The Securities and Exchange Commission charged BitConnect founder Satish Kumbhani with lying about BitConnect’s ability to generate $2 billion in profits from thousands of retail investors.
Founded in 2016, BitConnect developed a digital token called BitConnect Coin that could be exchanged for Bitcoin.
In a lawsuit filed in federal court in Manhattan, the SEC also charged promoter Glenn Arcaro and his firm Future Money Ltd, the top US promoter of BitConnect, of fraudulently receiving more than $24 million in “referral commissions” and other sums.
Arcaro pleaded guilty Wednesday to a similar fraud charge before U.S. Magistrate Judge Mitchell Dembin in San Diego.
The SEC said investors were informed in a BitConnect “lending program” that BitConnect was using a “volatility software trading bot” that would generate returns of 40% per month, and was awarded fictitious returns of 3,700% on an annual basis.
Prosecutors accused BitConnect of operating a “textbook Ponzi scheme” by paying former investors with new investor money.
For more information, view the original story from Reuters.