Department of Justice (DOJ) has announced it intends to sell $56 million worth of Bitcoin which was seized during the investigation of cryptocurrency investment scheme BitConnect. The proceeds from the sale will be used to reimburse those who lost money due to this scam.

The founder and promoters of BitConnect scammed investors out of $2 billion in 2017. Glenn Arcaro was the man behind BitConnect, the biggest heist in the cryptocurrency world. As a result of commissions and other payments to Arcaro, he earned no less than $24 million.

The Office of the US Attorney for the Southern District of California stated, “In truth, BitConnect operated a textbook Ponzi scheme by paying earlier BitConnect investors with money from later investors.”

In this Ponzi scheme, investors were promised large profits and guaranteed returns by trading on crypto markets' volatility. BitConnect's early investors were paid out of new investor money while Arcaro earned millions in commissions.

Glenn Arcaro, BitConnect's top promoter, pleaded guilty to federal charges and was seized of several crypto-assets. He and BitConnect founder Satish Kumbhani told investors that the coin could earn up to 40% in monthly returns by allowing them to borrow and trade the platform's native token using BTC as collateral. In 2018, the lending platform closed after state regulators issued cease and desist orders, preventing many investors from redeeming their crypto holdings.

The Securities and ExchangeCommission (SEC) of the United States sued Kumbhani in September for obtaining $2 billion from investors in an offering that was not properly registered with regulators. A lawsuit was filed by the SEC in May against five BitConnect promoters who created video testimonials on YouTube to gain commissions from it.

This is the largest crypto-currency fraud scheme ever criminally prosecuted in the United States. To date, it is the largest recovery resulting from a fraud involving crypto-currency.

Pavan A

CBW - External Analyst

INDIA