Top US authorities requested a US judge to liquidate nearly $56 million worth of digital assets seized from BitConnect’s promoter — who orchestrated one of the biggest cryptocurrency schemes in the US. The judge agreed to the request.
Last week, the US Attorney’s Office for the Southern District of California and US Justice Department both requested US District Judge Todd W. Robinson to confiscate proceeds from Glenn Arcaro — a US-based promoter for BitConnect accused of masterminding one of the biggest scams ever involving cryptocurrencies.
The repossession of the illegal proceeds is the largest single recovery from a crypto fraud in the country to date. Through his lawyer, Arcaro agreed to the seizure.
BitConnect exchange not new to controversy
The US Securities and Exchange Commission (SEC) in September sued Satish Khumbhani — founder of BitConnect — for allegedly misusing nearly $2 billion worth of Bitcoin raised from global investors.
In that same month, a Federal Criminal Court took legal action against Arcaro for swindling US investors. Arcaro pleaded guilty to the charges.
Five years ago, BitConnect sold its cryptocurrency in exchange for the popular Bitcoin. The company then told investors to contribute Bitcoins to the platform— with a promise to make more money as they had an automated program trading in Bitcoin.
The SEC later discovered BitConnect never used a Bitcoin trading program. Instead, Khumbhani siphoned the money and shared some of the proceeds with a group of promoters (Glenn Arcaro included) who helped him raise the money.
The SEC went to sue the founder of the now-defunct crypto exchange in September. The regulator was seeking fines, recouping of ill-gotten gains, and other relief in its lawsuit against BitConnect in Manhattan’s federal court.
Compensation process is to begin soon
The US government now plans to start a restitution process for the ill-fated victims of one of the biggest cryptocurrency schemes on US soil.
Nearly $56 million worth of digital currencies held by BitConnect’s US-based promoter, Arcaro, will be liquidated. The US government will sell the crypto and hold the proceeds in US dollars before reimbursing the victims.
According to the Justice Department, “the government maintains custody of the seized proceeds in a cryptocurrency wallet and intends to use the funds to provide restitution to the victims according to a future restitution order by the court at sentencing.
The Justice Department says Arcaro faces a maximum penalty of up to twenty years behind bars. He’s scheduled to be sentenced early next year after “a federal District Court judge considers the US sentencing guidelines and other statutory factors”.
