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`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.1 Page 1 of 19
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`UNITED STATES DISTRICT COURT
`
`SOUTHERN DISTRICT OF CALIFORNIA
`
`UNITED STATES OF AMERICA,
`
`V.
`
`August 2021 Grand Jury
`Case No. ------
`INDICTMENT
`
`SATISH KURJIBHAI KUMBHAN1,
`aka "Vindee,"
`aka "VND" '
`aka "vndbcc,"
`
`Defendant.
`
`Title 18, U.S.C., Sec. 1349 - Conspiracy to
`Commit Wire Fraud; Title 18, U.S.C.,
`Sec. 1343 - Wire Fraud; Title 18, U.S.C.,
`Sec. 371 - Criminal Conspiracy; Title 18,
`U.S.C., Sec. 1960 - Operation of an
`Unlicensed Money Transmitting Business;
`Title 18, U.S.C., Sec. 2 ~ Aiding and
`Abetting; Title 18, U.S.C., Sec. 1956(h) -
`Conspiracy to Commit Money Laundering;
`Title 18, U.S.C., Sec. 982(a), and Title 28,
`U.S.C., Sec. 2461(c) - Criminal Forfeiture
`
`At all times relevant, the Grand Jury charges:
`
`INTRODUCTORY ALLEGATIONS
`Relevant Individuals, Entities, Federal Agencies, and Terms
`
`1.
`
`21
`22 (referenced herein as "BitConnect") was an unincorporated organization established in
`
`BitConnect International PLC, aka "BitConnect," aka "BitConnect Ltd.,"
`
`23 approximately 2016. Between 2016 and 2017, BitConnect formed several affiliated entities
`
`24
`
`in the United Kingdom, including but not limited to: BitConnect Ltd. and BitConnect
`
`25 International PLC, which were all part ofBitConnect.
`2.
`26
`27 various investment programs through social media. BitConnect conducted its business
`
`BitConnect operated a cryptocurrency investment platform and touted its
`
`28 principally
`
`by means of websites
`
`accessible
`
`at www.bitconnect.co
`
`and
`
`DCS:nlv:San Diego:2/25/22
`
`

`

`•
`
`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.2 Page 2 of 19
`
`1 www.bitconnectcoin.co (together referenced as the "BitConnect Website"). The BitConnect
`
`2 Website was accessible worldwide to the general public and was accessed by individuals
`
`3 within the Southern District of California and elsewhere.
`
`3.
`
`4
`
`Defendant SATISH KURJIBHAI KUM:BHANI aka "Vindee" aka "VND"
`'
`'
`'
`5 aka "vndbcc," ("Defendant KUM:BHANI"), was a citizen of India who resided in Surat,
`
`6 India .. Defendant KUMBHANI founded, managed, and controlled BitConnect. Defendant
`
`7 KUM:BHANI used fictitious identities, including "Vindee," "VND," and "vndbcc" in order
`
`8 to conceal his identity and his control over BitConnect.
`
`9
`
`4.
`
`Defendant KUM:BHANI directed BitConnect's international network of
`
`1 0 affiliates, promoters, directors, managers, employees, and agents. Defendant KUM:BHANI
`
`11 disseminated information via wire communications in the United States and globally to the
`
`12 general public and to BitConnect's network of promoters and affiliates, all for further
`
`13 dissemination to the investing public regarding BitConnect's various investment programs.
`
`14 Defendant KUM:BHANI caused thousands of investors worldwide to invest in BitConnect' s
`
`15 cryptocurrency investment programs.
`5.
`
`16
`
`Glenn Arcaro ("Arcaro", charged elsewhere) was a resident of the United
`
`17 States and served as BitConnect's "national promoter" for the United States from in or
`
`18 around August 2017 to 2018 and was responsible for managing a team of United States-
`
`19 based promoters for BitConnect. Arcaro served as one of the most prolific and successful
`
`20 promoters ofBitConnect.
`
`21
`
`6.
`
`Defendant KUM:BHANI supervised, directed, and managed Arcaro as
`
`22 BitConnect's national promoter in the United States, and communicated regularly with
`
`23 Arcaro via wire communications.
`
`24
`
`7.
