By Evan Spicer
Director of Cryptocurrency Investigations
BitConnect was definitely a crypto scam writ large. In fact, it was up until then the largest bitcoin scam in history, having robbed its victims of $2.4 billion. This fraud has a similar playbook to many crypto scams, however, the amounts it stole were unprecedented and all eyes are on the crypto recovery process.
Hopes of crypto recovery from this major bitcoin scam were partly fulfilled as a San Diego judge ordered that $17 million in stolen funds should be returned to 800 victims of the crypto scam in 40 countries. Following the arrest of BitConnect founders and the liquidation of $56 million of the company’s assets, the process of fund recovery has begun.
Although $17 million seems like a far cry from the total $2.6 billion stolen, it’s a significant portion of the $56 million that has already been liquidated. This is a testament to the fact that crypto recovery can often be a lengthy process with many moving parts, but sooner or later, crypto scam victims have reason to hope that they will receive all or a good portion of their funds.
Anatomy of a $2.6 Billion Crypto Scam
BitConnect has been called a “textbook” Ponzi scheme by the Department of Justice (DoJ). In other words, BitConnect founders Glenn Arcaro and Satish Kumbhani were merely shuffling funds from customer deposits to withdrawals while taking plenty for themselves in between. A full 15% went into their private slush fund.
The pair promised new clients that they were offering legitimate cryptocurrency trading that would appreciate at least 1% daily. This may not seem like much at first, but 30% return on investment monthly is an absurd amount. No broker can guarantee tangible returns on any kind of investment, particularly volatile cryptocurrencies.
Arcaro and Kumbhani attracted new users by giving the impression that they were offering advanced trading opportunities that weren’t available elsewhere. They lured people into their “Lending Program” which included “Volatility Software” and a “BitConnect Trading Bot.” These were meant to be tools to make trading easier and more successful.
Instead, the purpose of these phony apps and software was to create the illusion that BitConnect’s fake token, BCC, was appreciating in value. The scheme involved customers using their bitcoin to buy the worthless BCC token. Bitconnect then manipulated the value.
Predictably, the value of the BCC token really did rise thanks to all of this hype and the unfortunate success of this crypto scam. Before Bitconnect’s collapse, it had a market cap of $3.4 billion. However, since it had no underlying value and was just driven up in price by false perception, it wouldn’t take long for it to fall and fall hard.
As with all crypto scams, there finally came a time when the right people had an inkling of what was going on. Many cryptocurrency experts smelled a rat with Bitconnect, including Ethereum founder Vitalik Buterin.
Soon after, regulators started targeting Bitconnect. The British Registrar of Companies kicked out Bitconnect and in the U.S., state governments of North Carolina and Texas issued cease and desist orders against Bitconnect for its lack of a license, misleading statements and lack of transparency.
Glenn Arcaro and Satish Kumbhani were both sentenced for masterminding the crypto scam and assets were liquidated to pay back victims. Although Bitconnect is finished, the crypto recovery story is an ongoing saga that hopefully will reach a satisfactory conclusion for Bitconnect’s victims.
Have You Lost Money to a Crypto Scam Like Bitconnect
If you’ve lost funds to Bitconnect or another type of crypto scam, it’s important not to give up hope. With MyChargeBack experts on your side, you can greatly improve your chances of crypto recovery success.
When you consult with us, we will gather information and launch a cryptocurrency investigation. MyChargeBack professionals will organize these findings into a crypto investigation report that will bolster your claim and give law enforcement leads to pursue your case.
MyChargeBack Will Help You Find Your Funds on the Blockchain
If you have lost money to a cryptocurrency scheme, seek fund recovery assistance right away. Consult with MyChargeBack experts and get started with your fund recovery claim. We have extensive knowledge and working relationships with regulators and more than 450 law enforcement agencies around the world, as well as solutions that can improve your prospects of getting your cryptocurrency back.