BitConnect's India-born founder charged with $2.4 bn fraud

Satish Kumbhani, an Indian national to launch crypto investment platform BitConnect, has been indicted by the United States Department of Justice for allegedly misleading investors about the company’s lending programme and defrauding them with about $2.4 billion.

According to court documents, Kumbhani, (36) misled investors about BitConnect’s “Lending Program.” The jury also claimed that BitConnect is an ‘alleged fraudulent cryptocurrency investment platform’ that reached a peak market capitalisation of $3.4 billion. 

As per a statement by the department, Kumbhani and his co-conspirators, under its lending programme, touted “BitConnect Trading Bot” and “Volatility Software” as its purported proprietary technology which can generate substantial profits and guaranteed returns by using investors’ money to trade on the volatility of cryptocurrency exchange markets. However, it was later discovered that BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors.  

“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilising increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars,” said Special Agent in Charge Ryan L. Korner of the IRS Criminal Investigation’s (IRS-CI) Los Angeles Field Office. 

The agency went to affirm that Kumbhani is charged with conspiracy to commit 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. 

Incidentally, Reserve Bank of India (RBI) Deputy Governor T. Rabi Shankar, while expressing his reservations over cryptocurrencies being legalised in India, considered virtual currencies being equivalent to “Ponzi schemes”. Shankar pointed out that “crypto-technology is underpinned by a philosophy to evade government controls.” He further said, “Cryptocurrencies have specifically been developed to bypass the regulated financial system.”