BitConnect Selling Unregistered Securities
BitConnect, an organization that initially claimed to be a community promoting bitcoin, has now landed itself in some trouble. On January 4th, the Securities Commissioner of the State of Texas issued an emergency cease and desist order against BitConnect. The leveled charges included the company’s selling of securities, which were not registered. In a news release on its official website, the securities board states that, as per the Texas Securities Act State Securities Board rules, the company must be registered and licensed to sell securities (which it is not). Therefore, the company is in violation of state law.
After identifying itself as simply a bitcoin advocate, the company “transitioned” into becoming a sort of crypto-platform that had its own cryptocurrency, BCC. BCC is supposed to be a peer-to-peer, open source cryptocurrency. What could make someone suspicious is the company has not revealed the identity of who developed BCC. BehindMLM conducted its own formal review back in April, 2017 and considered it to be nothing more than a pump and dump Ponzi scheme.
BitConnect has been accused of not providing sufficient information about its business operations. For example, the Texas regulator mentions that the company has not disclosed anything regarding its current financial status, or the methods it uses to generate profits for its investors. Furthermore, the company claims to be based somewhere in England, but it has not specified an exact physical location.
Questionable Investing Techniques
BitConnect promises huge returns while claiming to minimize risks. It claims that its proprietary Trading Bot does all the magic. However, absolutely nothing is shared by the company about what type of algorithm the Bot uses to operate. The Texas regulator further implies that the company makes contradictory statements when it affirms that cryptocurrency investments entail substantial risks, but apparently the techniques the company uses to make profits for its investors don’t involve much of risk factor.
Not the First Time
This isn’t the first time that authorities have clamped down on BitConnect. The UK wanted it to close its operations a few months back. Similar concerns were raised regarding its mode of operation. Even highly respected members of the crypto-world, including Ethereum’s Vitalik Buterin, have advised investors to be careful about approaching BitConnect. Basically, the company makes the outrageous claim that it can turn a $1,000 investment into $50 million within a 3 year time frame.
Too Good to Be True
We’ve all heard the saying: “If it sounds too good to be true, then it probably isn’t”. It would be a good idea for any investor to exercise caution, especially when a company promises an unrealistic ROI. People who dislike government regulations might think that the government should stay away and not intervene, even if a situation could result in large financial losses for naive people. Should the people be left to suffer the fate of their own actions without any sort of governmental protection?