Victims of the BitConnect Ponzi scheme will be compensated with proceeds from the sale of seized cryptocurrency worth $56 million.
To compensate victims of the crypto Ponzi scheme BitConnect, the US Justice Department will sell $56 million in seized cryptocurrency from the “number one promoter.”
According to a Justice Department announcement, the government will sell the cryptocurrency and hold the proceeds in US dollars before using the proceeds to “provide restitution to the victims pursuant to a future restitution order by the court at sentencing.”
Glenn Arcaro, 44, was apprehended with the cryptocurrency after pleading guilty to participating in a $2 billion scheme to defraud BitConnect investors. Arcaro is scheduled to be sentenced on January 7, 2022, and faces a maximum sentence of 20 years in prison.
Potential BitConnect scheme victims are encouraged to visit a justice.gov website for information on their rights, identify themselves as victims, and submit a victim impact statement.
What exactly was BitConnect?
BitConnect, one of the most well-known cryptocurrency scams of all time, billed itself as a cryptocurrency investment platform with huge returns based on its proprietary trading bot. In reality, the bot did not exist; it was a Ponzi scheme that rewarded participants based on the number of people who invested in the scheme.
BitConnect’s BCC cryptocurrency rose to become one of the 20 largest cryptos by market cap, valued at around $400, thanks to the pyramid scheme.
Following investigations by regulators in Texas and North Carolina, BitConnect shut down its lending and exchange platform, causing the price of BCC to plummet to less than $30.
The US Securities and Exchange Commission charged five BitConnect promoters in May 2021, and a $12 million settlement was reached in August. In the first action against BitConnect’s management, the SEC sued BitConnect, its founder Satish Kumbhani, and Arcaro a month later.
Cryptocurrency seizures by the US government
This is not the first time the US government has sold seized cryptocurrency.
The United States Marshals Service sold over 30,000 Bitcoin (then worth around $19 million) seized from the defunct dark web marketplace Silk Road in 2014. Tim Draper, a venture capitalist, scooped it up, and his haul is now worth more than $1.8 billion.
In February 2020, the US Marshals sold another 4,000 BTC of seized Bitcoin. It was once worth around $37 million, but its value has since risen to more than $240 million.