Over $17M in restitution ordered for victims of cryptocurrency fraud

A San Diego federal judge Thursday ordered one of the leaders of an alleged investment fraud scheme involving cryptocurrency to pay more than $17 million in restitution to around 800 victims worldwide.

The restitution order stems from a grand jury indictment returned against the owners and operators of cryptocurrency company BitConnect. Federal prosecutors say the company was run like a Ponzi scheme, in which investors were repaid using money from other investors.

Glenn Arcaro, 45, the company’s top U.S.-based promoter, pleaded guilty to federal charges and was sentenced to just over three years in prison. Arcaro was ordered Thursday to pay $17,646,801 in restitution to cryptocurrency fraud victims from over 40 countries for.

BitConnect’s founder, Satish Kumbhani, has also been indicted and remains a fugitive.

According to the U.S. Attorney’s Office, BitConnect investors were misled by the company’s claims that it used proprietary technology — known as the “BitConnect Trading Bot” and “Volatility Software” — to turn investors’ money into huge returns.

But while investor funds were being used to repay other BitConnect investors, prosecutors say Arcaro and others put up to 15% of investors’ money into a slush fund “to be used for the benefit of (BitConnect’s) owner and promoters.”

“Hundreds suffered devastating financial losses as a result of this terrible deception, and we hope today’s ruling will provide some relief to the victims,” U.S. Attorney Randy Grossman said in a statement.

Kumbhani was indicted last February. Authorities asked anyone with information regarding his whereabouts to contact the FBI at 216-522-1400.