Location of BitConnect founder still unknown, SEC tells Court
The Securities and Exchange Commission (SEC) has written to the New York Southern District Court to provide a status update concerning service of process on Satish Kumbhani and BitConnect.
As the Commission previously advised the Court, it 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.
In the SEC’s prior status report to the Court, the Commission reported that its efforts to obtain Kumbhani’s location from the foreign country from whom it had requested assistance had been unsuccessful, and that it was undertaking additional efforts to request the assistance of another foreign country to locate Kumbhani. Those efforts are still underway, and to date, Kumbhani’s location remains unknown to the Commission.
The SEC requests that the Court grant it an additional 90 days to complete service on the defendants if they are, contrary to current information, located in the United States.
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.