Better Late Than Never: SEC Finally Sues BitConnect Over $2B Ponzi

The United States Securities and Exchange Commission (SEC) decided to sue the most infamous scam of the cryptocurrency space — three years later.

What Happened: According to a recent SEC announcement, the regulator filed an action against BitConnect, its founder Satish Kumbhani, its top United States promoter, and his affiliated company.

The regulator alleges that the operation "defrauded retail investors out of $2 billion through a global fraudulent and unregistered offering of investments into a program involving digital assets."

BitConnect purportedly raised 325,000 Bitcoin for its Ponzi scheme, worth $2 billion at the time, which accounts for more than $15 billion.

Why It Matters: The SEC filed its complaint in the United States Court for the Southern District of New York, claiming that from early 2017 through early 2018, the defendants fraudulently sold unregistered securities as purported investments in a "lending program."

BitConnect allegedly induced investors to deposit funds for the firm to deploy them in its "volatility software trading bot" that would generate "exorbitantly high returns."

Still, the SEC alleges that — instead of deploying the user funds this way — BitConnect and Kumbhani transferred them for their benefit to their own Bitcoin BTC/USD wallets, their top United States promoter Glenn Arcaro, and others.

Guilty As Charged: The regulator also claims that BitConnect and Kumbhani established a network of promoters and rewarded them for their promotional effort by paying commissions to them, including Arcaro.

The defendants are accused of violating the antifraud and registration provisions of the federal securities laws. The legal action seeks injunctive relief, disgorgement plus interest, and civil penalties.

The SEC already reached settlements with two of the five individuals charged in a related action for promoting BitConnect and Arcaro, who pleaded guilty.

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