Scammers Have Been Around Forever. Then Came Crypto.

Christian Zelder, a New York artist who started investing in crypto to earn some travel money, ponied up $100 — a substantial sum for him at the time — in November 2017 to buy into BitConnect. The new cryptocurrency promised returns of up to 10 percent, which sounded almost too good to be true.

It was.

Zelder hoped to turn his $100 investment into $500 or $1,000. But after the price of BitConnect coin peaked at $445 on Dec. 28, 2017, it plummeted to $11.30 on Jan. 25, 2018, according to data from YCharts.

In its indictment of Satish Kumbhani, BitConnect’s founder, the Justice Department alleges that investors like Zelder were victims of “a massive cryptocurrency scheme that defrauded investors of more than $2 billion,” as U.S. Attorney for the Southern District of California Randy Grossman put it in a Justice Department news release.

BitConnect promoters had promised big returns on investments, pointing new investors to the supposed benefits of BitConnect’s lending program. But, according to prosecutors, Kumbhani and his co-conspirators were running a global Ponzi scheme. The founders and their international promoters hyped up BitConnect’s lending program in exchange for a share of the invested funds they obtained — and without disclosing their financial relationship to investors.