- The SEC sued the founder of BitConnect on Wednesday alleging a $US2 ($AU3) billion crypto fraud.
- Satish Kumbhani is accused of improperly selling securities in January 2017.
- BitConnect falsely told investors it could generate monthly returns as high as 40%, according to the SEC.
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The SEC sued the founder of BitConnect on Wednesday for an alleged $US2 ($AU3) billion crypto fraud, according to court filings first reported on by Bloomberg Law.
Satish Kumbhani is accused by the SEC of improperly selling securities, raising $US2 ($AU3) billion from investors in an offering that wasn’t properly registered with regulators. The security raise occurred in January of 2017.
According to the SEC, Kumbhani and Glenn Arcaro, a promoter, improperly sold securities tied to BitConnect’s purported “lending program” throughout 2017. The defendants falsely told investors that it could generate monthly returns as high as 40% with its “volatility software trading bot,” according to the complaint.
The SEC alleges no such trading strategy existed.
In May, the SEC sued five promoters tied to BitConnect that pushed the scheme by creating testimonials on YouTube. The promoters were awarded commissions based on their success in attracting new investors. According to the SEC, Arcaro received more than $US24 ($AU33) million in referral commissions.
The promoters paid 190 bitcoin and $US3.5 ($AU5) million to the SEC to settle the charges.
BitConnects folded in 2018 after it received cease and desist letters for the unauthorized sale of securities and being the victim of DOS cyber attacks.