The Securities and Exchange Commission (SEC) on Wednesday sued the founder of the now-defunct cryptocurrency trading platform BitConnect, alleging that he defrauded retail investors of about $2 billion in one of the largest cryptocurrency scams in history.
SEC expanded a civil lawsuit announced in May, accusing Satish Kumbhani, the founder of BitConnect and an Indian citizen, of illegally peddling BitConnect's unregistered products between January 2017 and January 2018.
The agency also accused marketer Glenn Arcaro and his company Future Money Ltd. Of fraud, saying they received more than $24 million in "referral commissions" and "development funds" during the promotion of BitConnect between August 2017 and January 2018.
SEC sought fines, recovery of ill-gotten gains and other remedies in a lawsuit filed in federal court in Manhattan.
SEC said Arcaro had pleaded guilty to the relevant US criminal charges. There are no further details.
BitConnect, founded in 2016, has created a digital token called BitConnect Coin, which can be exchanged for bitcoin.
Investors involved in BitConnect's "loan programme" were told that BitConnect would use a "volatility software trading robot" that would generate a 40 per cent return a month and about 3,700 per cent a year, SEC said.
In fact, BitConnect Coin prices plummeted 92% on January 16, 2018, and investors lost a lot of money.
SEC said Kumbhani, 35, lives in Surat, India, but his whereabouts are unknown, while Arcaro, 44, lives in Mulpark, California.