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26-02-2022|Crypto

The founder of a cryptocurrency company based in India has been charged with a $2.4 billion fraud.

Federal prosecutors announced that the founder of bitcoin investment site BitConnect, an Indian national, has been charged with organising a global Ponzi scam worth USD 2.4 billion.

Satish Kumbhani (36) of Hemal, Gujarat, allegedly deceived investors about BitConnect's "Lending Program," according to court records. According to the Department of Justice, BitConnect's market capitalization peaked at USD 3.4 billion.

On Friday, U.S. Attorney Randy Grossman for the Southern District of California said, "This indictment charges a huge cryptocurrency scheme that deceived investors of more than USD 2 billion."

Kumbhani is accused of conspiring to commit wire fraud and pricing manipulation, as well as operating an unregistered money transferring business and conspiring to launder money internationally. He faces a maximum sentence of 70 years in jail if convicted on all counts.

Kumbhani, who is still at large, and his co-conspirators promoted BitConnect's putative patented technology, "BitConnect Trading Bot" and "Volatility Software," as being capable of generating huge profits under the "Lending Program." They were able to guarantee returns by trading on the volatility of bitcoin exchange markets with money borrowed from investors.

BitConnect, according to the indictment, operated as a Ponzi scheme, compensating early BitConnect investors with money from later BitConnect investors. Kumbhani and his accomplices raised around USD 2.4 billion from investors in total.

The indictment, which was returned by a federal grand jury in San Diego, alleges that after operating for approximately one year, Kumbhani unexpectedly shut down the "Lending Program". He then directed his 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.

Kumbhani and his co-conspirators 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, according to the Department of Justice.

Kumbhani also circumvented US financial industry regulations, particularly those enforced by the Financial Crimes Enforcement Network (FinCEN). BitConnect, for example, despite operating a money-transfer business through its digital currency exchange, failed to register with FinCEN as required by the Bank Secrecy Act.

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