The SEC has brought an enforcement action against the crypto lending platform BitConnect, its founder Satish Kumbhani, BitConnect's top U.S. promoter, Glenn Arcaro, and Arcaro's affiliated company, Future Money Ltd. The SEC alleges in its complaint that the defendants defrauded U.S. and overseas retail investors by selling unregistered investments in a lending program. BitConnect allegedly falsely promised investors that BitConnect would use a "volatility software trading bot" that could generate returns as high as 40 percent per month. BitConnect also allegedly rewarded investors for recruiting new investors through a pyramid scheme-like referral program. BitConnect allegedly paid investors out of incoming investor funds and did not trade investors' Bitcoin consistent with its representations. Investors allegedly lost $2 billion. The action is pending in the United States District Court for the Southern District of New York. The SEC's September 1, 2021, press release announcing the action is here.
In a parallel action, the Department of Justice announced that Arcaro pleaded guilty to criminal charges for his role in BitConnect's cryptocurrency scheme. The DOJ claims the BitConnect scheme is the largest cryptocurrency fraud ever charged criminally. In pleading guilty, Arcaro admitted to conspiring with others to exploit rising interest in cryptocurrency by fraudulently marketing BitConnect's coin offering and digital currency exchange as a sound investment.
DISCLAIMER: This article was originally published by McGonigle PC prior to their combination with Davis Wright Tremaine LLP. The article is published here with permission.