Just as the Bitcoin bull market of 2016 was beginning, Satish Kumbhani emerged as an unlikely figure behind one of the most infamous crypto scams ever. His creation, BitConnect, promised annual returns of 120% but turned out to be a $2.4 billion ponzi scheme that devastated 4,500 people. Born in rural India, Kumbhani has remained an elusive character and there’s limited information about him online.
The Rise of BitConnect
Launched in 2016, BitConnect was introduced as a high-yield investment program based on a cryptocurrency called BitConnect Coin (BCC). Kumbhani presented BitConnect as a lucrative opportunity, promising investors high returns through a unique trading bot and volatility software. The platform’s model was simple: users would lend their Bitcoin in exchange for BCC and earn daily interest. Carlos Matos (the BitConnect guy) shouting “Bitconnect” at an event quickly became a popular meme.
The Allure of Easy Wealth
At its peak, the platform’s market cap soared to $3.4 billion and ranked in the top 20 crypto tokens in the world. Investors were drawn to the seductive idea of earning 1% daily compounded interest.
The scheme was particularly attractive because it seemed to leverage the volatility of the crypto market, a concept that was relatively new at the time. To make matters worse, some of the biggest crypto influencers such as Trevon James, CryptoNick, and Craig Grant promoted the ponzi.
However, the reality was grim. BitConnect was a ponzi scheme, paying earlier investors with the money from new ones. The scheme started to unravel when regulatory bodies from Texas and North Carolina issued cease and desist orders. In January 2018, BitConnect abruptly shut down its lending program, leading to a 92% crash in BCC’s value.
The closure of BitConnect led to a flurry of legal actions. Kumbhani was indicted by a federal grand jury in San Diego, charged with wire fraud, commodity price manipulation, operating an unlicensed money transmitting business, and international money laundering. The indictment alleged that Kumbhani and his co-conspirators obtained $2.4 billion from 4,500 investors across 95 countries.
The Global Impact
The BitConnect scam had a global impact. The fallout was devastating for many who had invested their life savings. The U.S. Department of Justice and the FBI took steps to bring Kumbhani to justice, highlighting the international nature of cryptocurrency fraud.
The Elusive Mastermind
According to the SEC, Kumbhani’s whereabouts remain unknown. Most likely he’s hiding in a country such as Dubai that doesn’t have an extradition agreement with India or the US. If caught, he faces up to 70 years in prison. It’ll be difficult to track him down and he probably used a pseudonym to resemble that of Satoshi Nakamoto.