`
`Future Money, Ltd. ("Future Money") was a limited company established in
`
`25 approximately 2017 in Hong Kong. Arcaro formed Future Money with the approval of
`
`26 Defendant KUM:BHANI as a way to lure people to invest in BitConnect. Arcaro publicly
`
`27 represented that Future Money was a cryptocurrency education course but, in fact, it was a
`
`28 sales funnel for BitConnect.
`
`2
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.3 Page 3 of 19
`
`8.
`1
`2 United States Department of the Treasury. FinCEN was responsible for regulating financial
`
`The Financial Crimes Enforcement Network ("FinCEN") was an agency of the
`
`3
`
`institutions in connection with compliance with the Bank Secrecy Act and the regulations
`
`4 thereunder.
`5
`9.
`
`A "Digital asset" or "digital token" generally referred to an asset issued and/or
`
`6 transferred using clistributed ledger or blockchain technology, including assets referred to
`
`7 as "cryptocurrencies," "virtual currencies," "digital coins," and "digital tokens."
`
`10. The "blockchain" was a distributed public ledger that recorded incoming and
`
`8
`9 outgoing cryptocurrency transactions.
`
`10
`11
`
`11.
`
`"Bitcoin" was a type of cryptocurrency. Bitcoin were generated and controlled
`
`through computer software operating via a decentralized, peer-to-peer network. Bitcoin
`
`12 could be used for purchases or exchanged for other currency on currency exchanges.
`
`13 Bitcoin was commonly known as "BTC."
`
`14
`
`12. A "trading bot" was computer software programmed to trade a digital asset
`
`15 based upon predetermined parameters.
`16
`13. A "cryptocurrency wallet" was a digital wallet used to store, send, and receive
`
`17 digital currency like Bitcoin. Each digital wallet had a unique digital address containing
`
`18
`
`letters and numbers that were used in order to send and receive cryptocurrency transactions.
`
`19
`
`14. A "cluster" referred to a collection of related cryptocurrency wallets or
`
`20 addresses usually under the control of a single entity or affiliated individuals.
`
`21
`
`15. An initial coin offering ("ICO") was a capital raising event in which an entity
`
`22 offered investors a unique "coin" or "token" in exchange for consideration-most
`
`23 commonly in the form of established virtual currencies or fiat currency. These tokens were
`
`24
`
`issued on a blockchain and were oftentimes listed on online platforms, called virtual
`
`25 currency exchanges, where they were tradable for virtual or fiat currencies.
`
`26
`
`16. To participate in an ICO, investors were typically required to transfer virtual
`
`27 currencies to the issuer's address, online wallet, or other account. During an ICO, or after
`
`28
`
`its completion, the issuer would typically distribute its unique "tokens" to the participants'
`
`3
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.4 Page 4 of 19
`
`1 unique address on the related virtual currency's blockchain. Similar to stockholders in an
`
`2
`
`initial public offering ("IPO"), holders of these tokens were then entitled to certain rights
`
`3 related to a venture underlying the ICO, such as profits, shares of assets, use of certain
`
`4 services provided by the issuer, and voting rights.
`
`5
`
`17. Under Title 7, United States Code, Section 1 a(9), a "commodity" encompassed
`
`6 a wide range of tangible and intangible items and was broadly defined to include all goods,
`
`7 articles, rights, and interests in which contracts for future delivery were presently or in the
`
`8 future dealt. Cryptocurrencies were commodities because there could be a contract for
`
`9 future delivery of a specific cryptocurrency.
`
`1 0
`
`18. A money transmitting business ( also referenced herein as an "MTB") included
`
`11 any person doing business whether on a regular basis or as an organized business concern,
`
`12
`
`including businesses operating a digital currency exchange in which such businesses
`
`13 exchanged one virtual currency into another virtual currency. An MTB was a financial
`
`14
`
`institution and required to register as such with FinCEN under Title 31, United States Code,
`
`15 Section 5330 and the regulations thereunder. The failure to register an MTB with FinCEN
`
`16 was a federal felony offense.
`
`17
`
`18
`
`Relevant Factual Background regarding Defendant and BitConnect
`
`The Formation and Management ofBitConnect
`
`19.
