The Securities and Exchange Commission of the United States has sued BitConnect’s founder for his alleged involvement in a $2 billion cryptocurrency scam that stunned the cryptocurrency community.
The United States Securities and Exchange Commission (SEC) has filed a civil case against BitConnect founder Satish Kumbhani, according to a news release published by the agency. BitConnect was described by the regulatory body as a “global fraudulent and unregistered offering of investments in a scheme using digital assets.”
Khumbhani was the company’s top promoter in the United States, where it eventually raised $2 billion from investors. The latter entrusted their assets to a program that BitConnect advertised as having a high rate of return.
According to the SEC’s press notice, Khumbhani and others diverted investor monies to digital wallets for their personal advantage. Additionally, they state that BitConnect created a sizable network of promoters worldwide, implying that this was a well-coordinated effort. Lara Shalov Mehraban, Associate Regional Director of the Securities and Exchange Commission’s New York Regional Office, stated,
“We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets. We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”
The SEC’s objective is to compile findings and reclaim a portion of the funds, among other things. Meanwhile, Khumbhani’s whereabouts are unclear.
The BitConnect saga serves as a cautionary tale.
While many investors are now suspicious of scams such as BitConnect’s ridiculously high return claims, many investors during the 2017 frenzy were misinformed. The crypto market appears to attract more new investors with each bull cycle, which usually results in some damage.
The BitConnect fraud is one of the most notable — and meme-worthy — occurrences in the bitcoin sector. As far as cryptocurrency Ponzi schemes go, this was the most egregious. Investors have become increasingly dubious of bitcoin ventures and their claims since then.
The incident had a significant impact on the market, encouraging due diligence, yet it has not prevented bitcoin scams from occurring. Regulators and investors are angry about the Africrypt scam, which resulted in the theft of $3.6 billion.
Regulators have increased their study of the crypto market in light of this and other factors. Regulators are prioritizing investor safety above all else, and fraud is undoubtedly at the top of their agenda. In any case, the market is still in its infancy, and regulation should help rein in any undesirable behavior.
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