The defendants allegedly lured investors to invest in BitConnect’s Lending Program by telling them that they will earn high profits (up to 40% interest per month).
BitConnect and Kumbhani claimed that they would deploy a purported proprietary “volatility software trading bot” and would use investors’ funds to generate profits. The defendants posted fake returns on the company’s website that amounted to an average of 1% per day or around 3,700% on an annualized basis.
“These claims were a sham. As Defendants knew or recklessly disregarded,
BitConnect did not deploy investor funds for trading with its purported Trading Bot. Rather, BitConnect and Kumbhani siphoned investors’ funds off for their own benefit, and their associates’ benefit…,” according to the SEC in the complaint.
The Commission further stated that the defendants conducted a Ponzi-like scheme to conceal the fact that they were not using investor funds to be traded with the purported Trading Bot. They allegedly used funds from newer investors to satisfy the withdrawal demands of earlier investors.
