Promoter of BitConnect fraud scheme returns $24 million to investors
Former BitConnect director and promoter Glenn Arcaro pleaded guilty to participating in a fraud scheme that swindled more than $2 billion from cryptocurrency investors.
According to a press release from the U.S. Department of Justice, BitConnect is considered the largest cryptocurrency fraud prosecuted.
Arcaro admitted that he conspired with others to defraud investors by taking advantage of their interest in cryptocurrencies. The scammers sold them proprietary BitConnect tokens and promoted exchange trading in digital assets as a lucrative investment.
In truth, BitConnect used a textbook Ponzi scheme, paying off early investors to later investors, the agency said in a statement
Arcaro led a large network of scheme promoters in North America, setting up a pyramid scheme known as the BitConnect referral program. He earned up to 15 percent of the amounts invested in another part of the project, the lending program, and also received rewards from the "black box."
Arcaro took responsibility for his actions in defrauding thousands of people around the world to invest in BitConnect. He stuffed his pockets with millions of dollars, money from victims who thought their money was invested in a new cryptocurrency with high returns, said FBI Special Agent Eric Smith.
The court ordered Arcaro to pay investors the $24 million he earned from the fraud.
In parallel, the SEC filed a civil lawsuit against BitConnect, its founder Satish Kumbhani, Arcaro and an affiliated company. The regulator accused them of making an illegal investment offer that resulted in them swindling $2 billion from investors.
We allege that the defendants stole billions of dollars from retail investors worldwide through their interest in digital assets, the document said.
The SEC is seeking refunds to investors with interest and civil penalties against the defendants.
Recall that the regulator has already reached agreements with three participants in the fraudulent scheme, who have agreed to pay damages and fines.