The US Department of Justice (DOJ) is selling cryptocurrency worth $56 million confiscated from Bitconnect’s “number one promoter,” the largest crypto scam scheme ever prosecuted. Investors were duped into investing more than $2 billion. The operator of Bitconnect faces a potential sentence of 20 years in prison.
The Justice Department announced that it would sell the seized cryptocurrency and keep the revenues in US dollars until it could utilize the money to compensate BitConnect victims. The $56 million in cryptocurrency is now held by the US government in wallets, and the amount of compensation paid to anyone affected by BitConnect’s scam will be determined by a future restitution decision by the court during sentencing, according to the US government.
On Friday, United States District Judge Todd W. Robinson permitted an application from the Department of Justice and the United States Attorney’s Office for the Southern District of California for power to liquidate nearly $56 million in scam funds captured from the self-described “number one promoter” of Bitconnect, a cryptocurrency, who given consent to the detention.
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According to the Justice Department:
“This liquidation marks the United States’ greatest single recovery of a cryptocurrency scam to date.”
The Justice Department stated that BitConnect was the largest crypto fraud case in the United States for which legal accusations had been issued.
BitConnect’s culprits were responsible for a $2 billion unlicensed securities issuance that made them rich. Glenn Arcaro, the program’s former director and marketer, was found convicted of charges of fraud and was sentenced to pay $24 million to BitConnect’s victims in September.
The Securities and Exchange Commission (SEC) has also filed charges against Arcaro and BitConnect founder Satish Kumbhani, whose locations are unknown as of this writing. Other individuals implicated in the Ponzi scheme have reached settlements with the SEC, but many are experiencing prison time or substantial financial fines for their role in fraudulently defrauding investors.
BitConnect was founded in 2017, and its proponents enticed investors with promises of high profits by allowing them to borrow and trade the platform’s native token using BTC as collateral. Following cease and desist orders from state regulators, the lending site shut down in 2018, leaving many investors unable to redeem their crypto holdings.
On September 1, Glenn Arcaro, 44, of Los Angeles, admitted to engaging in a major scheme to defraud Bitconnect clients in the United States and internationally, in which investors were unlawfully enticed to invest over $2 billion.
According to the DOJ, the government is trying to make whole victims of the Bitconnect fraud by selling bitcoin and retaining the proceeds in US dollars. The statement reads that the government will keep the confiscated proceeds in cryptocurrency wallets and plans to utilize them to pay compensation to the victims in accordance with a future restitution order issued by the court during sentencing.
Arcaro is expected to be sentenced on January 7, 2022, according to the US Department of Justice, and he faces a maximum punishment of 20 years of imprisonment.