Victims of the notorious cryptocurrency Ponzi scheme Bitconnect are set to receive over $17 million in restitution, according to an order issued by a federal district court in San Diego. The U.S. Department of Justice (DOJ) announced the ruling on Thursday, stating that the funds will be distributed among approximately 800 victims from more than 40 countries who were defrauded by the scheme.
Bitconnect, which was founded in 2016, promised investors high returns through its “Lending Program” and purported proprietary “Bitconnect Trading Bot” and “Volatility Software” technologies. However, the scheme was ultimately exposed as a Ponzi scheme, with funds from new investors being used to pay returns to earlier investors.
Investigation Into Bitconnect
The investigation into Bitconnect began on September 16, 2021, when the top U.S.-based promoter of the scheme, Glenn Arcaro, pleaded guilty to conspiracy to commit wire fraud. Arcaro admitted to marketing Bitconnect’s initial coin offering and digital currency exchange as a lucrative investment, with the goal of exploiting investor interest in cryptocurrency.
The DOJ explained that Arcaro and his co-conspirators misled investors about Bitconnect’s investment opportunities and technologies, and that up to 15% of the money invested into Bitconnect went directly into a slush fund to be used for the benefit of its owners and promoters.
Arcaro was sentenced to 38 months in U.S. federal prison in September 2022, and admitted to earning at least $24 million from the scam. At the time, the DOJ announced that all of that money would be repaid to investors or forfeited to the government. In November 2021, the Justice department offered for sale $56 million worth of crypto assets seized from Bitconnect.
Founder Indicted
The crypto pyramid’s founder, Indian national Satish Kumbhani, was indicted on February 25, 2022 for his key role in organizing the $3.4 billion fraud scheme. In August 2022, police in India launched an investigation into Bitconnect and a search for its mastermind. If convicted in the U.S., Kumbhani would face a maximum of 70 years in prison.
Restitution for Victims
The restitution for victims of Bitconnect is welcome news for those who were defrauded by the scheme. However, it serves as a reminder of the importance of thoroughly researching any investment opportunity, particularly in the often-volatile world of cryptocurrency. As the DOJ stated in its announcement, “Investors should always be wary of promises of high returns with little risk.”
