The founder of a cryptocurrency company was charged by a San Diego federal grand jury Friday in a wide-ranging indictment alleging he defrauded global investors out of more than $2.4 billion in what prosecutors said is believed to be the largest swindle of its kind ever criminally charged.
Satishkumar Kurjibhai Kumbhani, 36, a citizen and resident of Surat, India, is charged with numerous conspiracy counts relating to wire fraud, money laundering and commodities fraud, as well as one count of operating an unlicensed money transmitting business. His whereabouts were unclear Friday night.
Kumbhani, who used aliases to hide his identity, is accused of running BitConnect, the company he formed in 2016, as a “textbook Ponzi scheme,” according to the indictment.
Investors around the world, including those in San Diego, were encouraged to buy BitConnect’s open-source, decentralized cryptocurrency, called BCC, using Bitcoin for the purchase.
Investors would then “lend” their BCC tokens to Bitconnect, which would purportedly invest the proceeds using proprietary technology known as the Trading Bot and Volatility Software. The technology was supposedly designed to trade automatically, and profitably, by buying and selling on the volatility of Bitcoin, according to the indictment.
But much of the technology remained a mystery to investors. When someone asked for a demonstration at an event in 2017, Kumbhani was evasive: “So you ask me very hard question,” he told one interviewer. He added later, “For privacy reasons we are not disclosing anything …”
Prosecutors say the investments weren’t being traded as promised but were instead used to pay out earlier investors, typical of a pyramid scheme. The funds would also be used to pay BitConnect’s army of promoters, who would market the investment opportunity on social media and at live events.
Glenn Arcaro, described by prosecutors as “one of the most prolific and successful” of the bunch overseeing the…
