Posted by & filed under Blockchain/Cryptocurrencies, Fraud.

By Ann C. Logue

Financial fraud doesn’t have to involve real money because there are so many cryptocurrency frauds. This week, the SEC went after BitConnect, a defunct cryptocurrency operation. They charged the company and several principals with defrauding investors and offering unregistered securities through both Ponzi and pyramid schemes. 

The idea behind BitConnect was that retail customers would exchange their cash money for BitConnect Coins (BCC), digital tokens like so many others. Their investment would earn them incredibly high returns through the company’s volatility software trading bot. Customers would deposit their money for a term, at the end of which they could exchange their BCC for cash plus interest or roll the funds over for another term. Of course, the volatility software trading bot did not exist. Instead, the money was transferred to digital wallets controlled by BitConnect executives. 

Crypto market observers raised questions almost immediately. The company was formed in 2016, and Wikipedia reports that by 2017, UK regulators were asking for proof of legitimacy. At about the same time, one BitConnect fan, Carlos Matos, has so much love for the coin that he turned into a meme sensation. BitConnect shut down in January of 2018. Between then and this week, investigators were trying to figure out what happened so that they could bring charges.

Customers weren’t completely screwed by the business’s failure because BitConnect Coins are not quite worthless. reports that each is currently worth $0.0000088, down from a high of $451.92. There are 21 million outstanding, for a fully diluted market cap of $184.66—in dollars, not thousands or millions of dollars. It’s possible that something will happen to give BCC real value, as stranger things have happened in the crypto world.

The scammers, meanwhile, allegedly made off with $2 billion. 

In addition to BitConnect’s founder, Satish Kumbhani, the SEC also charged Glenn Arcaro, the company’s most enthusiastic US promoter. Arcaro had a website called Future Money that he used to promote BitConnect and its lending program; he also set up a multi-level marketing program to bring in more investors. Arcaro even made social media videos to criticize critics of the program, as there were many. Of course, Arcaro didn’t become as viral as another 

Arcaro entered a guilty plea on September 1, 2021 and admitted to receiving $24 million in the fraud. He is expected to be sentenced on November 15 and faces as much as 20 years in prison. Kumbhani is an Indian citizen and has not been located. I suspect that the SEC is not the only group looking for him. Meanwhile, Carlos Matos is apparently working as a wellness influencer.

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