`
`19
`20 Defendant KUMBHANI and others caused the creation of a native digital token or digital
`
`In or around 2016, Defendant KUMBHANI created BitConnect. To do so,
`
`21 currency called the "BitConnect Coin" ("BCC"), which was based on BitConnect's own
`
`22 blockchain. At BCC's peak price, BitConnect's market capitalization was approximately
`
`23 $4.3 billion. The BitConnect Website was accessible to the public globally, including to
`
`24
`
`individuals located within the Southern District of California, and provided potential
`
`25
`
`investors with information about BitConnect's investment programs and an account login
`
`26
`
`link.
`
`27
`
`28
`
`II
`II
`
`4
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.5 Page 5 of 19
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`1
`
`20.
`
`From in or around November 2016 to in or around January 2017, Defendant
`
`2 KUMBHANI and others conducted an ICO of BCC and introduced BCC to the investing
`
`3 public through the BitConnect Website and other wire communications. BitConnect
`
`4 claimed that BCC was an open-source, decentralized cryptocurrency.
`
`5
`
`21. Defendant KUMBHANI recruited promoters and affiliates, including Arcaro,
`
`6 from Asia, Europe, North America, Australia, and elsewhere to promote BCC and the
`
`7 investment programs BitConnect was offering. Defendant KUMBHANI organized various
`
`8 events internationally to promote BitConnect's blockchain technology, investment
`
`9 opportunities, and investment returns to the promoters and affiliates.
`
`10
`
`22. During one such presentation in or around August 2017 to BitConnect's
`
`11 promoters, including Arcaro, Defendant KUMBHANI made various statements in response
`
`12
`
`to questions, including the following:
`
`13
`
`a. When asked about
`
`the ownership of BitConnect, Defendant
`
`14 KUMBHANI stated that if the "government" knew the identity of BitConnect' s owner, the
`
`15 government "might punish them ... so we ... ultimately lose our money."
`
`16
`
`b. When asked why one of the United Kingdom corporate registration
`
`17 documents for BitConnect listed "Ken Fitzsimmons," a nominee, as a corporate officer for
`
`18 BitConnect, Defendant KUMBHANI explained that "Fitzsimmons" was listed because of
`
`19 Defendant KUMBHANI's desire to remain anonymous.
`
`20
`
`c. When asked about tax compliance, Defendant KUMBHANI stated, "we
`
`21
`
`[BitConnect] don't have any regulations ... we are dealing only with cryptocurrency, so
`
`22 we are not paying any tax to the government."
`
`23
`
`d. When asked how many coins BitConnect issued during the 2016 ICO,
`
`24 Defendant KUMBHANI stated that BitConnect issued "4.8 million BCC tokens at the time
`
`25 of [the 2016] ICO."
`
`26
`
`27
`
`28
`
`II
`II
`
`II
`
`5
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.6 Page 6 of 19
`
`1
`2 stated, "I already explained you [sic]. How BitConnect is making money they are using the
`
`e. When asked how BitConnect made money, Defendant KUMBHANI
`
`3 Volatility Software ... they are getting the profit from there and they also already have one
`
`4 million BCC token [sic] so if they want to make profit, they sell it ... you understand?"
`
`5
`
`f. When asked about the long-term prospects and viability ofBitConnect,
`
`6 Defendant KUMBHANI stated, "This will not ... shutdown by night."
`
`7
`
`8
`
`BitConnect's Lending Program Was a Ponzi Scheme
`
`23. Defendant KUMBHANI, Arcaro, and others aggressively marketed
`
`9 BitConnect's "Lending Program."
`
`10
`
`24. Defendant KUMBHANI and others touted the Lending Program's purported
`
`11 "Trading Bot" and "Volatility Software" as the centerpiece of BitConnect' s Lending
`
`12 Program, while knowing that the marketing materials for the Lending Program contained
`
`13 multiple false and fraudulent statements. Defendant KUMBHANI and others represented
`
`14
`
`that BitConnect would use investors' money as working capital to fund its own investment
`
`15 activity. Specifically, Defendant KUMBHANI,
`
`through BitConnect,
`
`falsely and
`
`16 fraudulently claimed that BitConnect' s proprietary "Trading Bot" and "Volatility Software"
`
`17 would generate substantial profits for investors by trading on the volatility of global
`
`18 cryptocurrency markets.
