US Securities Regulator Sues BitConnect Founder 2 Billion Dollars For Alleged Fraud

JAKARTA – The US securities regulator on Wednesday, September 1, sued the founder of the now-defunct cryptocurrency exchange platform BitConnect for his alleged role in fraudulently raising an estimated USD 2 billion from thousands of retail investors.

Expanding on a civil case announced in May, the US Securities and Exchange Commission accused BitConnect founder Satish Kumbhani, an Indian citizen, of 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 alleged that promoter Glenn Arcaro and his firm Future Money Ltd fraudulently received more than USD 24 million in "referral commissions" and other amounts as BitConnect's lead promoter in the US.

Arcaro pleaded guilty Wednesday, September 1 to charges of conspiracy-related criminal wire fraud before US Judge Mitchell Dembin in San Diego. His sentence is November 15.

The SEC lawsuit seeks to impose fines, cover illicit profits, and other favors.

Founded in 2016, BitConnect creates a digital token called BitConnect Coin that can be exchanged for bitcoin, the popular cryptocurrency.

The SEC said investors in BitConnect's "loan program" were notified that BitConnect used a "volatility software trading bot" that could generate a 40% return per month, and was given a fictitious return showing an annual profit of 3.700%.

But regulators say investors lost a lot of their money after the price of BitConnect Coin fell 92% on January 16, 2018.

Prosecutors said BitConnect was running a "textbook Ponzi scheme" by paying previous investors with new investors' money.

Kumbhani, 35, is said to have lived in Surat, India but his whereabouts are unknown. Arcaro, 44, lives in Los Angeles and founded Future Money in Hong Kong, authorities said.

Attempts to find Kumbhani were unsuccessful. Arcaro's attorney did not respond to a request for comment. The SEC sued five other BitConnect promoters on May 28.

It has obtained a valuation requiring two promoters, Michael Noble and Joshua Jeppesen, and fiancé Jeppesen to pay more than USD 3.5 million and 190 bitcoins. Other promoters have not responded to the lawsuit.