Bitconnect

Bitconnect (also spelled BitConnect and stylized bitconnect, ticker BCC) was an open-source cryptocurrency that was connected with the high-yield investment program (a type of Ponzi scheme) bitconnect.co.[2][3][4] After the platform administrators closed the earning platform on January 16, 2018, and refunded the users' investments in BCC, confidence was lost and the value of the coin plummeted to below $1 from a previous high of nearly $500.

Bitconnect Coin
BitConnect.png
Bitconnect logo
CodeBCC
Development
Original author(s)Satish Kumbhani
Initial releaseFebruary 15, 2016[1]
Development statusDiscontinued
Written inC++
Operating systemWindows, OS X, Linux, Android, iOS
Source modelOpen source
LicenseMIT License
Websitehttps://bitconnect.co/ (last archived version, 28 November 2018)
Ledger
Timestamping schemeProof of Stake
Block reward0.42% every 15 days; 10% inflation per year
Block time60 seconds

HistoryEdit

Bitconnect was released in 2016 with the goal of allowing users to lend the value of Bitconnect coin in return for interest payments. The marquee program was the so-called lending platform where users traded Bitcoin for Bitconnect Coin and could lock in the instantaneous value of the coin for a set period of time while earning interest calculated daily. The interest payouts were determined by a so-called "trading bot". The trading bot was the most controversial piece of the Bitconnect.co system.[citation needed] The liquidity of the BCC cryptocurrency funded users ability to exchange their earnings for Bitcoin.

The following is an excerpt from the details and instructions of the Bitconnect Lending platform:[5]

Bitconnect lending: You can invest BitConnect coin in Bitconnect lending platform exclusively from the BitConnect Dashboard. This investment option involves profiting from Bitconnect trading bot and volatility software. You will receive daily profit based on your investment option. 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 profit.

As the administrators detailed "Bitconnect is not a company". Several entities arose using the name Bitconnect, designating well-known promoters as principals. It is unknown if any money or contracts were ever distributed through these entities.

On November 7, 2017, the government of the United Kingdom issued Bitconnect a notice with two months to prove its legitimacy.[1][6]

On January 3, 2018, Texas State Securities Board issued a cease and desist to the company, calling it a Ponzi scheme, and citing failings in user earnings transparency, and misleading statements.[1] Texas State Security Board and North Carolina Secretary of State Securities Division warned that Bitconnect was not registered to sell securities in their respective states.[1]

On January 17, 2018, Bitconnect shut down,[3][1] and BCC prices crashed by 92% immediately after.[7] Bitconnect announced it would refund its loans.[8] However, the Bitconnect X website[clarification needed] remained open and operational, having just begun its ICO and allowing users to purchase BCCX coins with their BCC coins.[citation needed]

On January 31, 2018, a temporary restraining order froze Bitconnect's assets, expiring on February 13.[citation needed] However, Bitconnect as an entity never actually existed, so it is unclear what assets Bitconnect has (or ever had). An alleged India-region leader (one level below founder) of Bitconnect, Divyesh Darji, was arrested in Delhi, India, on August 18, 2018.[9] It is suspected that Mr. Darji is connected to well-known criminal entities involved in laundering so-called "Black Money" after the Indian government demonetization of the rupee. In 2019, Darji was arrested and released on bail in connection with a similar scam called Regal Coin.[10]

Criticism and collapseEdit

Bitconnect was suspected of being a Ponzi scheme[11] because of its multilevel marketing structure and impossibly high payouts (1% daily compounded interest).[7][8][12] Bitconnect interest fluctuated greatly with the volatility of Bitcoin, which its value was tied to.

