Former BitConnect director and promoter Glenn Arcaro pleaded guilty to participating in a cryptocurrency fraud that defrauded investors of more than $2 billion.
Director and Promoter of BitConnect Pleads Guilty in Global $2 Billion Cryptocurrency Scheme https://t.co/nzSRZSWjXI
— US Attorney CAS (@SDCAnews) September 1, 2021
According to a press release from the U.S. Department of Justice, BitConnect is regarded as the largest cryptocurrency fraud ever prosecuted.
Arcaro admitted that he conspired with other participants to defraud investors, exploiting their interest in cryptocurrencies. The fraudsters sold them proprietary BitConnect tokens and promoted exchange trading of digital assets as a profitable investment.
According to Arcaro, they misled investors about purported patented BitConnect technologies as a means of generating substantial profits from trading on cryptocurrency exchanges.
«To be frank, BitConnect operated a textbook Ponzi scheme, paying early investors with the money of later investors,» the department said.
Arcaro headed a large network of scheme promoters in North America, organising a pyramid known as BitConnect’s referral programme. He earned up to 15% of the amounts invested in another arm of the project—the lending programme—and also drew payments from the slush fund.
«Arcaro took responsibility for his actions in deceiving thousands of people around the world into investing in BitConnect. He lined his pockets with millions of dollars from victims who believed their funds were being invested in a new high-yield cryptocurrency,» FBI Special Agent Eric Smith said.
The court ordered Arcaro to pay investors $24 million—the proceeds of the fraud.
Separately, the U.S. Securities and Exchange Commission (SEC) filed a civil action against BitConnect, its founder Satish Kumbhani, Arcaro, and an affiliated company. The regulator accused them of unlawfully offering investments, through which they defrauded investors of $2 billion.
Today, we announced that we have filed an action against an online crypto lending platform, its founder, and its top U.S. promoter and his affiliated company.
They allegedly defrauded retail investors out of $2 billion!
More:https://t.co/gO10Ag0tfh pic.twitter.com/XghdUBqaCz
— SEC (@SECGov) September 1, 2021
«We allege that the defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets,» the filing states.
The SEC is seeking to recover money for investors with interest and civil penalties against the defendants.
The regulator has already reached settlements with three participants in the fraud scheme, who agreed to reimburse losses and pay penalties.