BitConnect victims to receive $17 million restitution

A federal court in California ordered today $17 million in restitution to be paid to roughly 800 victims from over 40 different countries who lost their money to the infamous BitConnect scheme.

The Department of Justice (DOJ) described Bitconnect as “a massive fraudulent cryptocurrency investment scheme.”

Bitconnect went down in history as the biggest heist in the cryptocurrency world. The scheme is alleged to have collected nearly 325,000 BTC (worth more than $6 billion at today’s prices). The now-defunct cryptocurrency platform was a Ponzi scheme founded in 2016, which fraudulently lured investors with promises of exorbitantly high returns.

Little is known about BitConnect founders, but the hoax that devastated the lives of thousands of retail investors is widely believed to have started in India.

BitConnect shut down its lending operation, which was the heart of the infamous platform, in 2018. However, the scam was notorious enough to warrant a regulatory action from the SEC regulator and the FBI.

Their promoters in the U.S. and elsewhere were allegedly rewarded through commissions that were mostly “concealed from investors,” the SEC said.

Like with all Ponzi schemes, the scam worked perfectly until victims started to become skeptical. Once they tried to withdraw their deposits or earnings, BitConnect could not sustain their operations and went bust.

Just before the scam broke out, regulators tried to catch up with the “get-rich-quick” scheme through cease and desist orders.

This wasn’t the first action against BitConnect by the SEC. The watchdog has previously reached settlements – worth nearly $12 million – with two individuals charged with promoting the scam in the U.S.

In September 2021, Glenn Arcaro, the top US promoter for BitConnect, pleaded guilty to conspiracy to commit wire fraud. Separately, in February 2022, the founder of BitConnect, Satish Kumbhani, was indicted for his central role in the multibillion-dollar fraud.

As part of Arcaro’s plea, he admitted to earning $24 million from the scam, all of which will be repaid to investors in restitution or forfeited to the government.

The United States Marshals Service (USMS), a federal law enforcement agency within the U.S. Department of Justice, also auctioned $56 million worth of cryptocurrency the authorities seized from BitConnect.

The DoJ said this liquidation of proceeds – forfeited as part of a civil forfeiture case targeting a US promoter of BitConnect – is the largest single recovery of a cryptocurrency fraud by the United States to date.

The government will maintain custody of the seized proceeds in cryptocurrency wallets.  Pursuant to a future restitution order by the court, it intends to use these funds to provide restitution to the victims.