While this is believed to be the largest cryptocurrency fraud ever criminally charged, the Justice Department also seized a record $56 million in cryptocurrency.
SAN DIEGO — Around $56 to $57 million worth of cryptocurrency seized through the prosecution of a man who participated in a large-scale investment scheme will be sold to repay investors victimized by the fraud, federal prosecutors in San Diego said this week.
The liquidation, which the U.S. Attorney’s Office called “the largest single recovery of cryptocurrency for victims to date,” stems from the investment scheme BitConnect, which prosecutors say defrauded investors out of more than $2 billion.
“This is believed to be the biggest cryptocurrency fraud ever charged criminally,” said Assistant U.S. Attorney Daniel Silva of the Southern District of California.
“This is a massive fraud,” Silva added, “It involves a pyramid scheme, a Ponzi scheme, securities fraud and also involves wire fraud.”
Glenn Arcaro of Los Angeles, 44, pleaded guilty to federal charges earlier this year for his role in misleading investors by claiming BitConnect used proprietary technology — known as the “BitConnect Trading Bot” and “Volatility Software” — to turn investors’ money into huge returns.
“They claimed that if you traded your bitcoin for their currency, currency called Bit Connect, that their trading ‘bot’ – a volatility software algorithm – would make sure you didn’t lose any money,” Silva told News 8.
Prosecutors say BitConnect actually operated like a Ponzi scheme, which used investor funds to repay other BitConnect investors.
Arcaro, who officials say was BitConnect’s top promoter in the United States, admitted to earning at least $24 million through the scheme, according to his plea agreement. His plea included an agreement to repay the defrauded investors, and a judge last week ordered the liquidation of Arcaro’s fraud proceeds to begin the process. Prosecutors say the proceeds are largely in the form of cryptocurrencies, including “Bitcoin, Ethereum, Litecoin, Dash, and several others.”
“It’s just really good to see these folks are going to get justice that got swindled out of their bitcoin,” said Tyrone Ross, CEO and co-founder of Onramp Invest, a crypto-asset platform for financial advisors. “That’s terrible.”
Ross advised, “You know it’s a scam when they guarantee returns.”
He also had advice for would-be crypto investors.
“It’s very important that you ask a lot of questions before you actually do anything,” he told News 8. “Then if you want to put some money in, put in a little bit so you know that if it goes to zero, it’s not going to change your way of living.”
“If it sounds too good to be true, it probably is,” Silva said. “Also with cryptocurrency, they are extremely volatile, extremely speculative, and your risk of loss is massive.”
The U.S. Attorney’s Office said victims of the scheme can learn about their rights and submit a victim impact statement for Arcaro’s sentencing hearing by clicking here.
Arcaro is set to be sentenced Jan. 7 in San Diego federal court.
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