The SEC has charged BitConnect founder with securities fraud and is seeking to recover the funds he allegedly stole from investors.
Bitconnect was a Ponzi scheme and lending programme which was associated with cryptocurrencies. The company was founded in 2016 and was headquartered in the United Kingdom. The company, however, became mired in controversy due to its promise of high returns and lack of regulation and transparency.
Recently, U.S. Securities and Exchange Commission (SEC) has charged BitConnect founder with securities fraud and is seeking to recover the funds he allegedly stole from investors.
Let’s take a closer look at what happened and what this means.
U.S. SEC charges BitConnect founder with $2 bln cryptocurrency fraud
BitConnect was a notorious Crypto investment platform developed in 2016. It was founded by programmers from India, the United Kingdom and Britain who all had different backgrounds. The platform initially launched with a website, referral program and exchange for its token, BitConnect Coin (BCC). During the ICO in late 2017, investors could purchase BCC tokens for as low as $0.1 each and in early 2018 the price reached an all-time high of about $474.
Since its inception, BitConnect was surrounded by controversy and allegations of being a Ponzi scheme. Its high referral system allowed members to earn even more if they referred others and invested money on BitConnect. By June 2019, BitConnect closed down citing negative media attention and legal action taken by multiple government agencies such as the U.S Securities Exchange Commission (SEC).
In December 2020, SEC accused BitConnect founder Divyesh Darji of defrauding over 2 billion dollars’ worth of investments from people worldwide by exploiting their greed in cryptocurrency investments. The SEC is now seeking to recover funds Darji allegedly stole from investors through a review process that involves vetting documents related to investments he received throughout his time running BitConnect between January 2017 and April 2018.
Alleged fraudulent activities of BitConnect
The U.S. Securities and Exchange Commission (SEC) has charged BitConnect founder Divyesh Darji with securities fraud for allegedly misrepresenting the company’s financial condition to investors to defraud them of more than $2 billion in the form of its cryptocurrency. BitConnect, founded in 2017, was an international network of cryptocurrency businesses offering investors returns on their investments through its Bitcoin-based lending program and initial coin offering (ICO) platform.
Darji is accused of misrepresenting the size and scope of his operations and manipulating cryptocurrency prices by covertly buying and selling large amounts of currency on various digital platforms. He is also accused of concealing his financial interest in projects he promoted or recommended, including illegal activities such as front-running trades or market manipulation to benefit himself while artificially increasing prices for other investors.
According to the SEC’s charges, these practices enabled Darji and associated companies to profit substantially from unsuspecting investors. As a result, the SEC is seeking civil penalties against Darji for violating multiple provisions enforced under federal securities laws and is seeking disgorgement and restitution from him for infringing on investor rights by misleading them about his activities.
The U.S. Securities and Exchange Commission (SEC) has charged BitConnect founder with securities fraud, seeking to recover money allegedly stolen from investors.
SEC alleges that the company and its founder, Divyesh Darji, have committed fraud involving $2 billion in cryptocurrencies. The SEC seeks to prevent Darji from taking any additional funds from investors and is also seeking to recover any funds he has already taken. It is also seeking other civil penalties.
This article will discuss the SEC’s charges and what it could mean for cryptocurrency investors.
Allegations of securities fraud
The U.S. Securities and Exchange Commission (SEC) has charged Kantrelle Trouble Moore, the founder of BitConnect, a digital currency trading platform, with securities fraud related to his alleged involvement in a $2 billion cryptocurrency fraud scheme. Moore allegedly violated federal securities laws’ registration and antifraud provisions when he ran a classic Ponzi scheme utilising BitConnect’s platform and its associated cryptocurrency token, “BCC”.
The SEC alleges that as part of this fraudulent scheme, Moore was able to solicit investments from approximately 200,000 investors around the world in an unregistered security called BitConnect Coins (BCC). Accordingly, investors were led to believe that their money would be used to develop the BitConnect platform and increase its value over time. Instead, Moore misappropriated the investor funds for his personal gain by transferring large sums of money into accounts held in his name or simultaneously withdrawn by third parties. According to the SEC’s complaint, as a result of these actions BitConnect ultimately collapsed in January 2018 due to lack of liquidity after having been deserted by investors who had collectively lost billions of dollars.
The SEC’s complaint seeks permanent injunctions against Moore and monetary relief for harmed investors including permanent disgorgement and civil money penalties designed to deter similar misconduct in the future.
Allegations of misappropriation of funds
The U.S. Securities and Exchange Commission (SEC) charged BitConnect founder Divyesh Darji with misappropriating funds related to a cryptocurrency trading and lending platform and operating a fraudulent gaming system. According to the SEC’s complaint, Darji made offers and sales of securities in the form of digital assets through BitConnect’s platform in exchange for funds from investors.
