Jake Paul-endorsed SafeMoon gets hacked after introducing a bug in upgrade
A public burn function introduced in the latest upgrade allegedly allows users to burn tokens from other addresses.
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Značka: Ponzi Scheme
Trouble in the Bahamas following FTX collapse: Report
Following the collapse of crypto exchange FTX, which was headquartered in the island nation of Bahamas, Bahamians are reportedly still trying to find a way to make sense of everything, while remaining optimistic about the future. According to a report by the WSJ, the island nation — which encouraged cryptocurrency companies to feel at home with their “copacetic regulatory touch” — has been rocked by the implosion of FTX. The Bahamas, which was also hard hit by hurricane Dorian in 2019 and the pandemic shortly afterward in 2020, was already struggling to find ways to strengthen its economy which relies heavily on tourism and offshore banking for a bulk of its GDP. It appeared that the prime minister of the Bahamas, Philip Davis, and his government believed crypto could play a critical role in the island’s economic recovery. Now, the community suggests that FTX’s sudden implosion has left a trail of unemployment on the tiny 80-square-mile island. While functioning at full capacity, FTX provided employment for locals, as it reportedly spent over “$100,000 a week on catering” and also set up a private shuttle service to transport workers around the island. FTX also hired a number of local Bahamians in areas such as logistics, events planning, and regulatory compliance, according to the WSJ. With the collapse of FTX, many high-spending foreigners who worked for the company and once boosted the local economy have reportedly fled the island, leaving Bahamanian security guards to now guard “nearly vacant buildings.”Related: SBF, FTX execs reportedly spend millions on properties in the BahamasIn the aftermath of the fall of FTX, some crypto community members have said they feel no sympathy for the effects of the collapse of FTX on the tiny island nation.A contributor on the Hacker news with the username matkoniecz commented; “Given that Bahamas help rich people and companies to evade taxes, my sympathy to negative consequences of that are limited.” Another user going by the handle Exendroinient00 shared, “Nothing wrong with inviting every scammer to do scamming on your islands,” in reference to the island’s laws, which seem to incentivize offshore banking activities on its island. On Oct. 18, Cointelegraph reported that the Bahamian securities regulator ordered the transfer of FTX’s digital assets to a wallet owned by the commission “for safekeeping.”According to a statement by the Royal Bahamas Police Force sent to Reuters on Nov 13, an investigation of possible criminal misconduct over the insolvency of FTX is underway by financial investigators and the Bahamas securities regulators.
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How to tell if a cryptocurrency project is a Ponzi scheme
The crypto world has experienced an increase in Ponzi schemes since 2016 when the market gained mainstream prominence. Many shady investment programs are designed to take advantage of the hype behind cryptocurrency booms to beguile impressionable investors.Ponzi schemes have become rampant in the sector primarily due to the decentralized nature of blockchain technology which enables scammers to sidestep centralized monetary authorities who would otherwise flag or freeze suspicious transactions.The immutable nature of blockchain systems that makes fund transfers irreversible also works in the scammers’ favor by making it harder for Ponzi victims to get their money back.Speaking to Cointelegraph earlier this week, KuCoin exchange CEO Johnny Lyu said that the sector was fertile ground for these types of schemes due to one main reason:“The industry is full of users eager to invest their money, and there is virtually no regulation that would stop projects from hiding their malicious intentions.”“Until clear and internationally approved financial regulation of the crypto industry is set in place, it will continue to witness the rise and collapse of Ponzi schemes,” he added.How Ponzi schemes workThe Ponzi scheme phrase emerged in 1920 when a swindler named Charles Ponzi marketed a high-returns program to investors which supposedly leveraged postal reply coupons to achieve impressive earnings. He promised investors returns of up to 50% within 45 days or 100% interest within 90 days. True to his word, the first group of investors got the claimed returns, but unbeknownst to them, the money they received was actually from later investors. The cycle was designed to lure new investors and enabled Ponzi to steal over $20 million.While he wasn’t the first to use such a scheme to scam people, he was the first to use it to such a scale; hence the technique was named after him.In a nutshell, a Ponzi scheme is a fake investment program that promises astronomical gains to clients but uses money collected from new investors to pay early investors. This helps the swindlers behind such operations to maintain some semblance of legitimacy and entice new investors.That said, Ponzi schemes require a constant flow of cash to be sustainable. The ruse usually comes to an end when the number of new recruits falls or when investors choose to withdraw their money en masse.How to spot a crypto Ponzi schemeThere has been a sharp rise in the number of Ponzi schemes in recent years in tandem with the crypto market’s uptrend. As such, it is important to know how to spot a Ponzi scheme.The following are