`
`19
`
`25.
`
`In truth, Defendant Kumbhani ran the Lending Program as a massive Ponzi
`
`20 scheme. BitConnect did not use assets invested in the Lending Program for trading related
`
`21
`
`to the purported Trading Bot and Volatility Software, and did not use purported profits to
`
`22 distribute proceeds to Lending Program investors, but rather paid earlier investors in the
`
`23 Lending Program with money from later investors.
`
`24
`
`26. By inducing investors to invest money through misrepresentations about
`
`25 BitConnect and the Lending Program, Defendant KUMBHANI caused BitConnect to
`
`26 obtain approximately $2.4 billion from retail investors worldwide, including investors in
`
`27
`
`the Southern District of California.
`
`28
`
`//
`
`6
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.7 Page 7 of 19
`
`27.
`
`1
`2 Defendant KUMBHANI was asked about the purported "Trading Bot" and "Volatility
`
`In 2017, during an interview at an event organized by DefendantKUMBHANI,
`
`3 Software." The interviewer asked Defendant KUMBHANI whether BitConnect would
`
`4 show the "Trading Bot" in action. In response, Defendant KUMBHANI avoided the
`
`5 question and evasively stated, among other things:
`a.
`
`"So you ask me very hard question ... "
`
`6
`
`7
`
`b.
`
`"Everybody is waiting to see the Trading Bot, how it is in action ... how
`
`8 we are getting the profit from the system .... "
`
`9
`
`c.
`
`"[A]nd we have shown the people and shown the promoters that there
`
`10 are some logics [sic] working behind the Trading Bot [ during a meeting with the promoters]
`
`11
`
`... for privacy reasons we are not disclosing anything about our last meeting."
`
`12
`
`28. To obtain investments from the public, Defendant KUMBHANI and others
`
`13 caused BitConnect to post false and misleading information about the Lending Program's
`
`14 purported daily historical rates of return on the BitConnect Website, and advertised the
`
`15 Lending Program on Coinmarketcap.com, a popular website in the digital asset space that
`
`16
`
`tracked price, available supply, trade volume, and market capitalization of various digital
`
`17
`
`tokens. These websites were accessed globally, including by individuals located within the
`
`18 Southern District of California.
`
`19
`
`20
`21
`
`BitConnect's Exchange was an Unregistered Money Transmitting Business
`
`29. To participate in the Lending Program, a prospective investor was first
`
`required to create an account on the BitConnect Website, and then transfer Bitcoin to a
`
`22 Bitcoin blockchain address provided to the investor and controlled by Defendant
`
`23 KUMBHANI and BitConnect. BitConnect then pooled the investors' Bitcoin in a series of
`
`24 addresses, or digital wallets, on the Bitcoin blockchain, which Defendant KUMBHANI
`
`25 controlled.
`
`26
`
`30. The investor's account page on the BitConnect Website would then reflect the
`
`27
`
`investor's purported Bitcoin investment in the investor's Bitcoin wallet.
`
`28
`
`//
`
`7
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.8 Page 8 of 19
`
`31. The investor would then remit Bitcoin to BitConnect to purportedly purchase
`
`1
`2 BCC tokens on the "BitConnect Exchange"-a digital currency exchange and money
`
`3
`
`transmitting service engaged in the business of the transmission of funds and digital
`
`4 currency-and then "lend" the BCC tokens to BitConnect, which, in tum, would
`
`5 purportedly invest these proceeds by buying and selling automatically, and profitably, on
`
`6 the volatility ofBitcoin via the Trading Bot.
`
`7
`
`32. BitConnect charged Lending Program investors an exchange fee through the
`
`8 BitConnect Exchange each time they exchanged their Bitcoin for BCC or exchanged BCC
`
`9 back into Bitcoin.
`
`10
`
`33. Although Defendant KUMBHANI,
`
`through BitConnect, operated the
`
`11 BitConnect Exchange as an MTB in the United States, including within the Southern
`
`12 District of California, neither Defendant KUMBHANI, nor any other person, ever registered
`
`13 BitConnect or the BitConnect Exchange with FinCEN, or complied with the statutes and
`
`14 regulations governing an MTB under Title 31, United States Code, Section 5330 and the
`
`15 regulations thereunder.
