The US Justice Department seized $56 million worth of bitcoin from a colossal Ponzi scheme that is now auctioned off. The Ponzi scheme case was filed against a man who endorsed an offshore crypto lending operation, BitConnect.
The seizure was pronounced by the Justice Department as the largest single cryptocurrency scam recovery by the U.S., followed by cryptocurrency liquidation.
The acquired money will be used to compensate BitConnect scam victims. The victims were asked to visit a website to submit their claim for reimbursement from the sale. The scam successfully entangled thousands of people in the U.S. and abroad in its shackles and swindled $2 billion worth of bitcoin for a whole year, from January 2017 to January 2018.
It offered around 40% interest per month that BitConnect was supposed to generate via its volatile software trading bot. All these claims made by BitConnect, its founder Satish Kumbhani, and Glenn Arcaro, the promoter of BitConnect, were a sham, according to the Securities and Exchange Commission.
The SEC stated in the suit that the Defendants knew or disregarded, BitConnect did not release the funds of investors through its alleged Trading Bot.
On the contrary, BitConnect and Kumbhani channeled the money for themselves and their associates by transferring the funds to digital wallets controlled by Kumbhani, Arcaro, other promoters, the Arcaro promoters, and others.
The Political Saga
The scheme is said to be the largest cryptocurrency scam ever perpetrated, according to the authorities. The cryptocurrency that was sold was seized from Arcaro-controlled 20 digital wallets; he pleaded guilty on September 1 for conspiracy and wire fraud-related scheme for marketing BitConnect’s coin offering and exchange.
Arcaro earned around $24 million from commissions and other payments. He admitted to misleading investors about the exchange’s supposed proprietary technology, AKA BitConnect Trading Bot and Volatility Software, claiming to generate large investment profits by trading on the volatility of crypto exchange markets.
BitConnect ministered a typical Ponzi scheme by paying previous BitConnect investors with money from the latest investors, according to the Justice Department.
Arcaro has approximately 20 years of prison sentence ahead of him due on January 7.
The U.S. Attorney’s Office for the Southern District of California along with the Justice Department were authorized to liquidate the crypto seized from Arcaro. According to the SEC, BitConnect was an unregulated organization that registered four companies in the U.K., all obsolete or dissolved.
Kumbhani, 35, on the other hand, is yet to be found.