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Crypto Scams that Rocked Asia to the Core, Part 1: BitConnect

Tim Alper
Last updated: | 3 min read
Carlos Matos at a BitConnect event. Source: A video screenshot, Youtube/JellyScrub

The rise of crypto has brought along a pretty unpleasant and unwanted passenger. As bitcoin (BTC) and major altcoins have had their time in the sun, an unsavory customer has tagged along for the ride – the crypto scammer.

After the very early years of crypto, Asia became the first real center of gravity for bitcoin and altcoins. Right up until the Mt. Gox scandal in Japan and the Chinese crypto crackdown of September 2017, crypto enjoyed exponential growth across the continent.

It wasn’t too long before retail investors wanted a piece of the action. And in their bid to follow suit with seasoned crypto traders and tech-savvy pioneers, many rushed in where angels fear to tread.

Scammers were waiting in the wings and took advantage, hatching fiendishly clever schemes that saw thousands of unsuspecting punters parted with their funds forever. In a new three-part series, looks at just a few of the continent’s most infamous offenders.

Part 1: BitConnect

Who remembers this guy?

BitConnect launched in February 2016 to much fanfare and arrived just in time to catch the biggest waves of the bull market that collapsed so spectacularly in early 2018. It claimed to be a crypto lending platform that let users trade bitcoin for a native token named bitconnect coin (BCC) for set periods, picking up interest that was calculated daily – supposedly by a trading bot.

It promised its users gigantic payouts of 1% daily compounded interest. And despite the fact that its founder Satish Kumbhani was primarily based in Surat, in the Indian state of Gujarat, BitConnect quickly went international, drawing in investors from all corners of the planet.

Kumbhani teamed up with a huge cohort of both domestic and international partners and the New York-based investor Carlos Matos (the hero of the video above). The latter’s enthusiastic showmanship was often the main event at the many BitConnect investor events held at locations around the world.

These spectacular set-pieces were a bid to drum up interest and make a select number of adherents feel like superstar investors, with billions of USD worth of bitcoin being swapped for BCC. All-comers thought they’d found the world’s only true get-rich-quick scheme.

And everything appeared to be running smoothly…until the wheels came spinning off in late 2017. First came a two-month warning from a regulator in the UK, where BitConnect had established a business.

Weeks later, the penny also dropped in the USA, where state securities regulators served up cease and desist orders, warning that BitConnect was selling unregistered securities to residents. Days later, the platform spectacularly closed down – although miraculously some might say, many investors managed to receive all or part of their stakes back as refunds.

Where are they now?

Kumbhani is still unaccounted for and his whereabouts are completely unknown. He had previously claimed to be BitConnect’s “Asian Leader.” One of his right-hand men, Divyesh Darji, the India head of the BitConnect, was arrested by the Gujarat Crime Investigation Department in August 2018, reported the Financial Express. Within a few months, though, Darji was out and up to old tricks again. He ended up on the run from the police after promoting a scamcoin named regal coin – which, The Times of India explained, had promised investors eye-watering 5,000% returns.

As for the alleged American partners, well, they’ve been recently been served with a series of legal wraps, the latest of which was served up by the US Securities and Exchange Commission (SEC) in early September. The regulator claims that the scale of the damage in the USA alone hit the USD 2bn mark.

The SEC is gunning for Kumbhani himself, as well as an American firm named Future Money and the main American promoter Glen Arcaro. The latter is looking at jail time in the States, but the elusive founder is still missing. Here’s what he says about his brainchild on his still-extant LinkedIn page:

“BitConnect is fasted growing bitcoin and Crypto community educating people about Cryptocurrencies and it’s opportunities.”

Not anymore. 

Read the second part of the series tomorrow.
Learn more:
Another Altcoin Scam Teaches Inexperienced Investors & Influencers a Lesson
NFT Project ‘Evolved Apes’ Developer Disappears with USD 2.9M

Asian Lonely Hearts Falling Victim to Bitcoin, Tether Scammers
TikToker Creates Joke ‘SCAM’ Coin – and People Are Buying it in Droves