$2 000 000 000 USD

JANUARY 2018

GLOBAL

BITCONNECT

DESCRIPTION OF EVENTS

"On November 13th, 2016, BitConnect announced that they would be launching in a press release on their website." In the announcement, the company described itself as "on the cutting edge of Bitcoin currency and trading. Due to the growing demand for independent banking, Bitconnect is an exemplary format for today’s smart investor. Bitconnect an open source community driven decentralized cryptocurrency will be launching soon."

 

"The following month, on December 26th, the company launched its lending platf[or]m and digital wallet."

 

According to their website, BitConnect "is an open source all in one bitcoin and crypto community platform designed to provide multiple investment opportunities with cryptocurrency education where it is entirely possible to find the independence we all desire, in a community of like-minded, freedom loving individuals who, like you, are seeking the possibility of income stability in a very unstable world."

 

"BitConnect claim to have one of the most lucrative cryptocurrencies to invest in as they state that their coin increases in value by up to 120% per year as they want to reward people holding the coins in return for helping maintain the security of the network (their words, not mine)."

 

"The company, which made its foray into the cryptocurrency scene with an initial coin offering (ICO) in late December 2016, swiftly cemented its position as one of 2017’s best performing currencies on CoinMarketCap. Indeed, during its heyday, BitConnect boasted a market cap of over $2.6 billion and a value exceeding the $400 mark."

 

"The platform is community-driven currency and platform. Only 28 million BitConnect Coins will exist, as people mine for more, the value of a single coin increases. Additionally, the more people who buy BitConnect Coin using other currencies, the value increases. Users also have the ability to trade BitConnect Coin."

 

"The BitConnect wallet allows users to accrue interest on their BitConnect Coins, meaning their total number will increase based on how long they hold their BitConnect Coin. Users also have the opportunity to lend Coins to each other, and if users sign others up for lending opportunities through BitConnect, the company rewards them with bonuses."

 

"Regardless of the stake though, investors were promised a one-percent return of investment (ROI) on a daily basis. To this end, the company had developed its own proprietary “trading bot and volatility software” that would turn your Bitcoin investment into a fortune. Or so the information provided on the website suggested."

 

"This meant that salting $1,000 away into your BitConnect investment account could net you more than $50 million within three years, assuming the scheme does indeed live up to its promise for one-percent interest compounded on a daily basis. Needless to say though, many deemed this model unsustainable."

 

"The company claims that members investing in their cryptocurrency can expect to see an ROI of up to 40% per month and that members can even earn more money by recruiting more people into the opportunity."

 

"BitConnect sold tokens of a type of bitcoin known as the BitConnect coin before suddenly shutting up shop last year amid concerns from customers it was a scam."

 

"[T]he website (found at bitconnect.co) doesn’t give out any information whatsoever as to which person(s) or company(s) are behind the operation, with the domain name also being registered privately too."

 

"[T]he company relied on an aggressive marketing strategy on all fronts. Putting aside its extensive digital and event marketing efforts, the company had enlisted a large army of multi-level affiliate marketers to recruit new investors, who could then work their way up by bringing in even more new investors – and so on and so on. In the real world, we call this a pyramid scheme."

 

"The BitConnect ponzi relied on exchanges like CoinMarketCap uncritically posting exchange data showing massive appreciation in the BCC token. Of course this was illusory, and there was nothing behind the curtain. The vast majority (95%+) of BCC volume derived from a single “exchange,” which was hosted on bitconnect.co. By uncritically listing this volume with no caveats, CoinMarketCap directly enabled the BitConnect scam, which ended up siphoning around $100m from investors (my estimate)."

 

"The tactic, which the promoters employed across multiple channels and social media platforms, essentially involved ballyhooing the Bitcoin investment service by touting screenshots of the impressive “profits” BitConnect has brought them; that is despite the fact that most of their winnings came from affiliates – not investing."

 

"Among the first ones to voice his concern with the company was Ethereum founder Vitalik Buterin. “If [one percent per day] is what they offer,” he said on Twitter back in November, “then that’s a [P]onzi [scheme].”"

 

"As one of the 20 biggest cryptocurrencies by marketshare, by that time the bullish investment service had expanded enough to attract the attention of the authorities. Following an investigation in November, the British Registrar of Companies served BitConnect with a strike-off notice, threatening to shut it down and dissolve its operation unless further action is taken."

 

In early January 2018, "BitConnect got slapped with a cease and desist letter from the Texas Securities Board, ordering the company to close down its operation and cut distribution of BCC – at least until it had worked out an agreement with the Securities Commissioner or was granted the necessary exemptions to continue its business."

 

“We are closing the lending operation immediately with the release of all outstanding loans,” the statement read. “With release of your entire active loan in the lending wallet we are transferring all your lending wallet balance to your BitConnect wallet balance at 363.62 USD [sic].”

 

“In short,” it continued, “we are closing lending service and exchange service while BitConnect.co website will operate for wallet service, news and educational purposes.”

 

"Washington D.C., Sept. 1, 2021 — The Securities and Exchange Commission announced today that it has filed an action against BitConnect, an online crypto lending platform, its founder Satish Kumbhani, and its top U.S. promoter and his affiliated company, alleging that they defrauded retail investors out of $2 billion through a global fraudulent and unregistered offering of investments into a program involving digital assets."

