800 victims of ‘massive’ Bitconnect fraud to receive $17M restitution
The millions will be distributed among the select number of victims, but thousands more were impacted by the $2.4 billion fraudulent scheme.
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A group of crypto fraud victims of the BitConnect investment scheme will see some respite from the multi-billion dollar fraud scheme after a court ordered they receive a share in a $17 million restitution.
The United States District Court for the Southern District of California ordered the restitution for the “massive” scheme on Jan. 12 according to a release on the same day by the Department of Justice (DOJ).
800 victims of the scheme, hailing from 40 countries will be able to take a small slice of the $17 million restitution, a term that refers to returning property or monetary value of losses to the proper owner.
The DOJ statement noted that Bitconnect was a purported crypto lending platform that touted proprietary technology including the “Bitconnect Trading Bot” and “Volatility Software” that claimed would net investors guaranteed returns.
It promised a return an average daily compounding interest of 1% or 3,700% annually.
Investors would trade in Bitcoin (BTC) receiving Bitconnect Coin (BCC) in return which could be lent out at varying rates of interest.
However, the whole platform turned out to be a “textbook Ponzi scheme,” as early investors were paid with funds supplied by new investors, it wrote.
The crypto platform launched in 2016 but collapsed in 2018 after pilfering $2.4 billion from over 4,000 people from 95 countries.
Related: How to tell if a cryptocurrency project is a Ponzi scheme
The alleged founder of Bitconnect, Satish Kumbhani, was charged by the DOJ in February 2022. He is also subject to a police investigation in India and his whereabouts are currently unknown.
The top U.S.-based Bitconnect promotor, Glenn Arcaro, pled guilty to wire fraud conspiracy charges in September 2021 and was ordered to pay back $24 million to investors.
According to the DOJ, Arcaro and others used 15% of Bitconnect investor money for a slush fund to be used for the benefit of its owner and other promoters.
On Sep. 16, 2022, Arcaro was sentenced to 38 months in prison for his participation in Bitconnect.
