Posts Tagged: indicted
Mining Capital Coin CEO indicted in $62 million crypto fraud scheme
Mining Capital Coin CEO and founder Luiz Capuci Jr. was — in an indictment unsealed yesterday — accused by the DOJ of allegedly running a $ 62 million global investment fraud scheme. He's the latest of severalcrypto company heads who have recently been similarly charged.
Through his company, Capuci convinced investors to purchase “Mining Packages," a global network of cryptocurrency mines that promised a certain return on investment every week. But instead of using investors’ funds to mine cryptocurrency as he promised, the DOJ alleges that Capuci diverted the funds to his own cryptocurrency wallets. Another MCC product known as “Trading Bots” operated under the same false pretenses. Capuci claimed that the bots operated in “very high frequency, being able to do thousands of trades per second” and promised investors daily returns.
“As he did with the Mining Packages, however, Capuci allegedly operated an investment fraud scheme with the Trading Bots and was not, as he promised, using MCC Trading Bots to generate income for investors, but instead was diverting the funds to himself and co-conspirators,” wrote the DOJ in its indictment.
MCC seemed to have all the workings of a pyramid scheme. Capuci recruited affiliates and promoters to lure investors. In return, he promised the promoters a number of lavish gifts, including Apple watches, iPads and luxury vehicles.
Currently the FBI’s Miami Field Office is investigating the case. The DOJ has charged Capuci, who is from Port St. Lucie, Florida, with conspiracy to commit wire fraud, conspiracy to commit securities fraud and conspiracy to commit international money laundering. If found guilty, he faces a maximum sentence of 45 years.
In a review of the cryptocurrency mining platform, crypto blogger Peter Obi noted that the combination of MCC’s $ 50 monthly fee for membership and its steep 3% withdrawal fee meant that investors were unlikely to make a profit unless they referred other investors. He pointed out that such a referral process was “particularly worrying” because it was consistent with other past crypto scams.
Indeed, a number of crypto leaders have been accused by authorities of running Ponzi schemes in recent years. Earlier this year the DOJ indicted Bitconnect founder Satishkumar Kurjibhai Kumbhani for allegedly running a $ 2 billion Ponzi scheme — believed to be the largest virtual currency pyramid scheme in history.
Capuci never registered his company with the SEC. The agency today issued a fraud alert for the company. According to the SEC press release, Capuci and his associates successfully convinced 65,535 investors to purchase mining packages worldwide and promised daily returns of one percent, paid weekly for over a year. In total, the group netted $ 8.1 million from the sale of the mining packages and $ 3.2 million from initiation fees.
BitConnect founder indicted by Justice Department has disappeared
SEC officials do not know the whereabouts of Satish Kumbhani, the founder of crypto trading platform BitConnect, who was charged last week with defrauding investors of $ 2.4 billion in a Ponzi scheme. This puts the SEC in quite a bind, since they have to serve the 36-year old entrepreneur with his court papers. In a court filing from Monday, the SEC stated that they did not have an address for Kumbhani, an Indian citizen, and suspected that he likely fled to another country.
The DOJ is charging Kumbhani with a number of offenses, including conspiracy to commit wire fraud, conspiracy to commit commodity price manipulation and conspiracy to commit international money laundering.
“Kumbhani’s location remains unknown, and the Commission remains unable to state when its efforts to locate him will be successful, if at all," wrote the SEC in its filing.
In order to buy some time, the SEC is asking the US District Court for the Southern District of New York for an extension of 90 days. Since BitConnect is an unincorporated entity and not a formal corporation, all court papers have to be served to Kumbhani himself.
First founded in 2016, BitConnect attracted a lot of attention on social media for its “Lending Program” which allowed users to lend their Bitcoin in exchange for a propriety Bitconnect cryptocoin. The program claimed it could guarantee returns by using investors’ money to trade on the volatility of the cryptocurrency markets."
“Under this program, Kumbhani and his co-conspirators touted BitConnect’s purported proprietary technology, known as the 'BitConnect Trading Bot' and 'Volatility Software', as being able to generate substantial profits and guaranteed returns by using investors’ money to trade on the volatility of cryptocurrency exchange markets. As alleged in the indictment, however, BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors,” wrote the DOJ’s Office of Public Affairs in a press release.
After years of crypto existing in a legally murky universe, U.S. government officials are cracking down on cryptocurrency fraud and scams at an increasing rate. Last year, the DOJ launched a national cryptocurrency enforcement team to handle complex cryptocurrency investigations, and recently appointed veteran cybersecurity prosecutor Eun Young Choi as its director.
BitConnect is just one of many cryptocurrency schemes that law enforcement has pinned down in recent months. The founders of BitMex, a crypto derivatives exchange, plead guilty to skirting anti-laundering laws in the US and were ordered to pay $ 20 million in fines. Earlier this month, the DOJ arrested Ilya Lichtenstein and Heather Morgan, two entrepreneurs who allegedly attempted to launder more than 25,000 Bitcoins stolen from the 2016 Bitfinex hack.