some of the aspects to look out for when considering whether a crypto project is a Ponzi scheme.Promises of ridiculously high returnsMany crypto Ponzi schemes claim to reward investors with hefty returns with little risk. This, however, contradicts how investing in the real world works. In reality, every investment comes with a certain amount of risk.Typical crypto investments fluctuate according to prevailing market conditions, so such claims should be viewed as a red flag. In many cases, investors who join such networks never get any returns on their money.Khaleelulla Baig, the founder and CEO of KoinBasket — a crypto index trading platform — told Cointelegraph that transparency should be the topmost factor to consider before investing money in a crypto project: “What really matters is the transparency about the project details. Most founders build their business on hope and rosy projections. Check the past track record of the founding team’s delivery track record vs commitment.” He also advised investors to stay away from projects with obscure fundamentals that are based on external influences.Unregistered investment projectsIt is important to confirm whether a crypto company is registered with regulatory organizations such as the United States Securities and Exchange Commission (SEC) before investing any money. Registered crypto companies are usually required to submit details regarding their revenue models to their respective regulatory authorities to avoid penalties. As such, they are unlikely to participate in Ponzi schemes.Projects registered in jurisdictions with lax crypto regulations that additionally have Ponzi-like characteristics should be avoided. Some jurisdictions, such as the European Union, have already come up withelaborate crypto regulations designed to protect crypto investors against these types of scams. According to a recent proposal passed by European Council, crypto companies will soon be obligated to abide by Markets in Crypto Assets (MiCA) rules and will be required to have a license to operate in the region.Putting crypto companies under MiCA will compel them to reveal their revenue models, and this will temper the rise of crypto enterprises relying on Ponzi-like plans in the bloc.Use of sophisticated investment strategiesPonzi schemes usually allude to complex trading strategies as part of the reason why they are able to obtain high yields with minimal risks. Many of their outlined growth strategies are usually hard to understand, but this is usually done on purpose to avoid scrutiny.The Bitconnect Ponzi scheme that was unveiled in 2016 is an example of a Ponzi scheme that utilized this tactic to trick investors. Its operators encouraged investors to buy BCC coins and lock them on the platform to allow its “sophisticated” lending software to trade the funds. The platform claimed to provide monthly yields of up to 120% per year.Ethereum co-founder Vitalik Buterin was among the first notable figures to raise the alarm on the project. The scheme was brought down by U.S. and British authorities, who declared it a Ponzi scheme. Its closure in 2018 triggered a BCC price drop that led to billions of dollars in losses.High level of centralizationPonzi schemes are usually run on centralized platforms. One crypto Ponzi that was based on a highly centralized network is the OneCoin Ponzi scheme. The pyramid scheme, which ran between 2014 and 2019, defrauded investors out of some $5 billion. The project relied on its own internal servers to run the ploy and lacked a blockchain system.Subsequently, OneCoins could only be traded on the OneCoin Exchange, its native marketplace. The tokens could be exchanged for cash, with fund transfers being made via wire.The OneCoin marketplace also had daily withdrawal limits that prevented investors from withdrawing all their funds at once.The scheme went down in 2019 following the arrest of some key members of the operation. However, there is an outstanding federal arrest warrant for OneCoin founder Ruja Ignatova who is still at large.Multi-level marketingSpeaking to Cointelegraph about crypto Ponzis, KuCoin CEO Johnny Lyu noted that the ominous red flags haven’t changed much over the years and multi-level marketing (MLM) was still at the heart of many Ponzi schemes:“Complex earning schemes involving multiple tiers of users, referral programs, percentages, sliding scales, and other tricks are all signs of a Ponzi scheme that feeds the upper tiers using the funds injected by the lower tiers without actually doing any business.” Multi-level marketing is a controversial marketing technique that requires participants to generate revenues by marketing certain products and services and recruiting others to join the network. Commissions earned by new recruits are shared with the up-line members.One Ponzi scheme that recently made headlines for making use of this hierarchical system is GainBitcoin. The pyramid scheme headed by Amit Bhardwaj had seven primary recruiters who were based in India and different continents around the world. Each of them was tasked with recruiting investors into the network.The scheme guaranteed users 10 percent monthly returns on their Bitcoin (BTC) deposits for 18 months.The scheme is alleged to have collected between 385,000 and 600,000 BTC from investors.Ponzi schemes have been used by scammers for over a hundred years. However, they have been able to thrive in the crypto industry due to the lack of elaborate regulations governing the sector.Because the crypto world is susceptible to these types of schemes, it is important to exercise caution before investing in any novel project.
