Indian cryptocurrency promoter sued in $2 billion fraud case
Satish Kumbhani has been charged by US Securities and Exchange Commission for siphoning off billons of dollars from unsuspecting investors.
A token of the virtual currency Bitcoin is seen placed on a monitor that displays binary digits in this illustration picture, December 8, 2017.
The US markets watchdog on Wednesday sued an online cryptocurrency lending company and its top executives over allegations of fraudulently raising $2 billion in investments.
The Securities and Exchange Commission (SEC) has charged BitConnect, its founder Satish Kumbhani, its top US promoter Glenn Arcaro and his company with offering "a fraudulent and unregistered offering and sale of securities in the form of investments in a 'Lending Program,'" an SEC statement said.
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The complaint says the defendants claimed the company's "proprietary 'volatility software trading bot'" would "generate exorbitantly high returns" on investors' money.
But the SEC has charged that, in fact, investors' funds were siphoned off and transferred into digital wallets controlled by the defendants.
Kumbhani had been under investigation for a few years.
To attract investors, the SEC alleged BitConnect and Kumbhani — an Indian national — created a network of promoters who were paid on commission, "a substantial portion of which they concealed from investors."
Arcaro, the leading promoter of the lending programme in the United States, has been accused of establishing the firm Future Money to "lure investors."
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"We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets," said Lara Shalov Mehraban, the associate regional director of SEC's New York office, in the statement.
The defendants have been charged with violating federal antifraud and registration provisions laws, and could face "injunctive relief, disgorgement plus interest, and civil penalties."
The SEC filed a related civil suit in May against five other BitConnect promoters and has settled with two of the defendants.
Arcaro also on Wednesday pleaded guilty to criminal charges in a parallel suit, according to the US Justice Department.
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