BitConnect was a cryptocurrency Ponzi scheme that operated from February 2016 to January 2018, defrauding approximately 4,000 investors from 95 countries of $2.4 billion. Founded by Indian national Satish Kumbhani, the platform marketed itself as a lending program offering returns of up to 40% monthly through a purported "BitConnect Trading Bot" and "Volatility Software" that claimed to profit from cryptocurrency market volatility.
Overview
BitConnect required investors to exchange Bitcoin for BitConnect Coin (BCC), the platform's proprietary token, which could then be "lent" to the platform for daily interest payments. The scheme promised approximately 1% daily returns (equivalent to 3,700% annually), with larger initial deposits qualifying for higher rates. BCC reached an all-time high of $463 in December 2017, and BitConnect achieved a market capitalization of $3 billion before its collapse.
The platform operated anonymously with no public whitepaper and utilized multi-level marketing tactics, offering referral commissions of up to 15% for recruiting new investors across multiple tiers. This structure drove exponential growth through social media campaigns, YouTube testimonials, and promoters who marketed BitConnect as a "second chance" for those who missed early Bitcoin investments.
Operations and Structure
In reality, BitConnect functioned as a textbook Ponzi scheme. Investigations revealed that no actual trading occurred through the alleged bot. Instead, funds from new investors paid returns to earlier participants, while Kumbhani and co-conspirators directed up to 15% of invested capital into a slush fund for personal benefit. Investment funds were transferred to digital wallets controlled by the operators and moved through international cryptocurrency exchanges rather than being used for any legitimate trading activity.
Kumbhani and his network also engaged in market manipulation, artificially inflating BCC's price to create the false appearance of legitimate market demand. The scheme's operations violated multiple financial regulations, including operating an unlicensed money transmitting business, as BitConnect never registered with the Financial Crimes Enforcement Network (FinCEN) despite operating in the United States.
Regulatory Action and Collapse
Warning signs emerged throughout 2017 as cryptocurrency community members, including Ethereum founder Vitalik Buterin, publicly accused BitConnect of operating a Ponzi scheme. On November 7, 2017, the UK government issued BitConnect a strike-off notice requiring proof of legitimacy within two months.
On January 3, 2018, the Texas State Securities Board issued a cease and desist order, formally identifying BitConnect as a Ponzi scheme and citing failures in transparency and misleading statements. North Carolina's securities division issued similar warnings. On January 16, 2018, BitConnect abruptly shut down its lending platform and exchange. BCC's price immediately crashed 92%, falling from over $400 to under $40 within hours, eventually declining to less than $1.
A U.S. District Court in Kentucky granted a temporary restraining order on January 31, 2018, freezing BitConnect's assets and requiring disclosure of cryptocurrency wallet addresses and transaction histories. However, since BitConnect operated as a decentralized scheme rather than a formal corporate entity, asset recovery proved extremely difficult.
Criminal Proceedings and Asset Recovery
In September 2021, the U.S. Securities and Exchange Commission filed civil charges against Kumbhani, top U.S. promoter Glenn Arcaro, and Arcaro's company Future Money LTD. The Department of Justice simultaneously initiated criminal proceedings against Arcaro, who pleaded guilty to conspiracy to commit wire fraud in September 2021.
In February 2022, federal prosecutors indicted Kumbhani on multiple charges including conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering. If convicted on all counts, he faces a maximum sentence of 70 years in prison. However, Kumbhani remains a fugitive, having reportedly fled India to an unknown location.
In September 2022, Arcaro was sentenced to 38 months in prison and ordered to pay $17.6 million in restitution to approximately 800 verified victims from over 40 countries. He also agreed to forfeit more than $24 million in proceeds from the scheme. In January 2023, a federal court formally ordered distribution of the restitution payments.
In February 2025, India's Enforcement Directorate seized $190 million in cryptocurrency assets linked to BitConnect associates, marking one of the largest seizures related to cryptocurrency fraud in India. Authorities also arrested Divyesh Darji, an alleged India-region leader, in August 2018 in connection with BitConnect and subsequently for involvement in another cryptocurrency scam called Regal Coin.
Cultural Impact and Aftermath
BitConnect gained notoriety beyond financial fraud circles due to a viral internet meme from its October 2017 promotional event in Pattaya, Thailand, where investor Carlos Matos delivered an intensely enthusiastic testimonial, repeatedly screaming "BitConnect!" The event exemplified the cult-like atmosphere the scheme cultivated among believers.
The case exposed significant vulnerabilities in cryptocurrency regulation and enforcement, particularly regarding cross-border financial crimes. While victims received approximately $17 million in restitution—less than 1% of total losses—the case demonstrated both the potential for blockchain forensics to trace illicit funds and the challenges of recovering assets in decentralized cryptocurrency schemes.
BitConnect's collapse served as a cautionary tale about unrealistic return promises, anonymous operations, multi-level marketing structures in cryptocurrency, and the importance of regulatory compliance and due diligence.
References
- U.S. Department of Justice (February 25, 2022). "BitConnect Founder Indicted in Global $2.4 Billion Cryptocurrency Scheme"
- U.S. Securities and Exchange Commission (September 2021). Civil complaint against BitConnect, Satish Kumbhani, and Glenn Arcaro
- U.S. District Court, Southern District of California (January 12, 2023). Restitution order for BitConnect victims
- IRS Criminal Investigation (September 16, 2022). "U.S. promoter sentenced to prison for role in fraud scheme"
- India Enforcement Directorate (February 2025). "$190 million asset seizure in BitConnect case"
- Texas State Securities Board (January 3, 2018). Cease and desist order
- Bloomberg (September 17, 2022). "BitConnect Promoter Gets 38 Months in $2.4 Billion Ponzi Scam"
- BDO Canada (October 27, 2022). "Cryptocurrency execs charged for $2.4 billion Ponzi scheme"