The Justice Department seized $56 million worth of cryptocurrency as part of an investigation into BitConnect's offshore crypto lending scheme, authorities said Tuesday. In its statement, the Justice Department said the liquidation of the cryptocurrency is - the largest single recovery of cryptocurrency fraud by the United States to date.
Scammers allegedly conned thousands of people in the USA and overseas out of $2 billion worth of bitcoin between January 2017 and January 2018 by claiming to be able to provide returns as high as 40% per month out of BitConnect purported volatility trading bot.
As Defendants knew or recklessly disregarded, BitConnect did not expand investor funds for trading with its purported Trading Bot, said SEC in court. By using digital wallet addresses controlled by Kumbhani, Arcaro, and other promoters, including the Arcaro Promoters, to transfer investor funds to their benefit and the benefit of their associates, BitConnect and Kumbhani siphoned off investors funds.
According to the Justice Department, BitConnect was a Ponzi scheme, paying earlier investors with money from later investors, the Justice Department said in September. Arcaro faces a maximum possible sentence of 20 years in prison. He is due to be sentenced on Jan 7th.