The U.S. Justice Department will dispose off in sales $56 million worth of cryptocurrency it seized as part of a massive Ponzi scheme case against a man who promoted the offshore crypto lending program BitConnect, authorities announced on Tuesday.
The Justice Department said the liquidation of the cryptocurrency follows “the largest single recovery of a cryptocurrency fraud by the United States to date.
Proceeds will be used to reimburse victims of the BitConnect fraud.
The Justice Department encouraged victims of that fraud to visit a website, https://www.justice.gov/usao-sdca/us-v-glenn-arcaro-21cr02542-twr, to submit claims for reimbursement from the sale.
That scam is alleged to have swindled thousands of people in the U.S. and abroad out of more than $2 billion worth of bitcoin from January 2017 to January 2018 by offering investors returns of as high as 40% per month, which supposedly would be generated by BitConnect’s purported volatility software trading bot.
“These claims were a sham,” the Securities and Exchange Commission said in a lawsuit in September against BitConnect, its founder Satish Kumbhani and Glenn Arcaro, a Los Angeles man who was the lead promoter of BitConnect in the United States.
“As Defendants knew or recklessly disregarded, BitConnect did not deploy investor funds for trading with its purported Trading Bot,” the SEC said in the suit.
Instead, “BitConnect and Kumbhani siphoned investors’ funds off for their own benefit, and their associates’ benefit, by transferring those funds to digital wallet addresses controlled by Kumbhani, Arcaro, other promoters, including the Arcaro Promoters, and other unknown individuals.”
Authorities said the scheme is believed to be the largest cryptocurrency fraud ever prosecuted.
The cryptocurrency being sold was seized from 20 digital wallets controlled by Arcaro, who pleaded guilty Sept. 1 to conspiracy and wire fraud related to the scheme to fraudulently market BitConnect’s coin offering and digital currency exchange.
Arcaro, 44, earned no less than $24 million from commissions and other payments
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