Signage is seen at the United States Department of Justice headquarters in Washington, D.C., August 29, 2020.

Andrew Kelly | Reuters

The U.S. Justice Department will sell off $56 million worth of cryptocurrency it seized as part of a massive Ponzi scheme case against a man who promoted the offshore crypto lending program BitConnect, authorities said Tuesday.

The Justice Department said the liquidation of the cryptocurrency follows “the largest single recovery of a cryptocurrency fraud by the United States to date.”

Proceeds will be used to reimburse victims of the BitConnect fraud.

The Justice Department encouraged victims of that fraud to visit a website, https://www.justice.gov/usao-sdca/us-v-glenn-arcaro-21cr02542-twr, to submit claims for reimbursement from the sale.

That scam is alleged to have swindled thousands of people in the U.S. and abroad out of more than $2 billion worth of bitcoin from January 2017 to January 2018 by offering investors returns of as high as 40% per month, which supposedly would be generated by BitConnect’s purported volatility software trading bot.

“These claims were a sham,” the Securities and Exchange Commission said in a lawsuit in September against BitConnect, its founder Satish Kumbhani and Glenn Arcaro, a Los Angeles man who was the lead promoter of BitConnect in the United States.

“As Defendants knew or recklessly disregarded, BitConnect did not deploy investor funds for trading with its purported Trading Bot,” the SEC said in the suit.

Instead, “BitConnect and Kumbhani siphoned investors’ funds
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