The creator of BitConnect is being sued for unlawfully soliciting money and cheating American investors out of more than $2 billion in investment funds.
As a result of his conviction, BitConnect founder Satish Kumbhani has gone missing after being indicted by the United States Department of Justice for running a $2.4 billion Ponzi scam.
The Securities and Exchange Commission said in a court statement on Monday that the whereabouts of Kumbhani is still unknown. In a statement, the SEC noted that Kumbhani’s last known whereabouts were in his home country of India, but that he has been unable to be located since the promoter of his BitConnect Ponzi scheme was charged by the SEC with cheating American investors out of more than $2 billion.
As stated in the petition, the convicted founder has most likely fled to a foreign country, and “Kumbhani’s whereabouts remain unknown, and the Commission is unable to predict when its attempts to find him will be successful if they will succeed at all,” according to the SEC. Among the charges against the founder is wire fraud, running an unregistered money transmitting company, and three conspiracies, including perpetrating wire fraud, manipulating commodities prices, and money laundering on an international scale.
The BitConnect tale began during the initial coin offering (ICO) period when it was one of the most widely publicized and talked-about initiatives on the internet at the time. By the middle of 2017, the cryptocurrency project had become a worldwide phenomenon, having gathered billions of dollars from investors throughout the world. Using a proprietary “trading bot” and “volatility software,” the project claimed to provide investors with a 10-percent return on their investment using its BCC coin. The business has not delivered on its promise.
The Department of Justice accused Kumbhani of operating a Ponzi scheme via BitConnect’s lending business, responsible for siphoning off $2.4 billion from investors. At the height of the market frenzy in December 2017, Bitconnect’s native token BCC reached an all-time high trading price of $463.31, resulting in a market capitalization of $3.4 billion.
By January 2018, the founder’s rug had been yanked out from under the enterprise, leading the token price to plummet to near nothing and generating enormous losses to investors.
The Department of Justice further accused Kumbhani of fabricating a fictitious market demand for BCC to attract additional naive investors. The project, like many others during the initial coin offering (ICO) mania, turned out to be a giant pyramid scam in which the designers utilized early donations to pay off old investors and then fled after amassing billions of dollars on the back of the excitement and the initial coin offering fever. Several Australian and the United States project promoters have already been found guilty and sentenced to prison. Others are now awaiting trial.