SAN DIEGO—Glenn Arcaro of Los Angeles has pleaded guilty in federal court for his participation in a “massive conspiracy” involving BitConnect, a cryptocurrency investment scheme that defrauded investors from the United States and abroad of over $2 billion, according to the U.S. Department of Justice.
The BitConnect scheme is believed to be the largest cryptocurrency fraud ever charged criminally, DoJ stated.
As admitted in documents entered before U.S. Magistrate Judge Mitchell D. Dembin, Arcaro conspired with others to exploit investor interest in cryptocurrency by fraudulently marketing BitConnect’s proprietary coin offering and digital currency exchange as a lucrative investment.
Arcaro further admitted that he and others conspired to mislead investors about 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. In truth, BitConnect operated a textbook Ponzi scheme by paying earlier BitConnect investors with money from later investors.
‘Preyed’ On Investors
“Arcaro and his confidantes preyed on investor interest in cryptocurrency. As a result, a staggering number of individuals lost an enormous amount of money,” said Acting U.S. Attorney Randy S. Grossman of the Southern District of California. “The Department of Justice will continue to protect the investing public and scrutinize the burgeoning cryptocurrency industry. To those who would be the next in line to defraud the investing public, let this action by the Department of Justice stand as a stark cautionary tale. To the investing public, let this also serve as a cautionary tale to safeguard your money and invest it wisely.”
According to prosecutors, Acaro acknowledged using social media to It make materially false and misleading statements, while concealing material facts, all to persuade investors that BitConnect was a lucrative investment. During the scheme, Arcaro posted videos that mocked those who questioned whether BitConnect had a Trading Bot and Volatility Software, doubted the true identity of BitConnect’s owner, and complained about losing their money in BitConnect, DoJ stated.
Pyramid Scheme
According to the documents filed, Arcaro sat atop a large network of promoters in North America, forming a pyramid scheme known as the BitConnect Referral Program. Arcaro earned as much as 15% of every investment into another part of the scheme—the BitConnect “Lending Program”—either from investors he recruited directly or those recruited by others beneath Arcaro in the pyramid.
Arcaro further received portions of all investments from a concealed “slush” fund, according to DoJ.
“Arcaro has accepted responsibility for his actions of defrauding thousands of individuals worldwide to invest in BitConnect,” said Special Agent in Charge Eric Smith of the FBI’s Cleveland Field Office. “He lined his pockets with millions of dollars, money from victims that believed their funds were being invested into a new cryptocurrency with a high rate of return. Those choosing to engage in financial criminal deception should know the FBI will not stop until all fraudsters are identified and held accountable.”
$24 Million to Be Repaid
Arcaro admitted that he earned no less than $24 million from the BitConnect fraud conspiracy, all of which, according to court documents, he must repay to investors.
Sentencing is scheduled to occur on Nov. 15 before U.S. District Judge Todd W. Robinson.