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Indian police launch probe into BitConnect founder wanted by US SEC
The saga of BitConnect, a major cryptocurrency scam scheme, is taking another twist as one of the BitConnect co-founders is now wanted by the Indian state police.Satish Kumbhani, an Indian national and the alleged founder of the crypto Ponzi scheme BitConnect, reportedly became subject to a new police investigation in India, The Indian Express reported on Wednesday.The Pune police, operating under the Indian state Maharashtra Police, launched a probe into Kumbhani after a Pune-based lawyer filed a complaint claiming that he had lost about 220 Bitcoin (BTC), or $5.2 million, due to BitConnect. The complainant said his original investment was 54 BTC, with returns of 166 BTC, which he allegedly used to reinvest into platforms.The claimant noted that transactions between him and the suspects took place between 2016 and June 2021, pointing to six more people allegedly involved in the scam alongside Kumbhani. No arrests have been made in the case, the report notes.BitConnect is one of the biggest scam schemes in the history of crypto, with the Ponzi orchestrators reportedly fraudulently raising about $2.4 billion from misled investors. Launched in February 2016, BitConnect operated a platform and a digital currency, shutting down in January 2018, with founders eventually vanishing with investors’ money.Despite BitConnect taking down operations years ago, the BitConnect case has been seeing a lot of action recently, with the Department of Justice charging Kumbhani for orchestrating the BitConnect scam scheme in February 2022.The United States Securities and Exchange Commission (SEC) subsequently said the authority was unable to locate the missing BitConnect co-founder. In a court filing in late February, the SEC noted that Kumbhani’s last known location was in his native India.Related: Dutch authorities arrest suspected Tornado Cash developerBitConnect is not the only crypto scam whose main arrangers are currently missing. Global prosecutors and authorities are also investigating scams like OneCoin, a $4 billion Ponzi scheme that ceased operating in late 2019. Ruja Ignatova, the Bulgarian-German creator of OneCoin, was added to the Ten Most Wanted list by the Federal Bureau of Investigation in June 2022. Ignatova, widely referred to as “Cryptoqueen” in the crypto community, was last seen in 2017.
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How to identify and avoid a crypto pump-and-dump scheme?
Educating oneself about the crypto ecosystem is crucial for investors to pursue during a bear market while awaiting a bull cycle. That being said, having a good understanding of crypto investment entails keeping an eye out for fraudulent projects that threaten to drain assets overnight, a.k.a. pump-and-dump schemes.Pump-and-dump in crypto is an orchestrated fraud that involves misleading investors into purchasing artificially inflated tokens — typically marketed and hyped by paying celebrities and social influencers. SafeMoon token is one of the most prominent examples of an alleged pump-and-dump scheme involving A-list celebrities, including Nick Carter, Soulja Boy, Lil Yachty and YouTubers Jake Paul and Ben Phillips.Once the investors have purchased tokens at inflated prices, the people owning the biggest pile of tokens sell out, resulting in an immediate crash in the token’s prices. While fraudsters disguise pump-and-dump schemes under the pretext of creating the next batch of crypto millionaires, knowledgable investors have the upper hand in identifying and avoiding their involvement. Pump-and-dump schemes are usually accompanied by false promises around three broad categories — solving real-world use cases, guaranteed exorbitant returns and unwithered backing from celebrities and influencers.The long-term success of a cryptocurrency is heavily dependent on the use cases it serves. As a result, people supporting pump-and-dump projects often suffice their involvement by highlighting the use cases the token aims to serve. In addition, such schemes typically rope in celebrities by upfront payments in cash and the project’s in-house tokens. Celebrities then market the fraudulent tokens to trusting fans, usually with promises of high investment returns. In the case of SafeMoon, celebrities were accused of a slow rug pull, implying a slow sell-off of holdings as the trading volume from retail investors remained inflated. Binance, the biggest crypto exchange in terms of trading volume, also warned investors from taking investment advice from celebrities and influencers.Superstars ≠ crypto experts.Music artist @JBALVIN says “do your own research”.On 2.13 when big names try to give you crypto advice — sound #CryptoCelebAlert and grab 1/2222 NFTs of basketball star @JimmyButler!Learn more ⬇️https://t.co/3rC7r0uJ8M