US Liquidating $56M in BitConnect Fraud Case

The U.S. Justice Department is set to begin liquidating roughly $56 million in fraud proceeds seized during its investigation into the cryptocurrency BitConnect.

According to a Justice Department news release, the liquidation represents the largest ever single recovery of cryptocurrency fraud by the government. The case itself was the largest ever crypto fraud case to be charged criminally, with BitConnect executives defrauding investors of more than $2 billion.

The case dates back to early 2017, when BitConnect’s Founder Satish Kumbhani and Glenn Acaro, its director and top promoter, carried out a fake offering and securities program through a “lending program,” the Justice Department said. In order to entice investors, the company allegedly falsely claimed that it would offer a “volatility software trading bot” that could deliver higher rewards using investors’ deposits.

Read more: BitConnect Exec Admits to Role in Alleged $2B Crypto Fraud

Arcaro pleaded guilty in September, admitting that he conspired “to exploit investor interest in cryptocurrency by fraudulently marketing BitConnect’s proprietary coin offering and digital currency exchange as a lucrative investment,” the Securities and Exchange Commission (SEC) said at the time.

Last week, a federal judge ordered the sale of the seized assets, which means the government will now try to compensate victims by selling the cryptocurrency and holding the proceeds in U.S. dollars. “The government will maintain custody of the seized proceeds in cryptocurrency wallets and intends to use these funds to provide restitution to the victims pursuant to a future restitution order by the court at sentencing,” the Justice Department said in a news release.

The department says potential victims of the BitConnect fraud case are asked to fill out a questionnaire to learn about their rights, identify themselves and submit a victim impact statement.

Arcaro is scheduled to be sentenced in January of next year and could face up to 20 years in prison. A U.S. District Court judge will determine the sentence after considering federal sentencing guidelines and other statutory factors.

The case will continue to be investigated by the FBI and IRS, with the U.S. Postal Inspection Service helping with the liquidation of the crypto proceeds.