BitConnect Founder’s Whereabouts Unknown
The United States Securities and Exchange Commission (SEC) said in a court filing that the Commission has been unable to detect Kumbhani’s exact location. For some time now, authorities have believed Kumbhani to be residing in a foreign country. As stated by the senior trial counsel Richard Primoff in September of 2021:
“Kumbhani has likely relocated from India to an unknown address in a different foreign country. Since November, the Commission has been consulting with that country’s financial regulatory authorities in an attempt to locate Kumbhani’s address. At present, however, Kumbhani’s location remains unknown, and the Commission remains unable to state when its efforts to locate him will be successful, if at all.”
Primoff further asked the court to grant the SEC a 90-day extension which would elapse on May 30, 2022. According to the attorney, the extension would enable the Commission to look for Kumbhani and serve the BitConnect founder with an earlier complaint by the SEC if he is found to be in the United States.
How it all Started
BitConnect was founded in 2016 and gained popularity in mid-2017 amid the initial coin offering (ICO) mania. Earlier in 2017, the platform launched a crypto lending program and had a native token called the BitConnect Coin (BCC).
The lending program which allowed users to loan their cryptocurrency to the platform’s trading bots, touted hyperbolic returns. Investors were promised a “volatility software interest” as high as 40% monthly. However, BitConnect’s operations came under heavy criticism from members of the crypto community, with Ethereum co-founder Vitality Buterin labeling the company a Ponzi scheme.
In January 2018, BitConnect shut down its lending program after U.S. regulators in Texas and North Carolina slammed the exchange with cease-and-desist orders. Before the closure, the scheme raised billions of dollars from investors globally.
Following the shut down, the value of BCC crashed to almost zero–down from an all-time high near $500 with a market capitalization of $3.4 billion–massive losses for investors.
SEC, DoJ Charge Kumbhani for Defrauding Investors
In September 2021, the SEC charged both Kumbhani, and the lead promoter of the BitConnect platform in the U.S. (Glenn Arcaro) for operating a fraudulent and unregistered investments program. Arcaro pleaded guilty to the charges levied against him.
Towards the end of February 2022, the Department of Justice (DoJ) also indicted Kumbhani for defrauding investors of $2.4 billion in a Ponzi scheme. According to the indictment, Kumbhani and his network of promoters allegedly manipulated and drove up the price of BCC to create artificial market demand.
In addition, the DoJ charged the BitConnect founder with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering.
If found guilty of all aforementioned counts, Kumbhani could face a maximum prison sentence of 70 years.