(Kitco News) - After more than four years of court proceedings and uncertainty, a group of victims of the BitConnect investment scheme will be receiving their share of a $17 million restitution judgment by a court in California.
According to a press release from the Department of Justice (DoJ), the United States District Court for the Southern District of California in San Diego has ordered more than $17 million in restitution to be distributed to 800 victims in over 40 countries for the losses they suffered by investing in BitConnect.
BitConnect was a cryptocurrency investment platform that launched in 2016 and ultimately collapsed in 2018 after pocketing more than $2.4 billion from more than 4,000 people in 95 countries.
Glenn Arcaro, the top U.S.-based promoter for BitConnect, pleaded guilty to a charge of conspiracy to commit wire fraud on Sept. 16, 2021, and was ordered to pay back $24 million to investors. In Sept. 2022, Arcaro was sentenced to a little over 3 years in prison for marketing BitConnect’s lending program as a lucrative investment.
BitConnect’s alleged founder Satish Kumbhani was indicted by the DoJ for his role in the fraud on Feb. 25, 2022, and remains under police investigation in India. Kumbahani has yet to face a judge as his whereabouts remain unknown.
Arcaro admitted to conspiring with others to exploit investor interest in cryptocurrency by fraudulently marketing BitConnect’s initial coin offering and digital currency exchange as a lucrative investment, the release said.
|
| U.S. government seizes $3.36 billion in cryptocurrency from Silk Road fraud |
Part of the scheme involved the promotion of the “BitConnect Trading Bot” and “Volatility Software,” which were billed as being able to generate substantial profits and guaranteed returns by using funds deposited by users to take advantage of the volatility in the crypto market. The bot promised investors a return of an average daily compounding interest of 1% or 3,700% annually.
In reality, the platform was a textbook example of a Ponzi scheme that paid off early investors with money deposited by later investors. “Arcaro and his co-conspirators ensured that up to 15% of the money invested into BitConnect went directly into a slush fund to be used for the benefit of its owner and promoters,” the DoJ said.
The DoJ granted a request to sell roughly $56 million in fraud proceeds tied to BitConnect in Nov. 2021, but it appears the sale didn’t occur until more recently as the original $56 million in assets was sold for only $17 million, a significant markdown. While the government sold the assets in an effort to make investors whole, the $17 million in restitution is roughly 0.7% of the total amount stolen over the course of BitConnect’s operation.
