The SEC has brought an enforcement action against the crypto lending platform BitConnect, its founder Satish Kumbhani, BitConnect’s top U.S. promoter, Glenn Arcaro, and Arcaro’s affiliated company, Future Money Ltd. The SEC alleges in its complaint that the defendants defrauded U.S. and overseas retail investors by selling unregistered investments in a lending program. BitConnect allegedly falsely promised investors that BitConnect would use a “volatility software trading bot” that could generate returns as high as 40 percent per month. BitConnect also allegedly rewarded investors for recruiting new investors through a pyramid scheme-like referral program. BitConnect allegedly paid investors out of incoming investor funds and did not trade investors’ Bitcoin consistent with its representations. Investors allegedly lost $2 billion. The action is pending in the United States District Court for the Southern District of New York. The SEC’s September 1, 2021 press release announcing the action is here.
In a parallel action, the Department of Justice announced that Arcaro pleaded guilty to criminal charges for his role in its cryptocurrency scheme. The DOJ claims the BitConnect scheme is the largest cryptocurrency fraud ever charged criminally. In pleading guilty, Arcaro admitted to conspiring with others to exploit rising interest in cryptocurrency by fraudulently marketing BitConnect’s coin offering and digital currency exchange as a sound investment.
GAO Releases Report on Use of Virtual Currencies to Facilitate Trafficking
Blockchain Law Center | (01/11/2022)
Annual Banking Report Predicts Increased Crypto Services in 2022
Blockchain Law Center | (12/20/2021)
Recent House Financial Services Committee Hearing: "Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States"
Blockchain Law Center | (12/10/2021)
OCC Releases Semiannual Risk Perspective
Blockchain Law Center | (12/07/2021)
Interagency Joint Statement on Crypto-Asset Policy and OCC Interpretive Letter Released the Same Day
Blockchain Law Center | (11/24/2021)
About Blockchain Law Center
Blockchain technology utilizes a distributed digital ledger to record and track information, and can be leveraged to gain transparency and certainty in transactions ranging from cryptocurrency to supply chain tracking. This blog provides information on the legal developments surrounding implementation of blockchain technology, with an initial focus on the financial services sector.