Bitcoin Ponzi Scheme: BitConnect Founder Missing After The Scam (2024)

The founder of BitConnect, Satish Kumbhani, charged in the United States last week with a $2.4 billion Bitcoin Ponzi scheme 2022, has vanished from his native country India, officials said a New York judge. This company is also included in the top 5 crypto Ponzi scheme list.

In September, prior to the criminal charges being filed, the U.S. Securities and Exchange Commission (SEC) had sued Kumbhani, asserting he fraudulently raised over $2 billion from investors in his digital currency exchange platform. But the SEC did not know where he was and was unable to serve him with the lawsuit.

Bitcoin Ponzi Scheme: What Really Happened?

The story became more intense on Monday. According to SEC attorney Richard Primoff said in a filing in federal court in Manhattan,

Kumbhani, 36, has likely relocated from India to an unknown address in a foreign country. Since November, the commission has been consulting with that country’s financial regulatory authorities in an attempt to locate Kumbhani’s address. At present, however, Kumbhani’s location remains unknown.”

He further said that the,

“SEC couldn’t say when its efforts to locate him will be successful, if at all.”

Primeoff further asked the U.S District Judge John Koetle for an extension until 30 May. The SEC stated that it wants to look for Kumbhani, and if it finds him in the United States, it will serve him with the complaints. On Tuesday, the SEC request was granted by Koeltl. He previously halted the civil case while the criminal investigation was on.

Of course, if the founder of BitConnect comes to the U.S., he could be arrested and can also go to prison if he is convicted of charges in the indictment that was filed on Friday in San Diego. Prosecutors stated that he created BitConnect in 2016 and the digital token, BitConnect Coin.

Kumbhani, Bitcoin Ponzi scheme founder, advertised the lending platform of BitConnect based on volatility software and a proprietary trading bot that would be traded on the global crypto space. But in reality, the lending program was a big Ponzi scheme that raised more than $2.4 billion in Bitcoin from investors across the globe prior to closing down in January 2018 as per the statement by the prosecutors.

The next day, one of the promoters of Kumbhani that was based in South Korea warned that,

“Some people here are talking about committing suicide” and that “lots of [Korean investors] invested everything they have,” according to the indictment. A promoter in Australia also wrote that “we are getting death threats…[and] the coin will be useless!!!!!”

In this Bitcoin Ponzi scheme, BitConnect used money from new investors to pay the earlier ones the U.S. said. He has been charged with wire fraud, functioning an unlicensed money transmitting business, and 3 conspiracies: to commit wire fraud; international money laundering; and commodity price manipulation.

Last September, the top promoter of BitConnect in North America, Glenn Arcaro, pleaded guilty. In November, prosecutors stated they would sell nearly $57 million in digital currency seized from Arcaro. This month, a judge granted an amended order for the sale.

How This Bitcoin Ponzi Scheme Started?

BitConnect was established in 2016 and received fame in mid-2017 amid the ICO (initial coin offering) mania. Previously, in 2017, the exchange released a crypto lending program and had a native token known as the BitConnect Coin (BCC).

The lending program which enabled users to loan their digital currency to the trading bots of the platform advertised hyperbolic returns. Investors have assured a “volatility software interest” as high as 40 percent every month. However, the operations of BitConnect came under heavy criticism from members of the crypto space, with Vitality Buterin the co-founder of Ethereum labeling the entity a Bitcoin Ponzi scheme.

In January 2018, BitConnect closed down its lending program after the U.S. regulators in North Carolina and Texas slammed the exchange with cease-and-desist orders. Before closing, the scheme raised billions of dollars from investors across the globe.

Following the close down, the value of BCC declined to almost zero–down from an all-time high near $500 with a market cap of $3.4 billion, which led to massive losses for investors.

The Bottom Line

The United States SEC (Securities and Exchange Commission) stated in a court filing that the Commission has not been able to detect the exact location of Kumbhani. For some time now, authorities have considered Kumbhani to be staying in a foreign country. As mentioned by the senior trial counsel Richard Primoff.

Primoff further requested the court to grant the SEC a 90-day extension which would expire on May 30, 2022. As per the attorney, the extension would allow the Commission to look for Kumbhani and serve the BitConnect founder with a previous complaint by the SEC if he is found to be in the U.S on the Bitcoin Ponzi scheme. BitConnect is also among the biggest Bitcoin pyramid scheme companies.