Cryptocurrency company BitConnect founder Satish Kurjibhai Kumbani has been indicted by a San Diego federal grand jury Friday for defrauding global investors out of more than $2.4 billion. This marks one of the biggest cases of embezzlement that was criminally charged in the court of justice as Kumbani was charged on multiple grounds like that of wire fraud, money laundering and commodities fraud, and one count of operating an unlicensed money transmitting business.
Kumbhani, 36, is originally from Surat, India, has been using numerous aliases to protect his identity and has been running the company since 2016. BitConnect was originally a proof-of-stake (PoS) platform that allowed users to buy Bitconnect Coin (BCC) to earn interest. However, users could sell Bitcoin (BTC) to buy BCC instead and then, by doing so, lock in the price of that BCC and earn daily interest over pre-defined periods.
In the indictment, the company was denounced as a “textbook Ponzi scheme,” as on September 2021, the SEC filed an action against Kumbhani, being BitConnect’s top promoter, along with his affiliated company. The action was alleged that they had defrauded retail investors out of a colossal amount of $2 billion through the means of fraudulent offering of investments that often went unregistered.
The money lent by the investors in the form of BCC tokens was used to pay our earlier investors instead of being traded as a part of a larger pyramid scheme. In addition, these funds were also being used to keep the marketing campaign of BitConnect alive by paying their sea of promoters on social media platforms and live events.