Indian Founder Of Cryptocurrency Company Charged With Fraud Of $2.4 Billion In US

Satish Kumbhani, 36, hails from Hemal in Gujarat is said to have misled investors about BitConnect’s “Lending Program.”

Representative Photo: Getty Images

New Delhi: An Indian national, who is the owner of a cryptocurrency investment platform BitConnect, has been charged for running a global Ponzi scheme to the tune of $2.4 billion.

Satish Kumbhani, 36, hails from Hemal in Gujarat is said to have misled investors about BitConnect’s “Lending Program.” BitConnect reached a peak market capitalisation of $3.4 billion, the department of justice said, according to the news agency PTI report.

What are the charges of fraud?

“This indictment alleges a massive cryptocurrency scheme that defrauded investors of more than $ 2 billion,” US Attorney Randy Grossman for the Southern District of California said on Friday.

Kumbhani has been charged with conspiracy to commit wire fraud and price manipulation, operation of an unlicensed money transmitting business and conspiracy to commit international money laundering.

If he gets convicted on all the above counts, he can face a maximum total penalty of 70 years in prison.

How did the lending programme lure investors?

Under the bitcoin investment platform’s “Lending Program”, Kumbhani, along with his co-conspirators promoted BitConnect’s purported proprietary technology, “BitConnect Trading Bot” and “Volatility Software”, as being able to generate substantial profits. The platform guaranteed returns by using investors’ money to trade on the volatility of cryptocurrency exchange markets.

The court has alleged that BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors. While running the scheme, Kumbhani and his co-conspirators generated approximately $2.4 billion from investors.

In fact, Kumbhani has allegedly shut down the “Lending Program” abruptly after operating for approximately one year.  He then went on to instruct network of promoters to fraudulently manipulate and prop up the price of BitConnect’s digital currency, BitConnect Coin (BCC), to create the false appearance of legitimate market demand for it.

Besides, Kumbhani and his co-conspirators have allegedly 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, the Department of Justice alleged.

Moreover, Kumbhani also evaded US regulations governing the financial industry, including those enforced by the Financial Crimes Enforcement Network (FinCEN).

(With inputs from PTI)