pic.twitter.com/Hml8AN2aEs— Binance (@binance) February 7, 2022In the next bull cycle, traditional and crypto investors across the globe will amp up efforts to recoup losses from the ongoing bear market. Knowing this information, fraudsters will try and find opportunities to dupe unwary investors by presenting unrealistic gains. As a result, do your own research (DYOR) stands as one of the best pieces of advice in crypto.Related: Sygnia CEO criticizes Elon Musk for alleged Bitcoin pump and dumpElon Musk was recently accused of manipulating crypto prices by prominent South African billionaire businesswoman Magda Wierzycka. Wierzycka believes that Musk’s social media activity and its implications on the price of Bitcoin (BTC) should have made him the subject of an investigation by the U.S. Securities and Exchange Commission. She believes that Musk knowingly pumped up the price of Bitcoin via tweets, including those mentioning Tesla’s $1.5 billion BTC purchase, then “sold a big part of his exposure at the peak.”
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Analysts identify 3 critical flaws that brought DeFi down
The cryptocurrency market has had a rough go this year and the collapse of multiple projects and funds sparked a contagion effect that has affected just about everyone in the space. The dust has yet to settle, but a steady flow of details is allowing investors to piece together a picture that highlights the systemic risks of decentralized finance and poor risk management.Here’s a look at what several experts are saying about the reasons behind the DeFi crash and their perspectives on what needs to be done for the sector to make a comeback. Failure to generate sustainable revenueOne of the most frequently cited reasons for DeFi protocols struggling is their inability to generate sustainable income that adds meaningful value to the platform’s ecosystem. Fundamental Design Principles for DeFi:- If the protocol doesn’t work without a reward token, it’s a Ponzi schemeA reward token should not be necessary for a protocol to function. That means the protocol is not a revenue generating business.— Joseph Delong* (@josephdelong) May 23, 2022In their attempt to attract users, high yields were offered at an unsustainable rate, while there was insufficient inflow to offset payouts and provide underlying value for the platform’s native token. This essentially means that there was no real value backing the token, which was used to payout the high yields offered to users. As users began to realize that their assets weren’t really earning the yields they were promised, they would remove their liquidity and sell the reward tokens. This, in turn, caused a decline in the token price, along with a drop in the total value locked (TVL), which further incited panic for users of the protocol who would likewise pull their liquidity and lock in the value of any rewards received. Tokenomics or Ponzinomics?A second flaw highlighted by multiple experts is the poorly designed tokenomic structure of many DeFi protocols that often have an extremely high inflation rate which was used to lure liquidity.High rewards are nice, but if the value of the token being paid out as a reward isn’t really there, then users are basically taking a lot of risk by relinquishing control of their funds for little to no reward. This largely ties in with DeFi’s revenue generation issue, and the inability to build sustainable treasuries. High inflation increases token supply, and if token value is not maintained, liquidity leaves the ecosystem.Related: Bear market will last until crypto apps are actually useful: Mark CubanOverleveraged usersThe overuse of leverage is another endemic DeFi problem and this flaw became crystal clear as Celsius, 3AC and other platforms invested in DeFi began to unravel last month.Users who staked these inflationary tokens to over-leverage their positions got liquidated as prices dipped due to market sell-offs.This led to a death spiral for the protocol. @Wonderland_fi is one such protocol where users leveraged $TIME to borrow $MIM and got liquidated— Magik Invest ✨ (@magikinvestxyz) June 28, 2022
These liquidations only exasperated the downtrend that many tokens were already experiencing, triggering a death spiral that spread to CeFi and DeFi platforms and a few centralized crypto exchanges.In this sense, the onus really falls on the users for being over-leveraged without a solid game plan on what to do in the eventuality of a market downturn. While it can be a challenge to think about these things during the height of a bull market, it should always be something in the back of a trader’s mind because the cryptocurrency ecosystem is well known for its whipsaw volatility. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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China’s BSN chair calls Bitcoin Ponzi, stablecoins 'fine if regulated'
