SEC charges crypto lending platform, key executives with suspected $ 2 billion fraud



The Securities and Exchange Commission announced on Wednesday that it has filed a lawsuit against BitConnect, an online crypto lending platform, its founder Satish Kumbhani, and its main US promoter and affiliate, alleging they had defrauded $ 2 billion retail investors through a global market. fraudulent and unregistered offer of investments in a program involving digital assets.

According to the SEC complaint, filed with the United States District Court for the Southern District of New York, from early 2017 to January 2018, the defendants made a fraudulent and unregistered offer and sale of securities in the form of investments in a “loan program” offered by BitConnect.

The complaint alleges that, in order to induce investors to deposit funds into the alleged loan program, the defendants falsely represented, among other things, that BitConnect would deploy its so-called “volatility software trading bot” which, by using the deposits of the investors, would generate exorbitant returns. .

However, the SEC alleges that instead of deploying investor funds to trade with the alleged trading bot, the defendants BitConnect and Kumbhani siphoned investor funds for their own benefit by transferring those funds to digital wallet addresses. controlled by them, their main promoter in the United States. , defendant Glenn Arcaro, et al.

The SEC complaint further alleges that BitConnect and Kumbhani established a network of promoters around the world and rewarded them for their promotional efforts and awareness by paying commissions, a significant portion of which they withheld from investors.

According to the complaint, among those promoters was Arcaro, the main national promoter of BitConnect for the United States, who used the website he created, Future Money, to attract investors to the loan program.

“We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets,” said Lara Shalov Mehraban, associate regional director of the SEC’s regional office in New York. “We will aggressively prosecute and hold accountable those who make mistakes in the digital asset space.”

The SEC complaint accuses the defendants of violating the anti-fraud and registration provisions of federal securities laws. The complaint seeks an injunction, restitution plus interest and civil penalties. The SEC previously made deals with two of the five people it indicted in a related action to promote the BitConnect offering. In a parallel action, the Justice Department today announced that Arcaro has pleaded guilty to criminal charges.

The SEC investigation was conducted by Gwen Licardo of the SEC Retail Strategy Working Group, Michael Baker and Pamela Sawhney of the SEC Cyber ​​Unit, and Jorge Tenreiro and Jordan Baker of the office. SEC regional office in New York. The case was overseen by John O. Enright, Ms. Mehraban and Kristina Littman, head of the Cyber ​​Unit. The litigation is led by Mark Sylvester, Richard Primoff, Ms. Licardo, Mr. Baker and Ms. Sawhney. The Commission appreciates the assistance of the Cayman Islands Monetary Authority, Hong Kong Securities and Futures Commission, Monetary Authority of Singapore, Ontario Securities Commission, the Romanian Financial Supervisory Authority and the Thai Securities and Exchange Commission.

The SEC’s Office of Investor Education and Advocacy and Enforcement Retail Strategy Working Group has issued an investor alert on digital assets and crypto investments. Investors can find additional information about digital assets and “crypto” investment programs, including warning signs of fraud, at Investor.gov.


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