The BitConnect scam has become one of the biggest scams in cryptocurrency history. But on Wednesday (12), the US Department of Justice announced the payment of compensation to some of those affected by the coup. According to an official DoJ publication, part of the victims will receive compensation of US$ 17 million. In current values, the amount corresponds to approximately R$ 90 million. The decision came from the federal district court in San Diego, which ordered restitution. About 800 victims from more than 40 countries will share the amount, which is the first compensation paid in this case. As CriptoFácil reported, the main director of BitConnect pleaded guilty to charges of electronic fraud in 2021. In November of that year, the DoJ sold the equivalent of R$ 308 million in cryptocurrencies to compensate the victims of the scheme.
Fraud and false promises
The US Securities and Exchange Commission (SEC) alleged that BitConnect committed fraud and made false promises to investors. The company’s scheme worked through a “volatility software trading bot”. With this program, BitConnect claimed to generate income above the market and offered part of this value to those who entered the scheme. Investors received a token, the “BitConnect token”, which they could sell and earn profits from this operation as well. But it was all a farce. What its founders did was use investor funds for personal benefit. They would then send the money to digital wallets under their control, effectively robbing investors. Federal prosecutors charged BitConnect, its founder Satish Kumbhani and its main prosecutor Glenn Arcao in September 2021. At the time, the DoJ claimed the fraud amounted to $2 billion. Eventually, the total amount came to $2.4 billion. Kumbhani and Arcao were also accused of offering securities without SEC authorization.
the feathers
However, the sentence the DoJ handed Arcao was low: just three years in prison for marketing BitConnect’s lending program as an investment. Prosecutors further said Arcaro operated a “Ponzi scheme” using money from new investors to pay off old ones. He allegedly created a website called Future Money to lure investors into the exchange’s lending program. In total, BitConnect had a presence in almost the entire planet. In all, the scheme claimed 4,000 victims from 95 countries. That is, the DoJ decision on compensation covers about 20% of victims. The DoJ did not mention when it sold the funds it seized in 2021. But it should be noted that in 2021 they announced a value of $56 million. But the compensation announced on Wednesday is almost 66% less than that amount. In short, the DoJ probably sold cryptocurrencies after the 2022 crash, which contributed to the low compensation amount. Based on current value, each victim would receive an average of $42,500, or about 2.25 Bitcoins (BTC). However, it is worth noting that the $17 million represents only 0.7% of the total $2.4 billion of fraud caused by BitConnect.