Indian origin crypto-scamster of $2.4bn indicted in San Diago, now at large


A US court has indicted an Indian cryptocurrency founder for orchestrating a global Ponzi scheme, by swindling billions of dollars.

Satish Kumbhani, the founder of Bitconnect, was running an alleged fraudulent cryptocurrency investment platform that reached a peak market capitalization of $3.4 billion.

According to court documents, Satish Kumbhani, 36, of Hemal, India, the founder of BitConnect, misled investors about BitConnect’s “Lending Program.”

Under this program, Kumbhani and his co-conspirators touted BitConnect’s purported proprietary technology, known as the “BitConnect Trading Bot” and “Volatility Software,” as being able to generate substantial profits and guaranteed returns by using investors’ money to trade on the volatility of cryptocurrency exchange markets.

On Friday, February 25, prosecutors said Kumbhani misled investors about his platform’s propriety technology. He promised high returns but they did not get what was offered to them. The US also alleged that BitConnect diverted the money of new investors to pay earlier ones. They were also operating a money transmitting business without any license.

US Securities and Exchange Commission attorney Richard Primoff, in a court filing, has stated that Kumbhani, 36, has relocated from India to an unknown address in a foreign country.

“Since November, the commission has been consulting with that country’s financial regulatory authorities in an attempt to locate Kumbhani’s address. At present, however, Kumbhani’s location remains unknown,” said Primoff in the filing requesting the US District Judge for an extension until May 30, 2022 to serve him with the complaint.

According to the indictment, to avoid regulatory scrutiny and oversight of BitConnect’s cryptocurrency offering, Kumbhani evaded U.S. regulations governing the financial industry, including those enforced by the Financial Crimes Enforcement Network (FinCEN). For example, although BitConnect operated a money transmitting business through its digital currency exchange, BitConnect never registered with FinCEN, as required under the Bank Secrecy Act.

“Crime, particularly crime involving digital currencies, continues to transcend international boundaries,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “The department is committed to protecting victims, preserving market integrity, and strengthening its global partnerships to hold accountable criminals engaging in cryptocurrency fraud.  We thank our partners around the world for their continued efforts.”

Kumbhani’s key aid Divyesh Darji, Asia head of Bitconnect is being investigated by the Surat CID team, India.

Darji meanwhile has been out on bail. Gujarat High Court, on February 7, extended his and his daughter Dimki Aatish Kumar Patel, another key accused in the case interim bail relief till the next hearing. The interim relief has continuously been extended for the last two years.

The Bitconnect scam size has been evaluated to the tune of INR 18,000 Cr ($2.4 Bn). However, according to the Surat CID team who has been investigating the case in India, the scam size was worth INR 41,000 Cr. Out of which Darji made a 10% cut, i.e. INR 4,100 Cr.

In 2016, Kumbhani claimed to have created a blockchain called Bitconnect. He then launched a Bitconnect lending program using native tokens called Bitconnect coins (BCC).

According to the SEC’s complaint, filed in the United States District Court for the Southern District of New York, from early 2017 through January 2018, Kumbhani conducted a fraudulent and unregistered offering and sale of securities in the form of investments in a “Lending Program” offered by BitConnect.

As did Amit Bhardwaj in the case of GainBitcoin, Kumbhani was asking investors to deposit in bitcoins while the returns were issued in BCC. In December 2017, BCC was one of the 20 crypto coins in the world.

Similar to how Bhardwaj organized big yacht parties for investors and promotors, Kumbhani too organized a slew of big events and particles in Dubai, Santa Clara and other cities to convince promotors and investors in the scheme.

Lara Shalov Mehraban, associate regional director of SEC’s New York Regional Office while filing the complaint in the US District Court said, “We allege that these defendants [Kumbhani and his associates] stole billions of dollars from retail investors around the world by exploiting their interest in digital assets. We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”

Kumbhani is charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering. If convicted of all counts, he faces a maximum total penalty of 70 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

As of now, Kumbhani is still at large.