`
`16
`
`17
`
`BitConnect's Referral Program
`
`34. Defendant KUMBHANI and BitConnect also operated a Pyramid Scheme
`
`18 known as the "Referral Program" through which BitConnect relied on promoters, like
`
`19 Arcaro, to promote and direct investors to invest in BitConnect's Lending Program.
`
`20
`
`35. At Defendant KUMBHANI's direction, Arcaro and other global promoters
`
`21 used unique Internet hyperlinks known as "referral links" to offer the Lending Program on
`
`22
`
`their personal social media pages. Investors, in turn, used the referral links to access the
`
`23 BitConnect Website, sell their Bitcoin in exchange for BCC, and invest in BitConnect's
`
`24 Lending Program. Defendant KUMBHANI paid commissions to BitConnect's promoters
`
`25 when investors invested in the Lending Program through the referral links.
`
`26
`
`36. Under the Referral Program, at the direction of Defendant KUMBHANI,
`
`27 Arcaro and other global promoters posted videos to their social media pages that contained
`
`28 materially false and misleading statements about the profits that they could earn from
`
`8
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.9 Page 9 of 19
`
`1 investing in the Lending Program. These videos were broadcast over the Internet and were
`
`2 viewed by individuals throughout the world, including in the Southern District of California.
`
`3
`
`3 7. Defendant KUMBHANI, Arcaro, and others used live events to attempt to
`
`4 persuade individuals to invest in BitConnect' s investment programs, including by investing
`
`5 their retirement and life savings. During one such event, BitConnect awarded Arcaro a
`
`6 Porsche for successfully luring investors to invest in BitConnect through the Lending
`
`7 Program and otherwise purchasing BCC.
`
`8
`
`38. On or about October 13, 2017, in a group text message, Arcaro wrote to a group
`
`9 of BitConnect's promoters and described how effective live events were in soliciting
`
`1 O investments into BitConnect, stating that, "When people get to events and they actually see
`
`11 human flesh that only existed on a computer screen, something clicks in your head and it
`
`12 becomes real only at that moment. People just want to be part of something bigger than
`
`13
`
`themselves. They're bored they're [sic] lives generally suck. If they feel like they belong
`
`14 somewhere, all the guards come down, that's when they start investing for real."
`
`15
`
`39. The Referral Program was essentially a Pyramid Scheme that rewarded
`
`16 BitConnect's promoters who successfully recruited investors. In fact, in its marketing
`
`17 materials, BitConnect depicted the Referraf Program as a multi-level pyramid.
`
`18
`19
`
`BitConnect's Development Fund
`
`40. To reward promoters for successfully recruiting investors, Defendant
`
`20 KUMBHANI paid promoters like Arcaro and others additional income from a pool of
`
`21
`
`investment proceeds known as the "Development Fund," which was essentially a slush fund
`
`22 of investors' money. Promoters could use these funds to market BitConnect's investment
`
`23 programs. National promoters for BitConnect, like Arcaro, could also use Development
`
`24 Fund payments for their own personal use.
`
`25
`
`41. Defendant KUMBHANI directed others,
`
`including Arcaro and other
`
`26 promoters for BitConnect, to conceal and hide the existence of the Development Fund from
`
`27
`
`the public. Defendant KUMBHANI did not want the public to know how investors' money
`
`28 was being diverted and spent.
`
`9
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.10 Page 10 of 19
`
`42. On or about August 25, 2017, Defendant KUMBHANI admonished Arcaro in
`
`1
`2 writing for revealing the Development Fund to the public through videos posted to his social
`
`3 media pages. Specifically, Defendant KUMBHANI stated the following:
`
`4
`
`a.
`
`"You are wrongly promoting [the] development fund in public and
`
`5 YouTube."
`
`6
`
`b.
`
`"Immediately stop promoting and delete all."
`
`7
`
`"Requesting you to remove all related posts."
`
`C.
`d.
`8
`9 In response, Arcaro wrote to Defendant KUMBHANI, "It will not happen again" and "You
`
`"Stop all activities immediately."
`
`10 have my word."
