The US authorities sell cryptocurrencies worth $ 56 million to compensate the victims of the BitConnect scam.
The department confirmed through a press release that the proceeds from the sale would become the first part of the compensation to victims of the fraud scheme in which investors in the US and globally lost more than $ 2 billion in Bitcoin.
The Justice Department noted that the cryptocurrency liquidation currently follows the most relevant recovery from fraud by the United States of America to date. In particular, a federal judge authorized the Department of Justice and the US Office of Attorneys for the Southern District of California to sell the seized cryptocurrency.
The DOJ highlighted that the government would now compensate the victims of the BitConnect scheme by selling the cryptocurrency and withholding the proceeds in US dollars.
The government would retain custody of seized earnings in cryptocurrency portfolios and intends to use these funds to provide restitution to victims according to a future restitution order by the court in sentencing.
The crypto got seized from BitConnect promoter Glenn Arcaro, who pleaded guilty to his role in the case. The currencies appeared in twelve portfolios that belonged to Arcaro, who earned more than $ 24 million in commissions and other payments.
Following his guilty plea in September, the sentence of Arcaros got scheduled on January 7, 2022, and would amount to a maximum of 10 years in prison.
The US Department of Justice (DOJ) revealed this information in a report published on September 1, stating that Arcaro assumed responsibility for the crimes perpetrated by BitConnet. He admitted his participation in parallel with other managers to take advantage of the growing interest in digital currencies among potential investors to introduce them into an international scam.
Arcaro Admitted Crimes Associated with BitConnect
Specifically, Arcaro admitted that he and others lied to investors about the alleged “BitConnect Trading Bot” and the “Volatility Software”, and were behind the main proposals raised by the company with which they promised a 1% daily return on invested capital.
The accused confessed that these products did not exist and that they were operating a Ponzi-type (Pyramid) scheme, in which the money allocated by new members went directly to pay older members.
Both Arcaro and his accomplices avoided the regular payment of taxes for the income they registered. This avoidance took place to keep their connections with BitConnect hidden and keep the illegal activities under the radar.
More About the Scam
The scam happened at the height of Bitcoin’s bull run in 2017. Victims got scammed after the company claimed to offer investors returns of up to 40% per month. The investment allegedly played a role in the generation of BitConnect’s so-called volatility software trading robot.
In September, the US Securities and Exchange Commission, SEC, sued BitConnect’s founders claiming that the company was an unincorporated organization that registered four companies in the UK. Currently, the companies are completely dissolved.
By: Jenson Nuñez
