Bitconnect promoter pleads guilty to Ponzi scheme, as platform faces new SEC charges

Former director and promoter of the notorious Bitconnect Ponzi scheme, Glenn Arcaro, has pleaded guilty to fraud charges related to his r...

Former director and promoter of the notorious Bitconnect Ponzi scheme, Glenn Arcaro, has pleaded guilty to fraud charges related to his role in the now defunct crypto exchange and lending platform.

He was ordered to pay back $ 24 million to investors.

In a parallel action in the long-running saga, the United States Securities Commission (SEC) indicted Bitconnect, its founder Satish Kumbhani, former director Arcaro and Future Money Ltd. for this ploy. The defendants are accused of handling a fraudulent and unregistered securities offering that grossed $ 2 billion.

The latest developments come three years later BitConnect stopped its lending platform and crypto exchange in light of warnings from regulators in Texas and North Carolina.

Bitconnect has been widely accused of being a Ponzi scheme, and the scheme endures in countless memes.

“Fraudulent marketing”

According to a September 1 statement from the Ministry of Justice (DoJ), Arcaro pleaded guilty on charges of conspiracy to commit electronic fraud.

The Los Angeles resident admitted to conspiring with “others” to exploit investors by “fraudulently marketing” BitConnect’s coin offering and crypto trading platform as a highly profitable investment.

The 44-year-old also admitted to misleading investors about the “BitConnect Trading Bot” and “Volatility Software” as being able to generate large profits and guaranteed returns by using investor funds to trade on the volatility of the crypto markets.

“In truth, BitConnect exploited a Ponzi scheme by paying the early investors of BitConnect with money from subsequent investors,” the DoJ statement read.

Arcaro reportedly tapped into a large network of developers in North America who formed a pyramid scheme dubbed the “Bitconnect Referral Program”. He earned around 15% per investment in BitConnect’s lending program, while he also received a reduction in all investments through a hidden “slush” fund.

The former promoter admitted to making around $ 24 million from his fraudulent activities and was ordered to return the full amount to investors.

“Arcaro has capitalized on the emergence of cryptocurrency markets, prompting innocent investors around the world to step in early by promising guaranteed returns and harnessing the internet and social media to reach more victims with more ease and speed, “said the special agent in charge. Ryan L. Korner of the IRS Criminal Investigation (IRS-CI) Field Office in Los Angeles.

Related: Crypto Is Too Big To Exist Outside Of Public Policy, SEC Chairman Warns

New SEC fees

The SEC charges announced today target BitConnect, founder Satish Kumbhani, former director Arcaro and Future Money Ltd – a company incorporated by Arcaro in Hong Kong.

According to September 1 complaint, the SEC alleges that the defendants conducted a fraudulent and unregistered securities offering through BitConnect’s lending platform between 2017 and 2018, which generated approximately 325,000 Bitcoin (BTC) worth $ 2 billion at the time.

The complaint claims that users were tricked into investing in the lending platform claiming that BitConnect’s trading bot would produce guaranteed returns of 40% per month, and accused BitConnect of posting “fictitious returns.” on the website equivalent to an average of 1% per day. , or 3,700% per year.

“These claims were a sham. As the defendants knew or recklessly ignored, BitConnect did not deploy investor funds to trade with its alleged trading robot. On the contrary, BitConnect and Kumbhani have siphoned funds from investors for their own benefit and that of their associates. “

The SEC notes that the whereabouts of BitConnect founder Kumbhani is currently unknown.

The SEC is calling for full restitution of funds, a ban on defendants from violating securities laws in the future, and civil monetary penalties.

In May, the SEC charged six other BitConnect promoters for their role in the alleged insecurity offer, and Cointelegraph reported on July 8 that the SEC had closed settlements with four of the six individuals.