San Diego, CA–A federal grand jury returned an indictment Friday charging a resident of India with multiple crimes for his alleged role in a massive criminal conspiracy involving the cryptocurrency company he founded, BitConnect.
The indictment alleges that Satishkumar Kurjibhai Kumbhani, 36, and his co-conspirators defrauded global investors of over $2 billion—believed to be the largest cryptocurrency fraud ever charged. The indictment follows the September 2021 guilty plea by BitConnect’s lead U.S. promoter, Glenn Arcaro..
The indictment alleges that BitConnect was a textbook Ponzi scheme. BitConnect solicited investors to use its “Lending Program,” which touted BitConnect’s purported proprietary technology, known as the “BitConnect Trading Bot” and “Volatility Software,” as being able to generate substantial profits and guaranteed returns. The indictment also alleges that in reality, the purported technologies generated no such profits, and merely functioned as a cover for the Ponzi scheme. In sum, earlier BitConnect investors were paid with money from later investors to promote the fraudulent scheme.
“This indictment alleges a massive cryptocurrency scheme that defrauded investors of more than $2 billion,” said U.S. Attorney Randy Grossman. “The U.S. Attorney’s Office and our law enforcement partners are committed to pursuing justice for victims of cryptocurrency fraud.”
As part of the criminal conspiracy, Kumbhani was further charged with a separate conspiracy seeking to commit commodities price manipulation for his attempt to artificially inflate the price of BCC and create the illusion of increased demand for BCC when the criminal scheme began to unravel. The commodities price manipulation conspiracy is believed to be the first time any cryptocurrency has been alleged to function as a commodity.
Furthermore, Kumbhani was charged with operating an unlicensed money transmitting business. To participate in the alleged Ponzi scheme that was BitConnect, unwitting BCC investors were required to use Bitcoin to purchase BCC on the “Bitconnect Exchange.” The BCC Exchange thus functioned to separate investors from the more widely used Bitcoin in exchange for the nascent BCC, which the investors could “lend” back to BitConnect to generate purported profits for the investor through the use of the above-mentioned BitConnect Trading Bot and Volatility Software.
Kumbhani was charged with an international money laundering conspiracy for conducting global transfers of Bitcoin and BCC to global investors and cryptocurrency purchasers—all of which were proceeds of the alleged wire and securities fraud.
“Crime, particularly crime involving digital currencies, continues to transcend international boundaries,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “The department is committed to protecting victims, preserving market integrity, and strengthening its global partnerships to hold accountable criminals engaging in cryptocurrency fraud.”
If convicted, Kumbhani faces a maximum penalty of 20 years in prison, forfeiture, and a $250,000 fine.