BitConnect founder Satish Kumbhani has been indicted by a federal grand jury in San Diego, to stand trial for orchestrating a Ponzi scheme.
Last year, the US Securities and Exchange Commission charged Kumbhani for fraudulently raising US$2 billion (A$2.8 billion) by “with lying about BitConnect's ability to generate profits, and violating registration laws meant to protect investors”.
The grand jury indictment, announced by the Department of Justice late last week, accuses the Indian citizen of lying about BitConnect’s Lending Program, Trading Bot, and Volatility Software.
The company claimed these would generate returns for investors, by using their money to trade on the volatility of crypto exchange markets.
However, all BitConnect did, the indictment says, was pay earlier investors using money taken from later investors.
“In total, Kumbhani and his co-conspirators obtained approximately US$2.4 billion from investors,” the DoJ statement said.
After the Lending Program had operated for a year, the DoJ said, Kumbhani shut it down, and instructed his minions to switch their attention to “manipulate and prop up the price of BitConnect’s digital currency”. This, the DoJ said, would create the impression there was demand for BitConnect Coin.
The DoJ also accused him of laundering the proceeds through a “cluster of cryptocurrency wallets”.
The specific charges in the indictment are 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.
While saying the charges would carry a cumulative 70 years in prison if Khumbani were convicted, that depends on whether the FBI and IRS are able to track him down, because the announcement noted that he remains at large.
