U.S. SEC has filed fraud charges against BitConnect after pieces of evidence proved his involvement in a crypto fraud evaluated at $2B. SEC disclosed on September 1 that it had filed a charge against the platform, the founder, and a U.S. executive, citing their involvement in a fraud-related case that scammed investors. SEC added that the founder, Satish Kumbhani conned investors through enticing investments offerings about cryptocurrency assets, which were all false. 

The filed complaints by SEC explained that the defendants purportedly organized a fraudulent investment offering and sale of securities on the platform, BitConnect to lure potential investors into depositing funds in the lending platform. In detail, the complaint alleged that BitConnect would employ a trading bot that would generate high profits for the investors using the deposited cash. Instead of deploying the trading bot, Kumbhani moved the funds from the investors’ addresses to the U.S. promoter’s. 

In addition, BitConnect rewarded the syndicates involved in marketing the various investment offerings with a substantial amount of money conned from the investors. Among those duly rewarded was the U.S. promoter, who used a fake website to entice investors. SEC concluded that the perpetrators would be held accountable for the gross misconduct and false exploitation in the crypto ecosystem. 

SEC Charges the Defendants, Seeks Injunctive Relief

SEC forwarded with charging the syndicates with violation of the antifraud registration provisions and sought civil punishments, as well as injunctive relief for the individuals involved in the scam. Cryptocurrency scams have been the major problem in the eco-space and DeFI protocols. Last month, malicious persons hacked into Cream Finance for the second time in 2021, stealing $18 million worth of ETH and other tokens. Back in February, the crypto lending platform alongside Alpha Finance lost a combined $37 million to hackers. 

While the DeFi protocols have made it more convenient for crypto transactions, the system is prone to hacks and fraudulent activities. As a result, many exchanges have stepped up to upgrade their wallets and nodes’ software to prevent future attacks. 

Fraudulent activities like that of BitConnect make potential crypto investors bow out of one of the most rewarding financial industries in the world. However, with financial regulators up in their game, these acts would be stopped more conveniently, leaving the DeFi space rid of anything that could pose harm to present and future investors.