The US government has seized $56 million worth of cryptocurrency from an admitted participant in the BitConnect scam and intends to sell the coins and use the proceeds to reimburse victims. The Department of Justice says that it’s the largest recovery of cryptocurrency to date — and that it was willingly given up by Los Angeles resident Glenn Arcaro, who has called himself BitConnect’s “number one promoter.”
According to the Securities and Exchange Commission (SEC), BitConnect convinced people to invest a total of $2 billion by telling them that it had a bot capable of generating incredibly high rates of return from crypto trading. In other words, BitConnect sold itself as a way for people to easily invest in cryptocurrency and to make a lot of money doing so, at a time when people were hearing a lot about crypto but didn’t know much about it (around 2016 through 2018).
In reality, the DOJ says it was all a scam — BitConnect used money from new investors to pay old ones (otherwise known as a Ponzi scheme), and its advocates built pyramid schemes where they would get a cut for convincing others to invest by promising them the same deal. In September, Arcaro pleaded guilty to participating in both parts of the scam while allegedly posting videos online to make fun of BitConnect doubters. He said that he had earned what was then valued at $24 million by his participation.
Some may also remember BitConnect from a heavily memed presentation given by one of its investors, who repeatedly shouted “BitConneeeeeect” and said that his wife accused him of falling for a scam.
While BitConnect largely traded in Bitcoin (victims would buy BitConnect’s own BCC tokens using Bitcoin and could ostensibly convert BCC back into Bitcoin through a convoluted process), the government plans to reimburse victims in USD. The DOJ’s press release says that the law enforcement arm of the US Postal Service will be helping convert the crypto to fiat currency. The government has set up a website for victims who are looking for compensation after the court sentences Arcaro in January 2022.