`
`11
`
`43. Given the directives from Defendant KUMBHANI regarding the Development
`
`12 Fund, in a text message exchange on or about November 28, 2017, Arcaro directed other
`
`13 promoters based in the United States, who were beneath Arcaro in the Referral Program
`
`14 pyramid (also referred to as Arcaro's "downline"), to conceal and mislead investors about
`
`15
`
`the Development Fund. Arcaro wrote: "BitConnect honchos say don't talk about the
`
`16 development fund on video. Big no no in their eyes. You're supposed to phrase it all as if
`
`17
`
`it's coming from you. Just don't mention that they [BitConnect] are funding." By
`
`18 "BitConnect honchos," Arcaro was primarily referring to Defendant KUMBHANI.
`
`19
`
`44.
`
`Similarly, in a text message exchange on November 28, 2017, Arcaro directed
`
`20 his downline promoters: "Don't ever show your dev fund on camera. If you have videos
`
`21 showing that fund, gotta take it down."
`
`22
`
`45. The concealment of the Development Fund by Defendant KUMBHANI,
`
`23 Arcaro, and other promoters was designed to hide from investors that up to 15% of their
`
`24
`
`investment in BitConnect's investment programs was being diverted directly into the
`
`25 Development ('slush') Fund and not invested as promised by BitConnect.
`
`26
`
`BitConnect's Relationship with Future Money
`
`46.
`
`27
`28 Arcaro created "Future Money," which was a purported educational program for individuals
`
`In 2017, with the support and encouragement of Defendant KUMBHANI,
`
`10
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.11 Page 11 of 19
`
`1 interested in investing in cryptocurrency. Future Money was funded with money obtained
`
`2 from BitConnect's investors.
`
`3
`
`4 7. Defendant KUMBHANI and Arcaro agreed to use Future Money as a sales
`
`4 funnel for BitConnect, which was intended to benefit Defendant KUMBHANI by
`
`5 identifying a larger number of potential investors for BitConnect.
`
`6
`
`48. Arcaro hid and concealed any financial relationship between Future Money
`
`7 and BitConnect from the public on the Future Money website and in any statements Arcaro
`
`8 made on social media.
`
`9
`
`49. Upon completion of the Future Money cryptocurrency course, however, Future
`
`10 Money directed its graduates to open accounts with BitConnect and use BitConnect's
`
`11 promoter network's referral links.
`
`12
`
`13
`
`50. As Defendant KUMBHANI's Ponzi scheme grew m size and scope,
`
`BitConnect Shuts Down
`
`14 government regulators began to question the fraudulent nature and appearance of the
`
`15 scheme and took steps to shut down BitConnect's operation in specific states.
`
`16
`
`51.
`
`For example, on or about January 4, 2018, the Texas State Securities Board
`
`17
`
`issued an Emergency Cease and Desist Order against BitConnect, in which the Securities
`
`18 Commissioner of the State of Texas concluded that BitConnect had engaged in fraud, made
`
`19 materially false and misleading statements to investors in Texas, and sold unlicensed
`
`20 securities.
`
`52.
`
`21
`22 - Securities Division issued a Temporary Cease and Desist Order against BitConnect to
`
`Similarly, on or about January 9, 2018, the Secretary of State ofNorth Carolina
`
`23 prevent BitConnect from further violating state securities laws because the State had
`
`24 concluded that BitConnect's investment offerings were unregistered securities.
`
`25
`
`53.
`
`Facing increasing regulatory scrutiny, on or about January 16, 2018,
`
`26 BitConnect abruptly announced it was shutting down the Lending Program immediately.
`
`27 From its peak price in early January 2018 to the closing price in the aftermath of Defendant
`
`28 BitConnect's shutdown, the price ofBCC plunged approximately 98% in value.
`
`11
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.12 Page 12 of 19
`
`54.
`
`1
`2 BCC, Defendant KUMBHANI directed BitConnect' s network of international promoters to
`
`Shortly thereafter, in order to fraudulently manipulate and prop up the price of
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`3 buy BCC on all cryptocurrency exchanges in order to create the false appearance of
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`4
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`5
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`6
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`legitimate market demand for BCC.
