Largest Cryptocurrency Scheme Prosecuted to Liquidate $56 Million
On November 12, 2021, Federal District Judge Todd W. Robinson granted the Department of Justice (DOJ) and the US Attorney's Office for the Southern District of California's request to liquidate approximately $56 million–the largest cryptocurrency fraud ever prosecuted, and the largest cryptocurrency scheme ever recovered in the U.S.
Glenn Arcaro, 44, who described himself as the "number one promoter" of the cryptocurrency consented to the seizure of the proceeds. The Federal Bureau of Investigation (FBI) and IRS Criminal Investigation (CI) continue investigations, with the Postal Inspection Service (USPIS) assisting in liquidation of cryptocurrency.
According to Market Insider, Arcaro received $24 million in referral commissions.
The DOJ announced Arcaro admitted to participating in a large-scale conspiracy to defraud BitConnect investors in the U.S. and abroad, resulting in the fraudulent investment of over $2 billion. Satish Kumbhani, the founder of BitConnect and Arcaro, reportedly told investors that the coin could return up to 40 percent on a monthly basis.
After receiving a cease-and-desist letter for unauthorized sale of securities and denial-of-service cyber-attacks, BitConnects shut down in 2018.
BitConnect promoters who created video testimonials and received commissions from YouTube were sued by the Securities and Exchange Commission (SEC) in May. The promoters settled with the SEC by paying 190 bitcoins and $3.5 million.
The SEC is currently suing Kumbhani for a global fraudulent and unregistered investment program involving digital assets defrauded retail investors out of $2 billion.
"We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets," stated Lara Shalov Mehraban, Associate Regional Director of SEC's New York Regional Office. "We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space."
The DOJ will use the seized proceeds to provide restitution to the victims in cryptocurrency wallets. The process of seeking to compensate victims of the BitConnect scheme will begin with the entry of the interim sale order once the cryptocurrency has been sold and the proceeds are held in U.S. dollars.