BitConnect founder remains out of SEC’s reach
The Securities and Exchange Commission (SEC) remains unable to locate Satish Kumbhani, the founder of BitConnect. This is made clear by a status report submitted by the SEC at the New York Southern District Court on August 24, 2022.
As the Commission previously advised the Court, the SEC did not know the whereabouts of Kumbhani, an Indian citizen, at the time it filed this action, and BitConnect is an unincorporated entity the Commission must serve through its manager, Kumbhani, pursuant to Rule 4(h)(1)(B) and Rule 4(h)(2).
In the Commission’s prior status reports to the Court, the SEC advised that it had learned that Kumbhani might have relocated from India to an unknown address in a different foreign country, and that the Commission had been consulting with that country’s financial regulatory authorities in an attempt to locate Kumbhani’s address, in order to serve both Kumbhani and BitConnect. The Commission also reported to the Court that Kumbhani remains at large in response to the indictment obtained by the United States Department of Justice against him from a grand jury on charges related to the Commission’s Complaint.
In response to the Commission’s formal request for assistance from the foreign country’s authorities for information as to Kumbhani’s whereabouts, that country’s government reported to the Commission that it has been unable to locate an address for Kumbhani or confirm that he is located there. The Commission is currently undertaking additional efforts to request the assistance of another foreign country to locate Kumbhani.
The SEC asks the Court to grant it a 90-day extension of time to serve the defendants.
According to the SEC’s complaint, from early 2017 through January 2018, the defendants conducted a fraudulent and unregistered offering and sale of securities in the form of investments in a “Lending Program” offered by BitConnect. The complaint alleges that, to induce investors to deposit funds into the purported Lending Program, Defendants falsely represented, among other things, that BitConnect would deploy its purportedly proprietary “volatility software trading bot” that, using investors’ deposits, would generate exorbitantly high returns.
However, instead of deploying investor funds for trading with the purported trading bot, defendants BitConnect and Kumbhani siphoned investors’ funds off for their own benefit by transferring those funds to digital wallet addresses controlled by them, their top promoter in the U.S., defendant Glenn Arcaro, and others.
The SEC’s complaint further alleges that BitConnect and Kumbhani established a network of promoters around the world, and rewarded them for their promotional efforts and outreach by paying commissions, a substantial portion of which they concealed from investors.
The SEC’s complaint charges the defendants with violating the antifraud and registration provisions of the federal securities laws. The complaint seeks injunctive relief, disgorgement plus interest, and civil penalties.