San Diego judge orders $17 million restitution payment in BitConnect pyramid scheme

A San Diego federal judge on Thursday ordered the top U.S.-based promoter of a worldwide cryptocurrency scam to pay more than $17.6 million in restitution to nearly 800 victims from around the globe.

Los Angeles resident Glenn Arcaro, 45, has also agreed to forfeit more than $24 million, which could also be used in the future to repay victims of the pyramid investment scheme BitConnect, which prosecutors have called a “textbook Ponzi scheme” that defrauded investors of more than $2.4 billion.

Arcaro sat atop the North American branch of the conspiracy as its lead promoter in the U.S., according to federal authorities. He pleaded guilty in September 2021 to conspiracy to commit wire fraud, and U.S. District Judge Todd Robinson sentenced him in September to three years and two months in prison. He has not yet started serving his sentence.

The Indian founder of BitConnect, Satishkumar Kurjibhai Kumbhani, was indicted last February by a San Diego federal grand jury. He is charged with numerous conspiracy counts relating to wire fraud, money laundering and commodities fraud.

Prosecutors said Kumbhani remains a fugitive.

According to prosecutors and the U.S. Securities and Exchange Commission, Arcaro used his website Future Money to lure investors into a lending program the company called its BitConnect Referral Program. Prosecutors alleged it was a pyramid scheme in which Arcaro earned as much as 15 percent of every investment from investors he recruited directly, or those recruited by others below Arcaro in the pyramid.

Arcaro and his co-conspirators claimed BitConnect used a proprietary technology — known as the “BitConnect Trading Bot” and “Volatility Software” — that was able to generate huge profits by using investors’ money to trade on the volatility of cryptocurrency exchange markets.

“In truth, BitConnect operated a textbook Ponzi scheme by paying earlier BitConnect investors with money from later investors,” prosecutors have said.

At the time of both Arcaro’s guilty plea and the indictment against Kumbhani, prosecutors said the BitConnect scheme was believed to be the largest cryptocurrency fraud ever charged criminally, though it now appears to be dwarfed by the criminal case resulting from the $7 billion collapse of the cryptocurrency exchange FTX.

According to court documents, the FBI sought out Arcaro’s potential victims beginning in October 2021 and ultimately identified nearly 5,000 potential victims. Of those, 797 people from more than 40 countries were able to provide proof of victimization, and the FBI determined they were jointly entitled to more than $17.6 million.

That money will come from the roughly $38.9 million the government obtained from selling Arcaro’s cryptocurrency holdings, according to court documents. The remaining money — about $21.2 million — will be put toward the $24 million Arcaro was ordered to forfeit.