Amid the Chinese government continuing to celebrate the massive decline of cryptocurrency markets this year, one key local blockchain expert has referred to crypto as a “Ponzi scheme.”Yifan He, CEO of Red Date Technology, a major tech firm involved in the development of China’s major blockchain project, the Blockchain Service Network (BSN), has penned a new article devoted to various kinds of cryptocurrencies and their supposed Ponzi-like nature.Published in the local newspaper The People’s Daily on June 26, the piece refers to private cryptocurrencies as the “biggest Ponzi scheme in human history.”The author mentioned the Terra network’s collapse, with the native token LUNA crashing 99% and the algorithmic UST stablecoin losing its 1:1 peg value to the U.S. dollar in May 2022. He also criticized the increasingly popular virtual currency concept known as X-to-earn, referring to move-to-earn or play-to-earn projects, calling the model a “phishing strategy.” The BSN chair also mentioned some well-known criticism of Bitcoin (BTC) by Microsoft founder Bill Gates and legendary investor Warren Buffett.He is not a fan of Bitcoin or any similar cryptocurrencies himself as well. “Currently all unregulated cryptocurrencies including Bitcoin are Ponzi schemes based on my understanding, just different risk levels based on the market caps and number of users,” He said in a statement to Cointelegraph on Monday.The BSN chair added that he had not had any cryptocurrency wallet or related assets ever: “I don’t touch them and won’t touch them in the future even if they become regulated because I don’t consider that they have any value whatsoever.”According to He, governments like El Salvador — which opted to adopt BTC as legal tender — “seriously need basic financing training.” “Otherwise, they put entire countries at risk unless their original intentions were to build state-owned crypto trading platforms and scam off on their citizens,” the exec told Cointelegraph.While criticizing Bitcoin and many other crypto projects, He still believes that some part of the crypto market could be doing just fine if it’s properly regulated. Cash-backed stablecoins like Tether (USDT) and Circle’s USD Coin (USDC) should not be viewed as Ponzi-like schemes, the BSN chair said, stating:“USDC or USDT are payment-related currencies, not speculative assets. Once they are fully regulated, they are fine.”He previously talked in favor of stablecoins in 2020. The executive once planned to integrate stablecoin payments into BSN as of 2021. The plan was eventually scrapped due to China’s hostility to crypto.Related: China warns Bitcoin is heading to zero but BoE looks on the bright sideThe news comes amid the Chinese government capitalizing on the ongoing crypto market crash to justify its multiple bans on the industry. The latest coordinated ban was enacted in September 2021, with multiple Chinese authorities taking action to prohibit all kinds of crypto transactions in the country.Despite all efforts, China continued to be a dominant Bitcoin mining supplier worldwide. According to data from the Cambridge Bitcoin Electricity Consumption Index, China was the second largest BTC mining hash rate producer after the United States as of January 2022.
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Swan Bitcoin CEO against crypto lenders: Users are way under-compensated for the risk
Swan Bitcoin CEO Cory Klippsten believes that the liquidity crisis involving Celsius Network may be just the beginning of a broader collapse in the crypto lending space. “It doesn’t matter if you’re an amazing CeFi lending platform, taking these retail deposits and lending them out the back end and giving them yield, or a terrible one, they’re all going to get kind of dragged down,” Klippsten said in an exclusive interview with Cointelegraph. Celsius, a leading crypto lending platform, halted withdrawals earlier this month, citing “extreme market conditions.” Since then, other crypto firms, including Babel Finance and Three Arrow Capital, have experienced liquidity issues. [embedded content]Klippsten, a hardcore Bitcoin (BTC) maximalist, has been a vocal critic of centralized lending platforms such as Celsius. “Their loan books are opaque, their activities are opaque. […] You’re being way under-compensated for the risk,” he explained. Klippsten is quite skeptical that Celsius will be able to fully compensate users who are currently unable to access their funds on the platform.“It’s going to be a fight over the scraps, unfortunately, for a number of years,” he predicted. Klippsten describes Celius as a particularly stark case of bad risk management, pointing out that similar business practices are common in the space and they will be soon targeted by regulators. Don’t miss the full interview on our YouTube channel and don’t forget to subscribe!
