A federal grand jury has indicted the 36-year-old founder of BitConnect for allegedly running a Ponzi scheme that bilked investors out $2.4 billion.
Prosecutors accused Satish Kumbhani of misleading investors about the company’s “Lending Program.” Kumbhani promised investors that they would earn massive profits by trading on the volatility of cryptocurrency exchange markets and said that BitConnect’s proprietary technology, known as the “BitConnect Trading Bot” and “Volatility Software,” would guarantee a return on their investments.
Instead, Kumbhani allegedly used money raised from new investors to pay off earlier investors. Within a year, Kumbhani shut down the program while fraudulently inflating the price of BitConnect’s digital currency to make it seem like there was a demand for the currency.
“Crime, particularly crime involving digital currencies, continues to transcend international boundaries,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “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.”
Kumbhani has been charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering. If convicted of all counts, he faces up to 70 years behind bars.
“Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space,” said Special Agent in Charge Eric B. Smith of the FBI’s Cleveland Field Office.