The U.S. Department of Justice officials said a San Diego federal grand jury recently returned an indictment charging the founder of the
cryptocurrency investment platform BitConnect with orchestrating a global Ponzi scheme.
Per court documents, the Justice Department alleges BitConnect founder Satish Kumbhani, 36, of Hemal, India, misled investors regarding the company’s Lending Program.
The Justice Department alleges Kumbhani and co-conspirators, via the program, promoted BitConnect’s proprietary technology known as the BitConnect Trading Bot and Volatility Software, as being capable of generating substantial profits and guaranteed returns using investors’ money to trade on the volatility of cryptocurrency exchange markets.
Additionally, the Justice Department’s indictment alleges BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors – alleging Kumbhani and co-conspirators obtained a total of approximately $2.4 billion from investors.
“Crime, particularly crime involving digital currencies, continues to transcend international boundaries,” Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division said. “The department is committed to protecting victims, preserving market integrity, and strengthening its global partnerships to hold accountable criminals engaging in cryptocurrency fraud.”
The Justice Department’s indictment also alleges Kumbhani evaded domestic regulations governing the financial industry, including those enforced by the Financial Crimes Enforcement Network (FinCEN) and the Justice Department indicated Kumbhani is 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.
“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,” Special Agent in Charge Ryan L. Korner of the IRS Criminal Investigation’s (IRS-CI) Los Angeles Field Office said.