The complaints allege that Darji fraudulently misappropriated investor funds when conducting his cryptocurrency-related business, using them instead to pay for personal expenses such as travel, real estate, luxury cars, and expensive watches, among other things. The total money involved is estimated at more than $2 billion.
Darji also allegedly engaged in deceptive conduct by attempting to conceal his misrepresentations of the facts by creating false records, financial statements and other documents overstating the value of BitConnect’s holdings. He also lied about BitConnect’s activities on social media posting false information to artificially inflate its price and value.
The SEC seeks a permanent injunction enjoining Darji from future violations of anti-fraud laws and rescission and/or disgorgement orders forcing him to return all ill-gotten gains plus interest or other monetary relief depending on further proceedings from the court. The agency is also seeking civil penalties for each violation against him for unlawfully selling unregistered securities or engaging in fraud or deception relating to those securities transactions under federal securities law.
Amount of funds sought to be recovered
The U.S. Securities and Exchange Commission (SEC) seeks to recover the funds it alleges were stolen by BitConnect founder Divyesh Darji via his involvement in the cryptocurrency project. The SEC has charged Darji with “operating a fraudulent, unregistered digital securities offering,” in which he obtained more than $2 billion from unwitting investors, including US investors.
The SEC order instituting proceedings against Darji states that he, along with BitConnect operators Trevon Brown and Joshua Bouhers, raised, over two years, approximately $2 billion from approximately two million users through offering unregistered investments called “Bitconnect Coins”. As part of the offering, investors who purchased these coins encountered signup bonuses through a multi-level referral system for those getting other users to join or purchase the coins.
The order also seeks disgorgement of all ill-gotten funds gained by Darji plus interest and further monetary penalties as detailed in Section 21D of the Securities Exchange Act of 1934 (the “Act”). In addition to seeking disgorgement plus interest and other equitable relief, the SEC is also looking to impose a below market barred from participating in any type of securities offerings or actions involving registrants under Section 15(b)(6)(B) of the Act.
Potential Impact of SEC Charges
The U.S. The Securities and Exchange Commission (SEC) has charged the BitConnect founder with securities fraud, alleging that he and two other people were behind a $2 billion cryptocurrency scam. This may have major implications for the cryptocurrency market, as the SEC is trying to recover the stolen funds and prosecute those involved.
Here, we look at the potential impact of SEC charges on the crypto market and investors.
Impact on the cryptocurrency market
The U.S. Securities and Exchange Commission’s (SEC) charges against the founder of BitConnect with securities fraud has sent shockwaves throughout the cryptocurrency market. The SEC seeks to recover $2 billion in funds the founder allegedly stole from investors through a fraudulent crypto-lending business.
Upon announcement of the charges, news of this harshly hit many investors and cryptocurrency traders alike. The SEC is seen as potentially impacting the crypto investment world due to its hierarchical stance on cryptocurrencies. Investors in other crypto investments taking place in America may be fearful that they have come under greater scrutiny over their activities now that a high-profile case has taken place and many may be wary of embarking on such activities again in light of this news.
BitConnect has been severely affected by the investigation, with its native token BCC trading at less than $1 compared to its all-time high of over $400 per unit just one year ago. In addition, founder Divyesh Darji has stepped down from his position within BitConnect amid SEC allegations, leaving analysts questioning whether or not those involved will ever see any restitution for their losses.
However, beyond these direct implications, ancillary ripple effects will likely be observed in the wider world of cryptocurrency as investors and regulators adjust their strategies according to what they can learn from this case. It serves as another reminder that due diligence should always occur when engaging in any cryptocurrency activity. It could herald a further reignition activity among government agencies focused on protecting public welfare regarding such investments or ventures.
Impact on investors
The U.S. Securities and Exchange Commission has charged BitConnect founder Suresh Sanghani with an alleged $2 billion cryptocurrency fraud related to the exchange’s controversial lending and exchange platform. This could have severe consequences for investors who put money into the project.
As a result, many investors are likely to suffer financial losses due to the fraudulent behaviour of its founder. The SEC’s charges against Sanghani contain several alarming revelations, such as how investors were allegedly misled and taken advantage of, where they were promised high returns through complex financial instruments offered by the company that they didn’t understand and were left with losses when the company collapsed.
The SEC suit will also provide insight into how Sanghani operated as a stock promoter in violation of securities laws by not disclosing his role in BitConnect and allegedly promoting an unregistered digital currency offering over various online channels including YouTube, Twitter, online publications, video conferencing sites, chatrooms, and other social media platforms.
These charges are likely to act as a warning for other investment schemes operating under dubious legal requirements or failing to meet regulatory standards for investor protection. Further ramifications from this case may extend beyond impacting specific investors as it could set a precedent for future cases related to crypto frauds.