its collapse.