- BitConnect creator Satish Kumbhani was accused by a US grand jury of accusations that he engineered a global Ponzi scheme that generated $2.4 billion from investors.
- Kumbhani may face up to 70 years in jail if convicted on all counts.
According to a Justice Department release, BitConnect creator Satish Kumbhani was accused by a US grand jury of accusations that he engineering a global Ponzi scheme that generated $2.4 billion from investors in a bogus cryptocurrency investment platform.
BitConnect shut down its exchange in January 2018 after receiving cease-and-desist orders from Texas and North Carolina state regulators. The Securities and Exchange Commission sued Kumbhani on September 1 for raising more than $2 billion in an unregistered offering. Glenn Arcaro, BitConnect’s leading promoter in North America, admitted guilt on the same day.
70 years in jail
Kumbhani, 36, was accused in San Diego of deceiving investors about BitConnect’s ostensibly exclusive technology, which fraudulently promised profits based on bogus “volatility software” that tracked bitcoin exchange markets, according to prosecutors.
Kumbhani, of Hemal, India, could not be reached for comment right away. He is accused of wire fraud, running an unregistered money transmission company, and three conspiracies: wire fraud, market price manipulation, and international money laundering.
“The commodities price manipulation conspiracy is believed to be the first time any cryptocurrency has been claimed to serve as a commodity,” prosecutors in the Southern District of California said in a statement.
Kumbhani may face up to 70 years in jail if convicted on all counts, although he is likely to receive significantly less time.
Prosecutors announced in November that they would sell approximately $57 million in cryptocurrency seized from Arcaro. A judge accepted an amended order for the sale earlier this month.
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Ponzi Scheme Warning Signs
In 1920, the Ponzi scheme concept was still alive and well. With the growth of technology, the Ponzi scheme progressed. In 2008, Bernard Madoff was found guilty of running a Ponzi scheme in which he faked transaction reports to make it appear that a client was gaining from assets that did not exist. Madoff was dead in prison on April 14, 2021.
What Is a Ponzi Scheme, Exactly?
A Ponzi scheme is a misleading financial plan that offers investors enormous rates of return with minimal risk. A Ponzi scheme is a deceptive investment scheme in which money is gathered from later participants in order for earlier investors to profit.
This is similar to a pyramid scheme in that both rely on the funds of new investors to repay prior investors.
When the influx of new investors ceases and there isn’t enough money to go around, both Ponzi and pyramid schemes ultimately fail. At that point, the plans fall apart.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
Source: https://www.thecoinrepublic.com/2022/02/27/the-us-charged-bitconnects-satish-kumbhani-with-2-4-billion-for-the-ponzi-scam/