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Binance’s CZ says he is ‘skeptical’ about the Terra relaunch
Binance CEO Changpeng Zhao, also known as CZ, expressed skepticism around the revival plan for the Terra ecosystem and the launch of the new LUNA token.“I try not to predict what the community will do. […] Many are skeptical. I’m one of those guys,” said CZ in an exclusive interview with Cointelegraph.Following the collapse of TerraUSD (USD), the Terra ecosystem’s stablecoin, CZ criticized its team for not handling the crisis properly and pointed at the project’s flaws that led to the crash. Still, Binance is now actively participating in Terra’s revival plan by hosting the airdrop of its new LUNA token. As CZ pointed out, despite the widespread skepticism around the Terra relaunch, Binance has a responsibility to help users affected by the crash of LUNA.“We still need to ensure continuity of people’s access to liquidity. […] We have to support the revival plan hoping that it may work,” he explained. According to CZ, the Terra fiasco should serve as a warning to projects that rely on unsustainable business models based on “aggressive incentives.”As he pointed out, crypto projects such as Terra offer high yields to attract people in the hopes that once there are enough users, they will become profitable. “We should really look at them in a fundamental way to measure that more revenue, more income is generated than just an incentive payout,” CZ pointed out. Check out the full interview on Cointelegraph’s YouTube channel, and don’t forget to subscribe!
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Terrible crypto trader gets 42 months for fraud, claiming he was a total gun
A crypto trader who defrauded over 170 people was sentenced to 42 months in prison on May 11 for operating a series of cryptocurrency funds claiming to make big returns but in reality were losing money and instead operated as a Ponzi scheme.The DOJ said that 25 year old Jeremy Spence had solicited millions through false representations, “including that Spence’s crypto trading had been extremely profitable when, in fact, Spence’s trading had been consistently unprofitable.” Spence, who operated the social media channels for a crypto investment scheme called “Coin Signals” was handed the decision by United Stated District Judge Lewis Kaplan for the U.S. District Court for the Southern District of New York. Spence was also sentenced to three years of supervised release and ordered to pay back his victims an amount of over $2.8 million.Spence was arrested in January 2021 by the Federal Bureau of Investigation (FBI) and seperate civil charges were brought forward by the Commodity Futures Trading Commission (CFTC).Spence pleaded guilty to commodities fraud in November 2021 for soliciting over $5 million from unwitting crypto investors by creating various cryptocurrency funds from November 2017 until April 2019 which he falsely claimed were making returns but in reality were making losses.One example provided by the DOJ said Spence posted a message to an online chat group claiming one of the funds made a 148% return that month.According to Law360 U.S. District Judge Lewis Kaplan who presided over the case said:”The thing I was struck by was the stupidity of the people you gulled into investing with you, there are real-life consequences to these shenanigans and they are serious.”Seeking to make a profit investors would transfer crypto to Spence to invest but as his trades weren’t making gains he created fake account balances to hide the losses. Spence started operating a Ponzi scheme using funds from new investors to pay earlier investors, with estimates that around $2 million worth of cryptocurrencies were distributed in this manner.Related: Making crypto conventional by improving crypto crime investigations worldwideIn a statement to the court Spence told Judge Kaplan that he is “mortified” by his own behavior, apologizing to his investors and claimed was unqualified to trade the amount he was sent adding he “entered a world that [he] was completely unprepared for”.Cointelegraph requested comment from Spence’s legal representatives but did not receive a response within the time given.
