U.S. to sell cryptocurrency worth $56 million after record seizure in BitConnect fraud case

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  • The US Department of Justice will sell $56 million worth of cryptocurrency seized in a massive Ponzi scheme case against a man promoting cryptocurrency lending program Bitconnect.
  • The Bitconnect scam has reportedly duped thousands of people in the US and abroad, worth more than $2 billion in bitcoins.
  • In September the Securities and Exchange Commission sued Bitconnect, its founders Satish Kumbhani and Glenn Arcaro, who were major promoters of Bitconnect in the United States.

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The US Justice Department will sell $56 million worth of cryptocurrency seized as part of a massive Ponzi scheme case against the preacher offshore crypto lending program bitconnect, officials said on Tuesday.

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The Justice Department said the liquidation of the cryptocurrency is “the largest single recovery of cryptocurrency fraud by the United States to date”.

The proceeds will be used to reimburse victims of the Bitconnect fraud.

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The Justice Department encouraged victims of that fraud to visit a website, https://www.justice.gov/usao-sdca/us-v-glenn-arcaro-21cr02542-twr, to submit a claim for reimbursement from the sale.

That scam alleges that from January 2017 to January 2018, thousands of people held more than $2 billion worth of bitcoins in the US and abroad, offering investors high returns of up to 40% per month, believed by Bitconnect. will be generated. Alleged volatility software trading bot.

“These claims were a sham,” The Securities and Exchange Commission said in a lawsuit in September Against Bitconnect, its founders are Satish Kumbhani and Glenn Arcaro, a Los Angeles-based man who was a major promoter of Bitconnect in the United States.

“As the defendants knew or negligently disregarded, Bitconnect did not deploy investor funds for trading with its alleged trading bots,” The SEC said in the suit.

Instead, “Bitconnect and Kumbhani, for their own benefit, and for the benefit of their affiliates, transferred those funds to digital wallet addresses controlled by other promoters, including Kumbhani, Archaro, the Archaro promoters and other unidentified persons.” done.”

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The scheme is believed to be the biggest cryptocurrency fraud ever, officials said.

The cryptocurrency being sold was confiscated from 20 digital wallets controlled by Archaro, which pleaded guilty on 1 September to conspiracy and wire fraud to fraudulently market Bitconnect’s coin offering and digital currency exchange.

Arkaro, 44, earned at least $24 million from commissions and other payments

Arcaro admitted that he and others misled investors about Bitconnect’s so-called proprietary technology, called a “Bitconnect trading bot” and “volatility software”, by claiming that they were able to control the volatility of cryptocurrency exchange markets. But doing business with big investments will generate profit.

“In truth, Bitconnect operated a textbook Ponzi scheme by paying first Bitconnect investors money from subsequent investors,” the Justice Department said in September.

Arkaro could face a maximum prison sentence of 20 years. He is to be sentenced on January 7.

A federal judge last Friday authorized the Department of Justice and the US Attorney’s Office for the Southern District of California to liquidate confiscated cryptocurrency from Arcaro, which had consented to the seizure.

The SEC said in its lawsuit that Bitconnect was an unincorporated organization that had registered four companies in the United Kingdom, all of which are now either defunct or dissolved.

The SEC said the whereabouts of Kumbhani, a 35-year-old Indian national, is unknown.

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