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`55. The very next day, on or about January 17, 2018, in a group text message
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`involving BitConnect's network of international promoters, a promoter for BitConnect
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`7 based in South Korea warned Defendant KUMBHANI that, "Koreans are freaking out" and
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`8 that "it was really bad [in Korea]." Another promoter for BitConnect based in South Korea
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`9 further warned Defendant KUMBHANI that, "some people here are talking about
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`1 O cornrnitting suicide over here in Korea in many BCC chat rooms. Please please post
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`11 something on bee website so people know what's really going on" and "lots of [Korean
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`12
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`investors] invested everything they have."
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`13
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`56. That same day, on or about January 17, 2018, a promoter for BitConnect based
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`14
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`in Indonesia alerted Defendant KUMBHANI in a group text message that, "In Indonesia
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`15 we have a problem. with some rnernber[s] want[ing] to bring us to the police, [especially]
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`16
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`... as a top promoter." In response, Defendant KUMBHANI wrote, "I will talk to you in
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`17 private."
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`57. On or about January 21, 2018, in a group text message involving Defendant
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`18
`19 KUMBHANI and BitConnect's network of international promoters, a promoter based in
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`20 Australia wrote that, "we are getting death threats ... [ and] the coin will be useless! ! ! ! ! "
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`21
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`58. After repeated warnings from. BitConnect' s promoters, on or about January 28,
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`22 2018, Defendant KUMBHANI responded in a group text message and stated that he was
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`23 not "relaxing" and that he had been "sick" for "three days," and that he had "more problems"
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`24
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`than "you guys."
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`25
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`59. At this time, global investors in BitConnect and the Lending Program. were
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`26 unable to withdraw their investments after BitConnect shut down its Lending program. and
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`27 BCC investments became essentially worthless. Investors in BitConnect who did not cash
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`28 out before the shutdown lost all or nearly all of their investments.
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`12
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`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.13 Page 13 of 19
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`1
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`60.
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`In contrast, Defendant KUMBHANI and his co-conspirators obtained
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`2 approximately $2.4 billion from investors worldwide through their global fraud scheme.
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`3 Defendant KUMBHANI and his conspirators further concealed the location, source, origin,
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`4 ownership, and control of the investment proceeds fraudulently obtained from BitConnect's
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`5 investors based in .the United States and elsewhere by commingling, cycling, and
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`6 exchanging such funds through BitConnect's cluster of cryptocurrency wallets and various
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`7 internationally-based cryptocurrency exchanges.
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`8
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`9
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`COUNT 1 - Conspiracy to Commit Wire Fraud
`(18 u.s.c. § 1349)
`61. The Introductory Allegations in Paragraphs 1 through 60 of this Indictment are
`
`10
`11 hereby re-alleged and incorporated herein.
`
`12
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`62. Between approximately 2016 and 2018, in the Southern District of California
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`13 and elsewhere, Defendant SATISH KURJIBHAI KUMBHANI, aka "Vindee," aka "VND,"
`
`14 aka "vndbcc," ("Defendant KUMBHANI"), together with others, known and unknown to
`
`15
`
`the Grand Jury, including Arcaro, knowingly and intentionally combined, conspired, and
`
`16 agreed to commit an offense against the United States, namely, wire fraud, in violation of
`
`17 Title 18, United States Code, Section 1343, to wit: Defendant KUMBHANI and others
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`18 agreed to execute and attempt to execute a scheme and artifice to defraud investors and
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`19 potential investors in BitConnect, a cryptocurrency investment platform, and to obtain
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`20 money and property by means of materially false and fraudulent pretenses, representations,
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`21 and promises, through the use of interstate and foreign wire communications.
`
`22
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`63.
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`It was a purpose of the conspiracy for Defendant KUMBHANI and his co-
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`23 conspirators, including Arcaro, to: (a) induce investors to invest in BitConnect through
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`24 materially false and fraudulent pretenses, representations, and promises; (b) generate profits
`
`25
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`for themselves and for BitConnect; and ( c) conceal the conspiracy.
`
`26
`
`27
`
`28
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`II
`
`II
`
`II
`
`13
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`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.14 Page 14 of 19
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`1
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`2
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`3
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`4
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`Manner and Means of the Conspiracy
`
`64.
