As reported by Core Media, BitConnect, the company behind what is widely believed to be a cryptocurrency Ponzi scheme, recently shut down its lending and exchange platform. The company made its move citing legal troubles and external pressure. Some investors are trying to get their money back through legal action.
According to public documents filed with the Southern District Court of Florida, the company was recently hit with a class action lawsuit, from plaintiffs that claim the company swindled them for a total of over $770,000. The lawsuit notably alleges the company’s exchange platform was a “wide-reaching Ponzi scheme.”
According to the documents, the investors who filed the lawsuit claim things at BitConnect weren’t what the company claimed they were. Per the complaint, the site’s promoters “illogically promised” monthly returns as high as 40 percent, and 1 percent compounding daily interest. This could amount to 3,000 percent annual gains.
It was operating using its BitConnect Token (BCC), required to lend on the platform, as an unregistered security. As such, the plaintiffs argue that BitConnect violated the Securities Act Further, they allege the funds weren’t used for a so-called trading bot, but were instead used to pay earlier investors, making it a Ponzi scheme.
It specifically cites a passage from BitConnect’s website:
“This investment option involves profiting from BitConnect trading bot and volatility software. You will receive daily profit based on your investment options. Upon investment term completion, you will receive your capital back to take out from the BitConnect lending platform or optionally reinvest back in lending platform to continue receiving daily profits.”
Notably, the company is going forward with its BitConnect X ICO, and has vowed to launch a new cryptocurrency exchange. While some of its promoters now encourage naïve investors to participate in the ICO, others split.
Going after BitConnect promoters
The case, brought by six individuals, is filed on behalf of all investors who lost their funds using BitConnect’s lending platform. It names several BitConnect branches in the UK, and interestingly goes after promoters as well.
It lists marketers such as Glenn Arcaro, who’s reportedly a director at the company, and YouTubers such as Trevon Brown (known as Trevon James), Craig Grant, and CryptoNick, filed as John Doe.
BitConnect’s team isn’t listed on its website, nor does the firm have a whitepaper describing its business model. Company records in the UK don’t include a phone number. As such, no outlet has seemingly been able to reach a company representative.
Some of those who promoted the scheme – including Arcaro – have now deleted their videos and posts related to BitConnect. They started doing so after the company received cease and desist letters from regulators in Texas and North Carolina. Nevertheless, cryptocurrency blogger Bitfinex’ed saved some of their now deleted videos, and shared them with the public.