 

"According to the SEC's complaint, filed in the United States District Court for the Southern District of New York, from early 2017 through January 2018, Defendants conducted a fraudulent and unregistered offering and sale of securities in the form of investments in a "Lending Program" offered by BitConnect. The complaint alleges that, to induce investors to deposit funds into the purported Lending Program, Defendants falsely represented, among other things, that BitConnect would deploy its purportedly proprietary "volatility software trading bot" that, using investors' deposits, would generate exorbitantly high returns. However, the SEC alleges that instead of deploying investor funds for trading with the purported trading bot, defendants BitConnect and Kumbhani siphoned investors' funds off for their own benefit by transferring those funds to digital wallet addresses controlled by them, their top promoter in the U.S., defendant Glenn Arcaro, and others. The SEC's complaint further alleges that BitConnect and Kumbhani established a network of promoters around the world, and rewarded them for their promotional efforts and outreach by paying commissions, a substantial portion of which they concealed from investors. According to the complaint, among these promoters was Arcaro, the lead national promoter of BitConnect for the United States who used the website he created, Future Money, to lure investors into the Lending Program."

 

"We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets," said Lara Shalov Mehraban, Associate Regional Director of SEC's New York Regional Office. "We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space."

 

"The SEC's complaint charges Defendants with violating the antifraud and registration provisions of the federal securities laws. The complaint seeks injunctive relief, disgorgement plus interest, and civil penalties. The SEC previously reached settlements with two of the five individuals it charged in a related action for promoting the BitConnect offering. In a parallel action, the Department of Justice today announced that Arcaro has pleaded guilty to criminal charges."

 

"The SEC's investigation was conducted by Gwen Licardo of the SEC's Retail Strategy Task Force, Michael Baker and Pamela Sawhney of the SEC's Cyber Unit, and Jorge Tenreiro and Jordan Baker of the SEC's New York Regional Office. The case was supervised by John O. Enright, Ms. Mehraban and Kristina Littman, Chief of the Cyber Unit. The litigation is being conducted by Mark Sylvester, Richard Primoff, Ms. Licardo, Mr. Baker, and Ms. Sawhney. The Commission appreciates the assistance of the Cayman Islands Monetary Authority, the Hong Kong Securities and Futures Commission, the Monetary Authority of Singapore, the Ontario Securities Commission, the Romanian Financial Supervisory Authority, and the Thailand Securities and Exchange Commission."

 

"The SEC's Office of Investor Education and Advocacy and Enforcement's Retail Strategy Task Force has issued an Investor Alert on Digital Asset and Crypto Investment. Investors can find additional information about digital asset and "crypto" investment schemes, including the warning signs of fraud, at Investor.gov."

BitConnect ran a large Ponzi scheme, which successfully tricked investors to invest over $2b. At the end, the scheme collapsed and the token value rapidly dropped 90%.

SEC.gov | SEC Charges Global Crypto Lending Platform and Top Executives in $2 Billion Fraud (Sep 19)
Cryptocurrencies That Were Proven to Be Scams | The Chain (Jan 16)
https://cryptpresso.com/cryptocurrency-scams-how-to-recognize-them-before-its-too-late/ (Jan 16)
BitConnect Review - Is It a Ponzi Scam? - Living More Working Less (Jan 17)
https://medium.com/@ducktator/ico-scams-hall-of-fame-dc915f1189af (Jan 17)
Living Bitconnect Meme Carlos Matos Seemingly Attacks Bitcoin, Calls It ”A Scam” and Says to ”Sell Everything” - Toshi Times (Jan 17)
https://knowyourmeme.com/memes/sites/bitconnect (Jan 17)
https://www.emchat.net/emchat/2018/1/26/bitconnect-customers-sue-company-for-allegedly-operating-ponzi-scheme (Jan 17)
https://steemit.com/bitcoin/@diorthotis/bitconnect-the-future-of-monetary-freedom-is-here (Jan 17)
Loading 3rd party ad content (Jan 17)
How BitConnect pulled the biggest exit scheme in cryptocurrency (Jan 17)
U.S. SEC charges BitConnect founder with $2 bln cryptocurrency fraud | Reuters (Jan 17)
Bitconnect, which has been accused of running a Ponzi scheme, shuts down – TechCrunch (Jan 17)
US government seizes $56 million in crypto from BitConnect’s ‘number one promoter’ - The Verge (Jan 17)
https://www.justice.gov/opa/pr/56-million-seized-cryptocurrency-being-sold-first-step-compensate-victims-bitconnect-fraud (Jan 17)
https://coinmarketcap.com/currencies/bitconnect/ (Jan 17)
Bitconnect - Wikipedia (Jan 17)
https://medium.com/s/the-crypto-collection/a-glimpse-into-the-dark-underbelly-of-cryptocurrency-markets-d1690b761eaf (Jan 22)
UK threatens to shut down popular Bitcoin investment site BitConnect (Jan 22)
@KennethBosak Twitter (Jan 22)
What's a Cryptocurrency Exit Scam? How Do You Spot One? (Jan 19)
The Bitconnect Coin Blockchain Community (@bitconnect) | Twitter (Jan 24)
Bitconnect (Jan 24)

Sources And Further Reading

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