- Through his company BitConnect, the Indian entrepreneur, allegedly misled investors and promised them substantial profits and guaranteed returns.
A federal grand jury in San Diego, California, has indicted Satish Kumbhani, founder of an investment and crypto trading platform on charges related to fraud and orchestrating a global Ponzi scheme. Founder of BitConnect, Kumbhani, 36, of Hemal, India, misled investors about his company’s “Lending Program,” and along with his co-conspirators, allegedly defrauded global investors out of more than $2.4 billion, according to a Department of Justice press release.
The Indian national 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. If convicted of all counts, he faces a maximum total penalty of 70 years in prison. Currently, his whereabouts are not known.
Kumbhani and his co-conspirators allegedly misled investors and promised them substantial profits and guaranteed returns. But BitConnect, which was formed in 2016, operated as a Ponzi scheme by paying earlier investors with money from later investors.
He abruptly shut down the Lending Program after a year. He then directed his network of promoters to fraudulently manipulate and prop up the price of the company’s digital currency to create the false appearance of legitimate market demand for it.
He also concealed the location and control of the fraud proceeds obtained from investors by commingling, cycling, and exchanging the funds through BitConnect’s cluster of cryptocurrency wallets and various internationally-based cryptocurrency exchanges.
To avoid regulatory scrutiny and oversight of BitConnect’s cryptocurrency offering, Kumbhani evaded U.S. regulations governing the financial industry, including those enforced by the Financial Crimes Enforcement Network (FinCEN).
“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. We thank our partners around the world for their continued efforts.”