The U.S. Justice Department is selling about US$56 million worth of cryptocurrency seized from BitConnect’s top promoter. The proceeds from the sale will be put toward paying back victims of the 2017 BitConnect scam, in which BitConnect’s founder and its promoters swindled investors out of US$2 billion.

In September, the Securities and Exchange Commission sued BitConnect, its founder Satish Kumbhani and Glenn Arcaro, who was the lead promoter of BitConnect in the United States. They accused BitConnect and Kumbhani of a US$2 billion fraud that misused bitcoin raised from investors world-wide. 

Afterwards, Arcaro pleaded guilty in federal criminal court over his role in the matter and consented to the seizure. The seizure was the largest single recovery from a cryptocurrency fraud in the U.S. to date, according to the Justice Department, which was a massive Ponzi scheme case. 

In a November 16 announcement, the Justice Department said it would sell seized cryptocurrencies and hold the U.S. dollar proceeds until it could use the funds to compensate BitConnect victims. However, it is unclear through what means the U.S. government would handle the sale of millions of dollars in crypto assets, or what effect it may have on the price of major tokens such as Bitcoin (BTC) and Ether (ETH). 

Created in 2017, BitConnect had promoters who lured investors with promises of large returns, encouraging them to use Bitcoin as collateral against which they could borrow and speculate on the platform’s native token. The lending platform shut down in 2018 after cease-and-desist orders from state regulators, leaving many investors unable to redeem their cryptocurrency holdings.

Satish Kumbhani’s whereabouts are still unknown and settlements with the SEC for others involved in the scam are still pending, but many individuals face prison sentences or severe financial penalties.