BitConnect, an anonymously-run cryptocurrency lending and exchange platform long suspected of being a well-marketed Ponzi scheme, abruptly ceased operations on Tuesday after receiving cease-and-desist orders from authorities in Texas and North Carolina.
Per Bloomberg, the Texas State Securities Board and North Carolina Secretary of State Securities Division told BitConnect it “isn’t registered to sell securities in those states.” Texas regulators warned that “Despite providing no information on how it will make money for investors— including the algorithms behind the Trading Bot—BitConnect is touting its investments as a ‘safe way to earn a high rate of return.’”
However, in a blog post, the company alleged that additional reasons were to blame, including “continuous bad press” that “created a lack of confidence in the platform” and “DDos attacks” that had “made the platform unstable and have created more panic in the community.” It also insisted that its token, BitConnect Coin (BCC), could be traded on other exchanges.
According to TechCrunch, BitConnect required users to buy into BCC to conduct transactions on the platform and has long promised “outsized returns depending on how long the loan was for.”
Image: Screengrab via TechCrunch
BitConnect’s inclusion of multi-level referral features led many to suspect it was funding those big returns by gouging new users on purchases of BCC—which began crashing in value this month and is likely to continue plummeting in value, per TechCrunch:
While the platform says they’re refunding all outstanding loans at a rate of $363.62 USD (an average of the token’s price over the last 15 days), the Bitconnect token is currently trading down 80% and worth less than $40, so while users may have been made whole on a BCC-equivalent, many are certainly suffering severe financial losses in terms of USD or Bitcoin (which is how they made their original investment).
According to TNW, BCC was worth $425 (£308) roughly 10 days ago but is now worth under $30 (£21) and continuing to slide.
The BitConnect subreddit is now set to private mode, but a cached version of the board includes a “LEGAL ACTION MEGATHREAD.” One user warned that “you guys are gonna bring the fucking fed into crypto... just accept you got duped,” while another taunted, “Invest in a ponzi, expect to get rekt. Good luck getting your money back, they’re probably on a beach in Thailand...”
While the operators of the site have insisted future projects including the BitConnect X ICO will continue, this seems like a pretty clear case of something that already has a fork stuck in it. But hey, you never know—maybe those Kodak KashMiners might still pay off. [Bloomberg]