The Department of Justice (DoJ) announced that the founder of an alleged fraudulent cryptocurrency trading platform, which at one time had a peak market of $3.4 billion, has been indicted by a San Diego Federal grand jury, according to a Feb. 25 release.
DoJ alleges that the crypto trading platform BitConnect amounted to a “global Ponzi scheme” founded by Satish Kumbhani. DoJ says that BitConnect managed to evade the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) and other enforcement methods by never registering with the FinCEN, which is required by law.
“Crime, particularly crime involving digital currencies, continues to transcend international boundaries,” Assistant Attorney General Kenneth A. Polite Jr. of DoJ’s Criminal Division said in the release. “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.”
DoJ says that the BitConnect platform and its founder paid early investors with the funds from later investors, earning Kumbhani and his co-conspirators up to $2.4 billion from investors. Court documents also allege that Kumbhani and his co-conspirators shut down a supposed key feature of the platform after a year and later artificially manipulated the BitConnect digital currency to prop up its price.
“[The] indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space,” Special Agent in Charge Eric B. Smith said in the release. “Dressing up a tried-and-true fraud scheme with a new twist and basing it overseas will not deter the resolve and dedication of the FBI to meticulously investigate and bring such fraudsters to justice.”
DoJ has been looking to beef up its work in the cryptocurrency arena, most recently by recording its largest-ever seizure just a few weeks ago, amounting to approximately $3.6 billion in cryptocurrency. The agency also recently named Eun Young Choi the first-ever director of the DoJ’s National Cryptocurrency Enforcement Team.
The Internal Revenue Service is also pushing for more cryptocurrency compliance tools, recently writing to Sen. Maggie Hassan, D-N.H., requesting both more funding and capabilities to better stop and prosecute criminal uses of cryptocurrencies.
