A federal grand jury in San Diego just indicted the founder of the BitConnect crypto scheme that allegedly defrauded thousands of investors in the US and abroad.
In a statement published on Friday, the U.S. Department of Justice says that Indian national Satish Kumbhani faces up to 70 years in prison if found guilty of wire fraud, commodity price manipulation, conspiracy to commit international money laundering and operating an unlicensed money transmitting business.
BitConnect was marketed as an online crypto investment program that uses proprietary technology to generate high returns, but US securities regulators claim that the operation is a Ponzi scheme that swindled billions of dollars from investors.
“BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors. In total, Kumbhani and his co-conspirators obtained approximately $2.4 billion from investors.”
According to the indictment, Kumbhani directed promoters of the lending program to manipulate the price of the BitConnect Coin (BCC) to create an impression that there is market demand for BitConnect’s digital asset.
The document also says that Kumbhani and his conspirators allegedly hid and relocated investors’ funds by moving the assets through internationally-based crypto exchanges using a number of cryptocurrency wallets.
In addition, Kumbhani allegedly avoided the scrutiny and oversight of BitConnect by not complying with the regulations of the financial industry, such as by not registering with the Financial Crimes Enforcement Network (FinCEN) as required by the Bank Secrecy Act.
Says special agent in charge Ryan L. Korner from the Los Angeles field office of the Internal Revenue Service Criminal Investigation (IRS-CI),
“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.
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.”
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