New Delhi: The founder of cryptocurrency investment platform BitConnet, who is an Indian national, has been allegedly charged for organizing a global Ponzi scheme worth $2.4 billion, according to the federal prosecutors.
The court documents informed that Satish Kumbhani, a resident of Hemal in Gujarat, misguided investors about BitConnet’s “Lending Program.” BitConnet reached the highest point of the market capitalization of $3.4 billion, the Department of Justice stated.
“This indictment alleges a massive cryptocurrency scheme that defrauded investors of more than $2 billion,” US Attorney Randy Grossman for the Southern District of California said on Friday.
The 36-year-old founder has been charged for conducting conspiracy on wire fraud and price manipulation which is an operation of an unlicensed money transmitting business and conspiracy to commit international money laundering. Notably, if he faces conviction from all courts, a maximum penalty of 70 years in prison will be faced.
The “Lending Program,” under which the founder Kumbhani and his co-conspirators tagged BitConnet’s claimed proprietary technology, “BitConnect Trading Bot” and “Volatility Software,” for generating substantial profits. They guaranteed returns by using investors’ money to trade on the volatility of cryptocurrency exchange markets.
As per the alleged charge, BitConnet functioned as a Ponzi scheme by paying earlier BitConnet investors with money from later investors. Kumbhani and his co-conspirators acquired nearly $2.4 billion from investors.
The indictment, which was returned by a federal grand jury in San Diego, alleged that after operation for at least one year, Kumbhani suddenly closed the “Lending Program.” Later, he directed his group of promoters to deceitfully manipulate and prop up the price of BitConnet’s digital currency, BitConnet Coin (BCC), creating a duplicate appearance of legitimate market demand for it.
Besides, the accused also shielded the location and control of the fraud proceeds acquired from investors by commingling, cycling, and exchanging the funds through BitConnet’s cluster of cryptocurrency wallets and various internationally-based cryptocurrency exchanges, alleged the Department of Justice.
Furthermore, Kumbhani dodged US regulations governing the financial industry, including those enforced by the Financial Crimes Enforcement Network (FinCEN). This means that though BitConnet was associated with the money transmitting business through its digital cryptocurrency exchange, it never registered with FinCEN, as required by the Bank Secrecy Act.
