Some victims of the BitConnect Ponzi scheme will receive over $17 million in restitution, according to an announcement by the United States Department of Justice (DOJ) on Thursday.
Per the announcement, a federal district court in San Diego ordered that the funds be distributed to 800 victims across over 40 different countries. However, the restitution only covers a small fraction of BitConnect victims, as the scheme defrauded over 4,000 individuals across 95 countries.
BitConnect Ponzi Scheme
In February 2022, the DOJ announced charges against Satishkumar Kurjibhai Kumbhani, the founder of BitConnect.
The DOJ alleged that Kumbhani conspired with other individuals to mislead investors about BitConnect’s “Lending Program,” claiming it uses proprietary technology, known as the “BitConnect Trading Bot” and “Volatility Software,” to generate extravagant profits and returns.
In reality, the purported technologies generated no profit as BitConnect was merely used to promote a Ponzi scheme, where new BitConnect investors’ funds were used to pay earlier investors.
The prospector further claimed that after operating for a year, Kumbhani suddenly closed down the Lending Program and then instructed his “network of promoters to fraudulently manipulate and prop up” the price of BitConnect’s native token BCC to create a “false appearance of legitimate market demand” for the cryptocurrency.
The DOJ stated that the scheme defrauded investors of more than $2 billion and termed it one of the biggest cryptocurrency frauds ever charged.
DOJ Charges BitConnect Founder
Kumbhani was 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.” He is currently at large.
Glenn Arcaro, the top U.S.-based promoter for BitConnect, pleaded guilty to conspiracy to commit wire fraud in September 2021. Arcaro admitted to conspiring with other individuals to defraud investors by fraudulently promoting BitConnect’s initial coin offering (ICO) and crypto exchange as a profitable investment.
He was sentenced to 38 months in prison in September 2022 and ordered to pay $24 million to BitConnect victims.
