US securities watchdog sues BitConnect over alleged $2bn fraud

The US Securities and Exchange Commission (SEC) is suing the founder of crypto exchange BitConnect over $2 billion worth of fundraising.

The securities watchdog said BitConnect chief executive Satish Kumbhani and his partner Glenn Arcaro fraudulently offered retail investors returns as high as 40 per cent.

The crypto exchange marketed itself as using a “volatility software trading bot”, which the SEC alleges was false.

The news comes after three people with links to BitConnect paid $3.5 million and 190 bitcoins to settle an earlier SEC lawsuit in August.

In January 2018, BitConnect closed after receiving cease and desist letters for the unauthorised sale of securities.

Cryptocurrency exchanges are coming under increased scrutiny from regulators globally.

Last month, the Financial Conduct Authority (FCA) has said it was “not capable” of supervising cryptocurrency exchange Binance, alleging it’s “complex and high-risk financial products” posed “a significant risk to consumers”.

"We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets," said Lara Shalov Mehraban, associate regional director of SEC's New York regional office. "We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space."

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