Indian Authorities Recover Ill-gotten Funds from BitConnect Crypto Ponzi Scheme

Indian authorities recovered almost $200 million worth of ill-gotten funds from a crypto Ponzi scheme from online-tracked digital wallets.

BitConnect: a lucrative crypto Ponzi scheme

BitConnect, an open-source cryptocurrency launched in 2016, grabbed the attention of many crypto enthusiasts.

The platform claimed to offer its users a wide assortment of investment opportunities, including “mining,” “staking,” and “trading” its crypto token, the BitConnect Coin, also known as BCC.

However, BitConnect’s most attractive feature was its so-called lending service, where users could trade Bitcoin for BCC, lock the coin’s value for a predetermined period, and earn funds from daily calculated interest.

The illusion of BitConnect’s Trading Bot

BitConnect founder Satish Kumbhani and promoter Glenn Arcaro claimed to have developed a bot, dubbed “BitConnect Trading Bot,” that would leverage investors’ funds to capitalize on the volatility of crypto exchange markets, promising 40 percent in monthly returns.

Although lucrative on paper, the bot was merely a trick, so it failed to deliver any actual results to its investors. However, the founders kept things under wraps by using funds from later investors to pay early BCC supporters; in other words, BitConnect ran as a Ponzi scheme.

BCC’s downfall and the aftermath

Authorities caught on to the scheme, and on Nov. 7, 2017, the UK government gave BCC a two-month notice to prove its legitimacy. A few months later, the Texas State Securities Board served the company a cease-and-desist order, leading to the service’s shutdown on Jan. 17, 2018, quickly followed by a 92% crash in the BCC token’s price.

According to an investigation, Kumbhani and Arcaro funneled investors’ crypto funds into their wallets instead of investing them. Arcaro pleaded guilty to conspiracy charges and promised to refund a total of $17,646,801 to over 800 BitConnect investors. However, Kumbhani disappeared and is still nowhere to be found.

Recovery of ill-gotten funds

On Saturday, India’s Directorate of Enforcement announced the seizure of various cryptocurrencies worth approximately $190 million and an additional $56 million in “movable and immovable properties” connected to the crypto scam.

“It was found that many transactions were carried out through Dark Web to make the transactions untraceable,” reads India’s Directorate of Enforcement’s announcement. “However, by tracking numerous web wallets and gathering ground intelligence, ED was able to zero-in-on the wallets and the premises where the digital devices containing said crypto currencies were available.”

While the recovered amount is significant in itself, it barely scratches 10 percent of the funds funneled through the fraudulent platform, valued at around $2 billion at the time of its shutdown.