A Securities and Exchange Commission (SEC) civil lawsuit has been filed against five individuals allegedly involved in promoting BitConnect’s “lending program”. BitConnect shut down it’s main lending platform operations in 2018 after regulatory warnings and allegations of fraud.
In a press release issue today on the SEC website, the body alleges that the individuals contributed to promoting and raising over $2B from retail investors in an unregistered digital asset securities offering. The issued complaint alleges that a network of promoters, four of the five defendants, offered and sold securities as part of the platform’s lending program without being registered broker-dealers, and without registering the securities with the SEC. This includes a flurry of “testimonial” style videos, the press release states, uploaded to YouTube to justify the merits behind the program. Promoters received commissions based around their success of soliciting funds, the complaint states.
The fifth individual listed in the complaint is accused of “aiding and abetting” the unregistered offering and sales, as a liaison between BitConnect and the promoters, and as a company representative at events and conferences.
In the press release statement, New York SEC Associate Regional Director Lara Shalov Mehraban stated “we allege that these defendants unlawfully sold unregistered digital asset securities by actively promoting the BitConnect lending program to retail investors. We will seek to hold accountable those who illegally profit by capitalizing on the public’s interest in digital assets.”
The platform initially launched in 2016, paralleled with the BitConnect Coin (BCC); the company leveraged a so-called “trading bot” and offered high-yield returns to users with daily calculated interest. Within the following year, UK government bodies were demanding BitConnect to verify it’s legitimacy, and by 2018, the operations started to shut down following increased government pressure in the U.S.
The BitConnect Coin, at it’s peak trading at nearly $500, immediately dropped over 90% following the shutdown. State securities divisions had started to apply pressure right before the shutdown, including alleging that BitConnect was a Ponzi scheme, and that BitConnect was not registered to sell securities in their respective states. Within weeks, BitConnect’s assets were frozen following a temporary restraining order.
It was undoubtedly a dramatic rise and fall for BitConnect.