- Indian authorities seized $190 million in crypto linked to the BitConnect scam.
- Investigators traced funds through blockchain wallets and online transactions.
- BitConnect lured investors with false profit claims and unregistered securities.
Indian authorities confiscated nearly $190 million in cryptocurrency linked to the BitConnect Ponzi scheme, which collapsed in 2018. The Enforcement Directorate conducted raids in Gujarat on February 11 and 15 and seized assets connected to BitConnect associates. Officials also took possession of approximately $15,582 in cash, an SUV, and electronic devices.
The scam defrauded 4,000 investors across 95 countries and led to an estimated loss of $2.4 billion. The ED’s Ahmedabad office uncovered an underground network of digital transactions that concealed illicit funds. By tracing blockchain wallets, internet protocol addresses, and transaction patterns, investigators identified and seized the assets, securing them in a cold wallet.
Fraud Investigation Under PMLA
The ED launched its investigation under the Prevention of Money Laundering Act (PMLA) after the Criminal Investigation Department in Surat, Gujarat, filed multiple First Information Reports. Authorities determined that Satish Kumbhani, the founder of the company, and his associates illegally accumulated vast crypto holdings instead of earning them through legitimate means.
Kumbhani allegedly built a global promoter network to expand the Ponzi scheme. The United States Department of Justice charged him in February 2022. According to the United States Attorney’s Office, BitConnect is the largest cryptocurrency fraud case ever prosecuted. Court documents indicate that the U.S. Securities and Exchange Commission has been unable to locate Kumbhani.
Deceptive Practices and Market Manipulation
Between November 2016 and January 2018, BitConnect lured investors with a “Lending Program” that offered unregistered securities. Promoters falsely advertised a trading bot capable of generating a 40% monthly return. Investors saw fabricated profits displayed on BitConnect’s platform, with projected annual returns reaching 3,700%.
Authorities found no evidence of real trading. Instead, new investor funds were used to pay existing investors. The scheme collapsed when BitConnect shut down its operations. Investigators traced funds to wallets controlled by Kumbhani and his associates. Officials also confirmed that Kumbhani violated U.S. financial regulations by failing to register with the Financial Crimes Enforcement Network as required by the Bank Secrecy Act.
Victims and Legal Consequences
At its peak, BitConnect Coin surged to $463.31, reaching a market capitalization of $3.4 billion before its downfall. The DOJ stated that Kumbhani and his team manipulated BCC’s market demand. The funds raised from investors were allegedly concealed through BitConnect’s network of cryptocurrency wallets and international exchanges.
Some victims of the scheme took extreme actions. In August last year, the ED disclosed that an investor, Shailesh Babulal Bhatt, who lost money in BitConnect, allegedly collaborated with accomplices to kidnap two of Kumbhani’s employees. They demanded 2,091 Bitcoin, 11,000 Litecoin, and about $1.7 million for their release. The ED reported that Bhatt took this action to recover his lost investment.
