‘Missing’ BitConnect Founder Presents More Questions Than Answers for SEC

BitConnect founder Satish Kumbhani has reportedly disappeared from India, according to a Bloomberg report citing local officials. The exchange’s founder was just charged with orchestrating a Ponzi scheme by federal prosecutors.

Background

In September 2021, the Securities and Exchange Commission (SEC) archived an action against the online crypto lending platform, Kumbhani, its top promoter in the US, and its affiliated company. The regulator had alleged that from early 2017 to January 2018, they had defrauded retail investors of $2.4 billion through a “global fraudulent and unregistered investment offering.”

“Defendants engaged in a fraudulent and unregistered offer and sale of securities in the form of investments in a “lending program” offered by BitConnect.”

Since then, the watchdog has repeatedly reiterated that they will “aggressively prosecute and hold accountable those guilty of misconduct in the digital asset space.”

Location of Kumbhanic

That said, SEC attorney Richard Primoff noted in his latest lawsuit that 36-year-old Kumbhani “probably moved from India to an unknown address in a foreign country.” He added,

“Since November, the committee has been consulting with that country’s financial regulators in an effort to find out Kumbhani’s address. At the moment, however, the location of Kumbhani is unknown.”

Primoff also asked the court for a May 30 delay to locate the founder. After being located, he is likely to be arrested in the US under the charges mentioned in the indictment of BitConnect and the digital token BitConnect Coin.

Unfortunately, until his whereabouts are confirmed, the SEC won’t be able to serve him with the lawsuit.

No “amnesty”

Meanwhile, it is worth noting how the regulator is cracking down on violations by the crypto companies. Recently, the SEC’s enforcement director told Reuters that the agency will not provide amnesty to crypto companies that are self-reporting securities violations. But they can get smaller sentences, it noted.

SEC’s Gurbir Grewal has noted,

“Our message to them is not, ‘Register your product and we will just ignore the billions you manage in this crypto lending product and your violations of securities laws.”

However, the agency official explained that the SEC’s message is that they will see the behavior of crypto companies “more favorably as they come in — like what the remedies will look like, including fines, and finding a way to deal with it.” comply with securities laws.”

“That’s the benefit entities get from self-reporting violations and working with us.”

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