About 800 victims of the infamous BitConnect financial pyramid are expected to receive compensation soon – albeit a small one. A California court ruled Friday that $17 million recovered from the scam must be returned to the nearly 800 victims who filed a class-action lawsuit.
BitConnect is one of the largest financial frauds in history, leaving a loss of US$2.4 billion worldwide, mainly in the United States. It was an alleged cryptocurrency lending platform that promoted proprietary technology, including a “Trading Bot” and “Volatility Software,” that were supposed to bring guaranteed returns to investors.
“In reality, however, BitConnect operated a classic Ponzi scheme, paying early investors in BitConnect money from later investors,” the US Department of Justice says in a press release.
Glenn Arcaro, the US Attorney for BitConnect, pleaded guilty to conspiracy to commit wire fraud in September 2021 and was sentenced to 38 months in prison a year later.
In February 2022, the ministry then unveiled an indictment against the project’s founder, Satish Kompany – who is still at large – accusing him of obtaining approximately $2.4 billion from investors.
The government charges Company with conspiracy to commit wire fraud, conspiracy to commit commodity price gouging, operating an unlicensed money transfer business, and conspiracy to commit international money laundering.
Bitconnect crypto scam
BitConnect launched in February 2016, and used a multi-tiered hierarchical structure to reward investors based on the number of affiliates they brought into the program.
BitcConnect’s token, BCC, rose to be the eighth most valuable cryptocurrency in the world in October 2017 and boasted a market capitalization of nearly $2.6 billion by the end of this year.
The project promised an average daily return of 1%, which means that you can turn $1,000 into $36,000 in one year.
Several prominent figures, including the creator of Litecoin, Charlie Leethe inventor of Ethereum, Vitalik ButerinAnd Mike Novogratz Digital Galaxy issued several warnings about the risks of the project, with Mike calling BitConnect “classic Ponzi”.
Anyone who doesn’t agree with this yet should watch this video: https://t.co/mA2NxKlSQN https://t.co/k2YJvWMnzE
– Vitalik.eth (@VitalikButerin) December 1, 2017
BitConnect collapsed in 2018 when regulators caught hold of the project, forcing its closure. Investors eventually got their BCC tokens back, but by that point, the coin had fallen from an all-time high of around $500 to essentially zero.
The US Securities and Exchange Commission filed a separate lawsuit against Bitconnect in September 2021, nearly three years after shutting down the project.
*Translated by Gustavo Martins with permission from Decrypt.