In this video, we look at how BitConnect’s founder Satish Kumbhani got away with a $2.4 billion crypto ponzi scheme.
00:00 Introduction
01:00 Origins of BitConnect
03:47 Growth of BitConnect
07:07 BitConnect comes crashing down
09:59 What happened to the mastermind behind BitConnect’s crypto scam
Origins of BitConnect: Back in November 2016, when India was going through demonetisation, a man by the name of Satish Kumbhani in Gujarat was launching BitConnect’s ICO. During this time as a number of people in India were turning towards cryptocurrencies in a bid to store their money virtually without paying taxes. That is why they were willing to pay up to 25% premium just to buy Bitcoins. Their ICO was a success: BitConnect was able to raise around $410,000 from these early ICO investors, which was a sizeable amount of money back then - this was before ICOs were a common thing - at the end of 2016, there were only 663 cryptocurrencies, compared to today when there are close to 10,000 active cryptocurrencies.
Growth of BitConnect: With BitConnect offering massive returns and people posting their earning on social media platforms, more and more people started to invest their money in BitConnect. The biggest reason why so many people bought into this cryptocurrency was actually its lending program, powered by BitConnect’s proprietary trading bot, which capitalised on crypto market volatility to generate immense returns for BitConnect holders. These returns came in two forms: daily returns ranging from .10% to .25%, which when multiplied by 365 equates to an annual return of between 36.5% and 91.25%, as well as monthly returns of up to 40%, which equates to an annual return of up to 480%. By the end of 2017, BitConnect Coin had a market cap of $2.87 billion. It had become one of the top 20 cryptocurrencies in the world, within a year.
BitConnect comes crashing down: Now, nobody had actually seen this proprietary trading bot in action, there was no proof that this bot even existed, but FOMO can make people do some pretty incredible things. As BitConnect got bigger, naysayers began to speak up. Prominent crypto investors and entrepreneurs who understood the world of crypto better than anyone started pointing out that BitConnect was probably a ponzi scheme. Take for example Ethereum’s founder Vitalik Buterin, or Litecoin’s founder Charlie Lee. Global authorities were next - on the 7th of November, 2017, the government of the United Kingdom sent BitConnect a notice, requesting that they either prove the legitimacy of their business in the next two months or shut down their operations. Then on the 3rd of January of 2018, the Texas State Securities Board sent them an emergency cease and desist order – calling BitConnect a ponzi scheme. A week later, North Carolina’s Securities Division did the same. Satish Kumbhani’s house of cards was beginning to fall down, and BitConnect holders began to realise that they couldn’t get their money out - the lock-in period prevented them from avoiding the impending collapse of BitConnect. BCC peaked at $463 in December of 2017 - by the 18th of January, 2018, it was worth less than $20 - it had fallen by more than 95% in less than a month - the FOMO evaporated. The party was over.
What happened to the mastermind behind BitConnect’s crypto scam: Well, the United States Department of Justice has indicted Satish on charges of orchestrating a global ponzi scheme, and they’re looking for him - nobody knows where he is. At one point he was arrested by India’s Criminal Investigation Department in 2019 in Surat and the FBI had even interrogated him, but in spite of this, he is currently at large. Of course, there were a number of other people involved in Bitconnect, it wasn’t just Satish - he may have even had a co-founder, a co-conspirator named Divyesh Darji who fled back to India in 2017, right after investigations into Bitconnect were initiated by governments and police forces around the world. Divyesh...
