The top U.S. financial regulator has filed a civil lawsuit against the founder of BitConnect for his alleged role in a $2 billion crypto-currency scam.
The US Securities and Exchange Commission (SEC) has charged BitConnect founder Satish Kumbhani, whose whereabouts are unknown. Kumbhani was allegedly involved in a fraudulent securities offering that raised $2 billion for the company. The defendant sold unregistered securities related to the company’s loan program throughout 2017, according to documents filed in a New York federal court.
Lara Shalov Mehraban of the SEC’s New York Regional Office noted, “We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets.”
The Indian citizen knowingly violated investor protection rules in this way, according to the SEC. The case against the platform’s executives and a third-party company, Future Money, has been a prolonged saga. A total of five people involved in the scheme by creating misleading YouTube testimonials were sued in late May.
This latest action comes three years after the crypto exchange and lending platform ceased all operations in January 2018 after receiving warnings from several state authorities in the US. The crypto exchange platform also reportedly suffered denial-of-service attacks.
The federal regulator intends to recover ill-gotten funds from the system that promised good returns to retail investors. The company’s senior staff assured investors that the platform’s volatility trading software could offer returns of up to 40 percent per month. Investors were also promised annualized gains of 3,700% in exchange for their investment.
The company’s former director and promoter, Glenn Arcaro, has already been charged with fraud and pleaded guilty yesterday. Arcaro and his company Future Money earned about $24 million in referral fees. He has since been ordered to pay back investors in the now-defunct crypto platform $24 million.
Kumbhani, meanwhile, acted as the U.S. promoter of the crypto platform when it was still operational. The SEC accuses Khumbhani and other parties of funneling investor funds and using them for personal gain. The SEC press release adds that the scam was a coordinated scheme and involved other developers working around the world.