`
`It was a part of the conspiracy that:
`
`a.
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`Defendant KUMBHANI and his co-conspirators, using interstate and
`
`foreign wire communications, discussed the scheme to defraud over Internet chats and text
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`5 1nessages, posted videos to social media platforms to encourage investment in BitConnect,
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`6 and used the BitConnect Website to promote the scheme.
`
`7
`
`b.
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`Defendant KUMBHANI and his co-conspirators made and caused
`
`8 others to make materially false and fraudulent pretenses, representations, and promises to,
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`9 and concealed and caused others to conceal material facts from, investors and potential
`
`1 0
`
`investors, regarding BitConnect' s Lending Program, Referral Program, Development Fund,
`
`11 and purported Trading Bot and Volatility Software.
`
`12
`
`c.
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`Defendant KUMBHANI and his co-conspirators operated a Ponzi
`
`13
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`scheme by paying earlier investors with money from later investors in order to perpetuate
`
`14
`
`the fraudulent scheme.
`
`15
`
`d.
`
`Defendant KUMBHANI and his co-conspirators evaded and
`
`16 circumvented U.S. regulations governing the financial industry in order to perpetuate and
`
`17 conceal the fraudulent scheme.
`
`18
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`65.
`
`In total, Defendant KUMBHANI and his co-conspirators fraudulently induced
`
`19
`
`investors to invest approximately $2.4 billion in BitConnect and to deposit those funds in
`
`20 BitConnect's cluster of cryptocurrency wallets.
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`21 All in violation of Title 18, United States Code, Section 1349.
`
`22
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`23
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`24
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`COUNT 2 - Wire Fraud
`(18 u.s.c. § 1343)
`66. The Introductory Allegations in Paragraphs 1 through 60 of this Indictment are
`
`25 hereby re-alleged and incorpo_rated herein.
`
`26
`
`67. Between approximately 2016 and 2018, in the Southern District of California
`
`27 and elsewhere, Defendant SA TISH KURJIBHAI KUMBHANI, aka "Vindee," aka "VND,"
`
`28 aka "vndbcc," ("Defendant KUMBHANI"), together and with others, known and unknown
`
`14
`
`

`

`Case 3:22-cr-00395-TWR Document 1 Filed 02/25/22 PageID.15 Page 15 of 19
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`1 to the Grand Jury, including Arcaro, did knowingly and intentionally devise a scheme and
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`2 artifice to defraud, and to obtain money and property by means of materially false and
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`3 fraudulent pretenses,
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`representations,
`
`and promises, knowing
`
`such pretenses,
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`4 representations, and promises were false and fraudulent when made, and for the purpose of
`
`5 executing such scheme and artifice, transmitted and caused to be transmitted by means of
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`6 wire communication in interstate and foreign commerce writings, signs, signals, pictures,
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`7 and sounds.
`
`8 All in violation of Title 18, United States Code, Section 1343.
`
`9
`
`10
`
`11
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`COUNT 3 - Conspiracy to Commit Commodity Price Manipulation
`(18 u.s.c. § 371)
`68. The Introductory Allegations in Paragraphs 1 through 60 of this Indictment are
`
`12 hereby re-alleged and incorporated herein.
`
`13
`
`69. Between approximately 2017 and 2018, within the Southern District of
`
`14 California and elsewhere, Defendant SATISH KURJIBHAI KUMBHANI, aka "Vindee,"
`
`15 aka "VND," aka "vndbcc," ("Defendant KUMBHANI") knowingly and willfully did
`
`16 combine, conspire, confederate, and agree with others, both known and unknown to the
`
`17 Grand Jury, including Arcaro, to commit the following offense against the United States of
`
`18 America: To manipulate the price of a commodity in interstate commerce, namely BCC, in
`
`19 violation of Title 7, United States Code, Section 13(a)(2).
`
`20
`
`21
`
`70.
`
`It was a purpose of the conspiracy for Defendant KUMBHANI, together and
`
`The Conspiracy
`
`22 with others known and unknown to the Grand Jury, including Arcaro: (a) to submit buy
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`23 orders to purchase BCC from cryptocurrency exchanges in order to artificially push up the
`
`24 price assessment of BCC; (b) to create the illusion of demand