(Bloomberg) — BitConnect founder Satish Kumbhani, charged in the U.S. last week with a $2.4 billion Ponzi scheme, has vanished from his native India, officials told a New York judge.
In September, before the criminal charges were filed, the U.S. Securities and Exchange Commission had sued Kumbhani, claiming he fraudulently raised more than $2 billion from investors in his cryptocurrency exchange platform. But the SEC didn’t know where he was and couldn’t serve him with the lawsuit.
The mystery deepened a bit Monday.
Kumbhani, 36, “has likely relocated from India to an unknown address in a foreign country,” SEC attorney Richard Primoff said in a filing in federal court in Manhattan. “Since November, the commission has been consulting with that country’s financial regulatory authorities in an attempt to locate Kumbhani’s address. At present, however, Kumbhani’s location remains unknown.” Primoff said the SEC couldn’t say “when its efforts to locate him will be successful, if at all.”
Primoff asked U.S. District Judge John Koeltl for an extension until May 30. The SEC said it wants to look for Kumbhani and, if it finds him in the U.S., serve him with the complaint. On Tuesday, Koeltl granted the SEC request. He previously halted the civil case while the criminal investigation proceeds.
Of course, if Kumbhani comes to the U.S., he could be arrested and potentially go to prison if he’s convicted of charges in the indictment filed Friday in San Diego. Prosecutors said he created BitConnect in 2016 and the digital token, BitConnect Coin.
Kumbhani touted BitConnect’s “lending program” based on proprietary “trading bot” and “volatility software” that would trade on the global crypto markets. But in reality, the lending program was a massive Ponzi scheme that raised $2.4 billion from investors around the world before shutting down in January 2018, prosecutors said.
The next day, one of Kumbhani’s promoters based in South Korea warned that “some people here are talking about committing suicide” and that “lots of [Korean investors] invested everything they have,” according to the indictment. A promoter in Australia also wrote that “we are getting death threats…[and] the coin will be useless!!!!!”
BitConnect used money from new investors to pay earlier ones, the U.S. said. He is charged with wire fraud, operating an unlicensed money transmitting business, and three conspiracies: to commit wire fraud; commodity price manipulation; and international money laundering.
Read More: SEC Sues Five BitConnect Promoters Over $2 Billion Scheme
Last September, BitConnect’s top promoter in North America, Glenn Arcaro, pleaded guilty. In November, prosecutors said they would sell about $57 million in cryptocurrency seized from Arcaro. This month, a judge approved an amended order for the sale.
The indictment of Kumbhani seeks the forfeiture of $2.4 billion attributable to his actions.
The criminal case is USA v. Kumbhani, 22-cr-00395, U.S. District Court, Southern District of California (San Diego); the civil case is SEC v. BitConnect, 21-cv-7349, U.S. District Court, Southern District of New York (Manhattan).
(Updates with judge granting SEC request.)
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