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What just happened? The US Department of Justice has been given the green light by a district judge to begin liquidating approximately $56 million in cryptocurrency sized from the “number one promoter” of BitConnect, a failed cryptocurrency that was linked to a Ponzi scheme a few years back.
Back in September, 44-year-old Glenn Arcaro of Los Angeles pleaded guilty to participating in a conspiracy to defraud BitConnect investors. Arcaro said he and others knowingly mislead investors about BitConnect’s supposedly proprietary technology, which they claimed could generate substantial profits and guaranteed returns.
“In truth, BitConnect operated a textbook Ponzi scheme by paying earlier BitConnect investors with money from later investors,” the Justice Department said.
Investors collectively dumped over $2 billion into the scheme, making it the largest cryptocurrency fraud scheme ever charged criminally.
The government’s goal with the liquidation is to make whole victims of the scheme through restitution. Those who lost money are invited to fill out a victim impact statement to identify themselves as potential victims. The government will sell off the crypto and hold the proceeds in US dollars before distributing it to victims.
It's unclear which cryptocurrency or cryptocurrencies the seized funds are in, but a good guess would be Bitcoin. The largest cryptocurrency by market cap is currently trading just south of $58,000 after hitting an all-time high earlier this month of nearly $69,000.
Arcaro, meanwhile, is scheduled to be sentenced early next year and is facing a maximum of 20 years in prison for his role as the top promoter of BitConnect in the US. Arcaro said he earned no less than $24 million from BitConnect, all of which must be paid back to investors.