Satish Kumbhani – the founder of cryptocurrency investment company Bit Connect – has been charged with conspiracy to commit wire fraud and conspiracy to commit commodity price manipulation amongst other crimes.
Bit Connect Is Facing the Call of Justice
Bit Connect is believed to have been at the forefront of a $2.4 billion crypto Ponzi scheme. U.S. attorney Randy Grossman for the Southern District of California explained in a statement:
This indictment alleges a massive cryptocurrency scheme that defrauded investors of more than $2 billion. The U.S. Attorney’s Office and our law enforcement partners are committed to pursuing justice for victims of cryptocurrency fraud.
Kumbhani presently lives in India, meaning he is outside the jurisdiction of the U.S. Justice Department. Government officials claim that Bit Connect and its executives misled investors by stating that they could potentially earn heavy profits through investing in the company. The company put out a statement that it boasted unique trading software that could generate profit and guarantee returns through crypto trading options.
Unfortunately, the company operated what appears to be a classic Ponzi scheme in which the funds garnered from new traders were used to pay off old investors. Assistant attorney general Kenneth A. Polite Jr. of the Justice Department’s criminal division said:
Crime, particularly crime involving digital currencies, continues to transcend international boundaries. The department is committed to protecting victims, preserving market integrity, and strengthening its global partnerships to hold accountable criminals engaging in cryptocurrency fraud. We thank our partners around the world for their continued efforts.
Eric B. Smith of the Federal Bureau of Investigation’s (FBI’s) Cleveland, Ohio field office was put in charge of the case against Bit Connect. Throwing his two cents into the mix, Smith mentioned:
Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space. Dressing up a tried-and-true fraud scheme with a new twist and basing [the scheme] overseas will not deter the resolve and dedication of the FBI to meticulously investigate and bring such fraudsters to justice.
Bringing the Fraudsters Down
Ryan L. Korner of the Internal Revenue Service (IRS) was also tasked with hunting down Kumbhani. He commented in an interview:
As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars. However, make no mistake. Our agency will continue our long tradition of following the money, whether physical or digital, to expose criminal schemes and hold the fraudsters accountable for their illegal acts of trickery and deceit.
Not long ago, blockchain analysis company Chainalysis issued a report stating that the amount of fraud that has taken place in the crypto space over just the last year alone grew to unprecedented levels.