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SEC unable to locate BitConnect founder convicted in $2.4B fraud case
Indicted by the United States Department of Justice in a $2.4 billion Ponzi scheme, BitConnect founder Satish Kumbhani remains untraced following conviction.In a court filing on Monday, the Securities and Exchange Commission said that the whereabouts of Kumbhani remains unknown. The SEC noted that Kumbhani’s last known location was in his native country India, but has remained untraced ever since the promoter for his BitConnect Ponzi scheme was charged by the SEC for defrauding American investors of over $2 billion.SEC in its filing noted that the convicted founder has most probably fled to a foreign country and “Kumbhani’s location remains unknown, and the Commission remains unable to state when its efforts to locate him will be successful, if at all.” The founder is charged with wire fraud, operating an unlicensed money transmitting business, and three conspiracies: committing wire fraud; commodity price manipulation; and international money launderingRelated: SEC charges 5 for illegally promoting $2 billion Bitconnect Ponzi schemeThe BitConnect saga dates back to ICO-era and was among the most highlighted and talked about projects at the time. Founded in 2016, the crypto project became a global sensation by mid-2017 as it raised billions of dollars from global investors. The project promised a lending program based on proprietary “trading bot” and “volatility software” that would offer 10% earning to investors via BCC token.The DOJ charged Kumbhani for running a Ponzi scheme via BitConnect’s lending program where the project managed to siphon off $2.4 billion from investors. Bitconnect’s native token BCC recorded an all-time-high trading price of $463.31 at the peak of the market frenzy in December 2017 reaching a market cap of $3.4 billion. The founders rug pulled the project by January 2018, crashing the token price to near zero and causing massive losses to investors. BitConnect (BCC) price history. Source: CoinMarketCapThe DOJ also accused Kumbhani of creating fake market demand for BCC to lure more unsuspecting investors. The project like many others in the ICO era turned out to be a massive pyramid scheme where the creators used early funds to pay off old investors and later ran away after collecting billions based on hype and ICO craze. . Several promoters of the project across Australia and the U.S. have already been convicted and facing jail.
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DOJ indicts BitConnect’s Indian founder for $2.4B crypto Ponzi scheme
The founder of the infamous crypto exchange BitConnect, Satish Kumbhani, has been charged for allegedly misleading investors globally and defrauding them of $2.4 billion in the process.According to the Department of Justice (DOJ), a San Diego-based federal grand jury specifically charged Kumbhani for orchestrating the alleged Ponzi scheme via BitConnect’s “Lending Program”:“BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors. In total, Kumbhani and his co-conspirators obtained approximately $2.4 billion from investors.”BitConnect (BCC) price history. Source: CoinMarketCapBack in 2017 amid the hype, BitConnect (BCC) recorded an all-time high of $463.31 in trading price, which according to the DOJ reached a peak market capitalization of $3.4 billion. However, as evidenced by the graph above, the prices soon collapsed within a few months causing massive losses to investors. Kumbhani, who resides in Gujarat, India, allegedly promised investors “ to generate substantial profits and guaranteed returns” under the BitConnect’s “Lending Program.” The indictment alleges Kumbhani used the funds from new investors to partially pay back the old investors until abruptly shutting down the program — operating a textbook Ponzi scheme. The DOJ further stated that Kumbhani and his co-conspirators faked market demand for BCC through market manipulation. The resultant investments were allegedly concealed and transferred via “BitConnect’s cluster of cryptocurrency wallets and various internationally-based cryptocurrency exchanges.”[embedded content]Supporting DOJ’s allegations, back in Sept. 2021, former BitConnect promoter Glenn Arcaro pled guilty to fraud charges related to his role in the now-defunct crypto exchange and lending platform.The indictment also alleges that Kumbhani evaded U.S. regulations by failing to register with the Financial Crimes Enforcement Network (FinCEN), as required under the Bank Secrecy Act. All in all, “Kumbhani is charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering,” said the DOJ press release. The case is currently being investigated by the FBI Cleveland Field Office and IRS Criminal Investigation (CI). If convicted of all counts, Kumbhani will be subject to a maximum total penalty of 70 years in prison. In addition, the DOJ recommends all BitConnect investors register themselves as potential victims. Related: SafeMoon pump-and-dump lawsuit targets Jake Paul, Soulja Boy and othersOn Feb. 20, a new class-action lawsuit demanded a jury trial against popular celebrities and influencers for their alleged participation in a classic pump-and-dump scheme relating to SafeMoon tokens. As Cointelegraph reported, the lawsuit alleged that SafeMoon and its subsidiaries mimicked real-life Ponzi schemes by misleading investors to purchase SafeMoon tokens under the pretext of unrealistic profits.Choose your fighter #SafeMoon #BitConnectttttt pic.twitter.com/b1GMnMHxuF— W◎◎F of Wall Street | CwooFA (@WoofManCapital) April 21, 2021Drafted by plaintiffs Bill Merewhuader, Christopher Polite and Tim Viane, the lawsuit looks to represent and compensate all individuals who bought SafeMoon tokens since March 8, 2021, and were victims of the alleged rug pull attempt.
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