Bitcurrent Ponzi scheme
Representations of various cryptocurrencies – Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin – are placed on PC motherboard in this illustration taken June 29, 2021. REUTERS/Dado Ruvic/Illustration

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

The restitution order follows 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 conspiracy to commit wire fraud and was sentenced to just over three years in prison. Arcaro was ordered Thursday to pay $17.64 million in restitution to investors from more than 40 countries.

BitConnect’s founder, Satish Kumbhani, also has 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 their money into a slush fund “to be used for the benefit of the company’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,” said U.S. Attorney Randy Grossman.

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

– City News Service