A federal district court in San Diego ordered Thursday that over $17 million in restitution be distributed to approximately 800 victims from over 40 different countries due to their investment losses in BitConnect, a massive cryptocurrency investment scheme that defrauded thousands of investors worldwide.
On Sept. 16, 2021, Glenn Arcaro, 44, the top U.S.-based promoter for BitConnect, pleaded guilty to conspiracy to commit wire fraud.
Separately, on Feb. 25, 2022, the founder of BitConnect, Satish Kumbhani, was indicted for his central role in the multibillion-dollar fraud.
Defendants are presumed innocent unless proven guilty.
As part of Arcaro’s plea, he admitted to conspiring with others to exploit investor interest in cryptocurrency by fraudulently marketing BitConnect’s initial coin offering and digital currency exchange as a lucrative investment.
Arcaro and co-conspirators misled investors about BitConnect’s “Lending Program.”
Under this program, Arcaro touted BitConnect’s purported proprietary technology, known as the “BitConnect Trading Bot” and “Volatility Software,” as being able to generate substantial profits and guaranteed returns by using investors’ money to trade on the volatility of cryptocurrency exchange markets.
In truth, however, BitConnect operated a textbook Ponzi scheme by paying earlier BitConnect investors with money from later investors.
Arcaro and his co-conspirators ensured that up to 15% of the money invested into BitConnect went directly into a slush fund to be used for the benefit of its owner and promoters.
The FBI Cleveland Field Office and IRS-CI Los Angeles Field Office investigated the case.
Trial Attorney Kevin Lowell of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Carl Brooker, Lisa Sanniti, and Mark W. Pletcher and Contract Attorney Mark McDonald for the Southern District of California are prosecuting the case.