Former director and promoter of the infamous Bitconnect Ponzi program, Glenn Arcaro, has pleaded guilty to fraud allegations related to his role in the now defunct crypto exchange and credit platform
He was ordered to return $ 24 million to investors.
In a parallel lawsuit in the long-running saga, the US Securities and Exchange Commission (SEC) Bitconnect, its founder Satish Kumbhani, the former director Arcaro and Future Money Ltd. charged with the plan. The defendants are charged with making a fraudulent, unregistered securities offer with net profits of $ 2 billion.
The latest developments come three years after BitConnect shut down its lending platform and crypto exchanges amid warnings from Texas and North Carolina regulators.
Bitconnect has been widely accused of being a Ponzi scheme, and the scheme lives on in myriad memes.
Arcaro pleaded guilty to charges of alleged conspiracy to commit wire fraud, according to a September 1 press release from the Department of Justice (DoJ).
The Los Angeles resident admitted to conspiring with “others” to exploit investors by “fraudulently marketing” BitConnect’s coin offering and crypto trading platform as a highly profitable investment.
The 44-year-old also admitted to using the BitConnect Trading Bot and Volatility Software to mislead investors into believing that they could make big profits and guaranteed returns by using investor funds to trade the volatility of the crypto markets.
“In truth, BitConnect operated a textbook-like Ponzi scheme in which previous BitConnect investors were paid with money from later investors,” says the DoJ’s press release.
Arcaro is said to have operated a large network of promoters in North America that formed a pyramid scheme called the Bitconnect Referral Program. He earned around 15% per investment in BitConnect’s loan program, while also receiving a cut on all investments through a hidden “slush” fund.
The former promoter admitted he made around $ 24 million from his fraudulent activities and was asked to repay the entire amount to investors.
“Arcaro has benefited from the emergence of the cryptocurrency markets, enticed innocent investors around the world to jump in early by promising them guaranteed returns, and used the internet and social media to reach a larger pool of victims more easily and quickly,” said Special Agent in Charge Ryan L. Korner of the IRS Criminal Investigation (IRS-CI) Los Angeles office.
Related: Crypto is too big to exist outside of public policy, the SEC chairman warns
New SEC fees
The SEC charges announced today target BitConnect, founder Satish Kumbhani, former director of Arcaro and Future Money Ltd – a company founded by Arcaro in Hong Kong.
According to the Sept. 1 complaint, the SEC alleges that defendants made a fraudulent and unregistered security offering through BitConnect’s lending platform between 2017 and 2018, which at that time generated approximately $ 325,000 bitcoin (BTC) worth $ 2 billion .
Today we announced that we have filed a lawsuit against an online crypto lending platform, its founder, and its leading US promoter and its affiliate.
They allegedly defrauded private investors out of $ 2 billion!
More: https://t.co/gO10Ag0tfh pic.twitter.com/XghdUBqaCz
– SEC (@SECGov) September 1, 2021
The lawsuit alleges that users were misled into investing in the credit platform by claims that BitConnect’s trading bot would generate guaranteed returns of 40% per month, and accused BitConnect of posting “fictitious returns” averaging 1 on its website % published per day, or 3,700% annually.
“These claims were a sham. As the defendants knew or carelessly disregarded, BitConnect did not use investor funds to trade with its alleged trading bot. Instead, BitConnect and Kumbhani have siphoned off investors’ funds for their own benefit and that of their employees. “
The SEC finds that BitConnect founder Kumbhani’s whereabouts are currently unknown.
The SEC is calling for a full recovery of the funds, a ban on defendants from violating securities laws in the future, and civil fines.
In May, the SEC indicted six other BitConnect promoters over their roles in the alleged uncertainty offer, and Cointelegraph reported on July 8 that the SEC had settled four of the six people.