India Seizes $198M in Cryptocurrency Assets Linked to Bitconnect Case

TLDR

• Indian authorities seized $198 million in cryptocurrencies connected to the Bitconnect Ponzi scheme, along with cash and luxury items
• Bitconnect operated from 2016-2018, promising investors returns of up to 40% monthly through a fake trading bot
• The scheme attracted global investors by claiming 3,700% annual returns but actually diverted funds to private wallets
• US authorities have charged key figures, with top promoter Glenn Arcaro sentenced to prison and ordered to pay $17 million in restitution
• Founder Satish Kumbhani was indicted but remains at large, with the total fraud estimated at $2.4 billion

Indian law enforcement has recovered $198 million worth of cryptocurrencies linked to the Bitconnect fraud, marking a major development in the ongoing investigation of one of the largest cryptocurrency schemes in history.

The Directorate of Enforcement (ED) in Ahmedabad conducted search operations on February 11 and February 15, 2024, under the Prevention of Money-Laundering Act. During these operations, authorities seized digital assets valued at approximately Rs. 1,646 crore ($198 million).

The recovery included additional items beyond the cryptocurrency assets. Investigators also found Rs. 13,50,500 in cash, a Lexus vehicle, and various digital devices during their searches.

The investigation began following First Information Reports filed by the Crime Investigation Department in Surat. These reports detailed the operations of Bitconnect, which ran from November 2016 to January 2018.

Bitconnect operated what investigators called a “Lending Program,” which was neither registered nor legal. The scheme promised investors extremely high returns, drawing in people from around the world, including many from India.

The company’s marketing strategy relied heavily on an international network of promoters. These individuals received commissions for bringing new investors into the scheme, creating a pyramid-like structure that helped the fraud grow rapidly.

Inside Bitconnect’s Global Operation

At the center of Bitconnect’s promises was a supposed “volatility software trading bot.” The company claimed this technology could generate returns of up to 40% per month for investors. They went further, suggesting daily returns of 1%, which would amount to roughly 3,700% annually.

Indian officials discovered that these returns were completely fictional. Instead of investing the money as promised, the operators moved funds to digital wallets under their control. The ED successfully tracked these wallets through a combination of technical analysis and ground-level intelligence gathering.

The scheme collapsed in early 2018 when it was exposed as a Ponzi scheme. The total value of the fraud is estimated at $2.4 billion, affecting investors worldwide.

U.S. authorities have also taken action against Bitconnect’s operators. Glenn Arcaro, who served as the platform’s main promoter in the United States, received a 38-month prison sentence. He was also ordered to pay more than $17 million in restitution to victims around the globe.

The founder of Bitconnect, Satish Kumbhani, faces serious charges. In February 2022, U.S. authorities indicted him for his role in the scheme. However, Kumbhani’s current location remains unknown, and he continues to evade authorities.

The ED’s investigation revealed how the scheme operated technically. By tracking numerous web wallets and gathering intelligence from various sources, investigators identified the specific digital wallets containing the fraudulent funds.

The recent seizure represents a portion of the total funds involved in the scheme. Authorities continue their efforts to locate and recover additional assets connected to the fraud.

Law enforcement agencies from multiple countries are working to recover funds and prosecute those responsible. The investigation remains active as authorities work to uncover additional assets and bring remaining suspects to justice.

The February 15 announcement from the ED confirms that the seized digital assets are now under government control, with investigations continuing into other aspects of the case.