Founder of Fraudulent Cryptocurrency Charged in $2 Billion BitConnect Ponzi Scheme (DOJ Release)SEC Charges Delaware-Based Investment Adviser and Its Principal with Conducting a Fraudulent "Cherry-Picking" Scheme (SEC Release)
The indictment alleges that Kumbhani and his co-conspirators defrauded global investors of over $2 billion-believed to be the largest cryptocurrency fraud ever charged. This indictment follows the September 2021 guilty plea by BitConnect's lead U.S. promoter, Glenn Arcaro (21-CR-2542-TWR).The indictment alleges that BitConnect was a textbook Ponzi scheme. BitConnect solicited investors to use its "Lending Program," which 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. The indictment alleges that in reality, the purported technologies generated no such profits, and merely functioned as a cover for the Ponzi scheme. In sum, earlier BitConnect investors were paid with money from later investors to promote the fraudulent scheme.As part the criminal conspiracy, Kumbhani was further charged with a separate conspiracy seeking to commit commodities price manipulation for his attempt to artificially inflate the price of BCC and create the illusion of increased demand for BCC when the criminal scheme began to unravel. The commodities price manipulation conspiracy is believed to be the first time any cryptocurrency has been alleged to function as a commodity.Furthermore, Kumbhani was charged with operating an unlicensed money transmitting business. To participate in the alleged Ponzi scheme that was BitConnect, unwitting BCC investors were required to use Bitcoin to purchase BCC on the "Bitconnect Exchange." The BCC Exchange thus functioned to separate investors from the more widely used Bitcoin in exchange for the nascent BCC, which the investors could "lend" back to BitConnect to generate purported profits for the investor through the use of the above-mentioned BitConnect Trading Bot and Volatility Software.Lastly, Kumbhani was charged with an international money laundering conspiracy for conducting global transfers of Bitcoin and BCC to global investors and cryptocurrency purchasers-all of which were proceeds of the alleged wire and securities fraud.
U.S. Imposes Sanctions on Russian Entities and Individuals / FINRA Alerts Firms to Sanctions (FINRA Regulatory Notice 22-06 / February 25, 2022)[F]rom at least January 1, 2011 through December 31, 2015, Toroian traded securities in Bell Rock's master trading account and delayed allocating the securities to specific client accounts until after she had observed the securities' performance over the course of the day. She allegedly then disproportionately allocated profitable trades to accounts that belonged to her and her family members and allocated less profitable and losing trades to client accounts. According to the SEC's complaint, the securities that Toroian allocated to accounts held by Toroian and her family members increased in value by more than 2%, or a gain of over $1 million, between the time Toroian purchased them and when she allocated them. By contrast, the securities that Toroian allocated to her clients' accounts decreased in value by -more than 1.3%, or a loss of over $1 million, between the time Toroian purchased them and when she allocated them. The complaint further alleges that Bell Rock and Toroian misrepresented to clients that all trades would be allocated fairly and that Bell Rock and Toroian would not put their interests before their clients' interests. The complaint also alleges that Bell Rock failed to implement policies and procedures designed to prevent Toroian's cherry-picking.
On February 24, 2022, the Department of the Treasury announced additional sanctions against Russia. As part of these measures, the Department of the Treasury's Office of Foreign Assets Control (OFAC) issued Directive 2 Under Executive Order 14024: Prohibitions Related to Correspondent or Payable-Through Accounts and Processing of Transactions involving Certain Foreign Financial Institutions1, as well as Directive 3 Under Executive Order 14024: Prohibitions Related to New Debt and Equity of Certain Russia-related Entities.Treasury stated the OFAC measures target "Russia's two largest financial institutions, Public Joint Stock Company Sberbank of Russia (Sberbank) and VTB Bank Public Joint Stock Company (VTB Bank)," as well as three other major Russian financial institutions, Otkritie, Novikom and Sovcom. These sanctions include numerous subsidiaries of Sberbank, VTB Bank, Otkritie and Sovcom.OFAC also "expanded Russia-related debt and equity restrictions to additional key aspects of Russia's economy" and issued Directive 3 "to prohibit transactions and dealings by U.S. persons or within the United States in new debt of longer than 14 days maturity and new equity of Russian state-owned enterprises, entities that operate in the financial services sector of the Russian Federation economy, and other entities determined to be subject to the prohibitions in this directive."In addition, "(p)ursuant to E.O. 14024, OFAC identified the following 11 Russian entities as being owned or controlled by, or having acted or purposed to act for or on behalf of, directly or indirectly, the GoR:. . ."