BitConnect Collapses, Defrauding Investors of Estimated $2 Billion
Summary #
BitConnect, a cryptocurrency and lending platform, operated a fraudulent high-yield investment program (HYIP) from 2016 to 2018. The platform promised unsustainable daily returns of 1% with compounding, attracting a large investor base through aggressive multi-level marketing (MLM) tactics. In January 2018, BitConnect abruptly shut down the HYIP, triggering a panic and leading to a 90%+ drop in the value of BitConnect Coin (BCC). The U.S. Securities and Exchange Commission (SEC) later concluded BitConnect operated as a Ponzi scheme, defrauding investors of an estimated $2 billion.
Attackers #
Key figures involved in BitConnect include founder Satish Kumbhani and top promoter Glenn Arcaro.
Losses #
BitConnect defrauded investors of an estimated $2 billion USD.
Timeline #
- February 15, 2016: BitConnect launched along with HYIP program.
- January 5, 2018: Texas securities regulator issues cease and desist order against BitConnect.
- January 16, 2018: Bitconnect shuts down HYIP, Bitconnect Coin (BCC) price dropped from $525 to under $1.
- September 1, 2021: Top promoter Glenn Arcaro pleads guilty to wire fraud, forfeiting $56 million. The SEC has filed an action against BitConnect.
- February 25, 2022: Founder Satish Kumbhani indicted on fraud charges.
- January 12, 2023: Arcaro ordered to pay $17 million in restitution to victims.
Early Indicators #
- Unsustainable Return Promises: Offered a 1% daily ROI.
- Aggressive MLM Tactics: Used multi-level marketing to attract investors.
- Regulatory Concerns and Warnings: Received cease and desist orders from Texas State Securities Board and North Carolina Secretary of State Securities Division.
- Lack of Transparency: Unclear investment strategy and operation of so-called “trading bot”.