(Reuters) -US Securities and Exchange Commission on Wednesday sued the founder of the now-defunct cryptocurrency exchange platform BitConnect over his alleged role in fraudulently raising about $ 2 billion from thousands of retail investors.
Expansion of a civil lawsuit filed in May, the SEC accused BitConnect founder Satish Kumbhani, an Indian citizen, of lying about BitConnect's ability to generate profits and violate registration laws designed to protect investors.
In a trial in Manhattan federal court, the SEC also accused promoter Glenn Arcaro and his firm Future Money Ltd. with fraudulent receipt of more than $ 24 million in "referral commissions" and other sums as BitConnect's leading US promoter.
Mr. Arcaro pleaded guilty Wednesday to a related criminal fraud conspiracy charge before U.S. Judge Mitchell Dembin in San Diego. His verdict is November 15
BitConnect was founded in 2016 and created a digital token called BitConnect Coin that can be exchanged for bitcoin, the popular cryptocurrency.
The SEC said that investors in a BitConnect "lending program" were told BitConnect used a "volatility software trading bot" that could generate returns of 40% per month and received fictitious returns with 3,700% annual profits.
But the regulator said investors lost much of their money after the price of BitConnect Coin fell 92% on January 16, 2018.
Prosecutors said BitConnect ran a "textbook Ponzi system" by paying previous investors with new investor money .
Mr. Kumbhani has lived in Surat, India, but his whereabouts are unknown, while Arcaro lives in Los Angeles and incorporated Future Money in Hong Kong, authorities said.
Efforts to find Kumbhani failed. Arcaro's lawyer did not respond to requests for comment.