The Bitconnect Coin was among the world's top 20 most successful cryptocurrency tokens[13] until its price collapsed after traders began losing confidence. BCC rose from a post ICO price of $0.17 to an all-time high of US$463 in December 2017; it declined to US$0.40 as of March 11, 2019. Bitconnect released outstanding loans at a rate of US$363.62 to the Bitconnect Wallet in form of BCC. However, soon after that news the internal exchange price and liquidity collapsed resulting in a nearly complete loss of value.[8][14][15]

Legal issuesEdit

On January 16, 2018, Bitconnect announced it would shut down its cryptocurrency exchange and lending operation after regulators from Texas and North Carolina issued a cease and desist order against it.[16][17][18][19] On January 31, 2018, a U.S. District Court, Western District of Kentucky, granted a temporary restraining order freezing Bitconnect's assets and "to disclose cryptocurrency wallet and trading account addresses, as well as the identities of anyone to whom Bitconnect has sent digital currencies within the last 90 days".[citation needed]

In September 2021 the U.S. Securities and Exchange Commission sued Bitconnect, alongside its founder Indian Satish Kumbhani, American Glen Arcaro who served as Bitconnect's lead national promoter in the United States from August 2017 to January 2018, and Future Money LTD a company Arcaro created to lure into Bitconnect's lending Program. The SEC alleged that Bitconnect defrauded U.S. investors a total of $2 billion.[20][21][22]

Parallel to SEC civil charges, the United States Department of Justice had initiated criminal charges against Arcaro. On 1 September 2021, Ararco pleaded guilty of criminal charges pressed by DOJ which includes conspiracy to commit wire fraud and criminal forfeiture.[23]

Internet memeEdit

On October 28, 2017, Bitconnect held its first (and only) annual ceremony in Pattaya, Thailand. During the event, an investor named Carlos Matos from New York City gave an exuberant presentation and testimonial about the website, which included him intensely screaming "BITCONNECT!!" several times;[24] the scene quickly became an Internet meme. Both Matos' meme and the questionable practices of Bitconnect were profiled by John Oliver and Keegan-Michael Key on the program Last Week Tonight, and by Ethan and Hila Klein on h3h3Productions.

See alsoEdit

ReferencesEdit

  1. ^ a b c d e "What is BitConnect (BCC) and how does it work?". Finder.com. 2 January 2018. Archived from the original on 25 January 2018. Retrieved 30 January 2018.
  2. ^ Mix (2018-01-17). "How BitConnect pulled the biggest exit scheme in cryptocurrency". The Next Web. Archived from the original on 2018-01-31. Retrieved 2018-01-30.
  3. ^ a b Wieczner, Jen (January 17, 2018). "Bitcoin Crashes to Below $10,000 as Cryptocurrency Scams Scare Investors". Fortune. Archived from the original on January 27, 2018. Retrieved February 10, 2018.
  4. ^ "Seeking Victims in Bitconnect Investigation". Federal Bureau of Investigation. Retrieved 2021-01-04.
  5. ^ "Investing in BitConnect Lending - Bitconnect". bitconnect.co. Archived from the original on 19 November 2017.
  6. ^ "BITCONNECT LTD - Filing history (free information from Companies House)". beta.companieshouse.gov.uk.
  7. ^ a b Williams, Sean. "BitConnect, Alleged Crypto Ponzi Scheme, Shutters Its Lending and Exchange Services and Plunges 92%". The Motley Fool. Archived from the original on 2018-01-18. Retrieved 2018-01-18.
  8. ^ a b c Tepper, Fitz. "Bitconnect, which has been accused of running a Ponzi scheme, shuts down". TechCrunch. Archived from the original on 2018-01-18. Retrieved 2018-01-18.
  9. ^ Osborne, Charlie. "Alleged head of BitConnect cryptocurrency scam arrested in Dubai - ZDNet". Retrieved 27 October 2018.
  10. ^ "Bitcoin millionaire 'on the run' after second cryptocurrency scam". 5 June 2019.
  11. ^ Popper, Nathaniel; Bowles, Nellie (2018). "Bitcoin Falls Below $10,000 as Virtual Currency Bubble Deflates". The New York Times. ISSN 0362-4331. Archived from the original on 2018-01-18. Retrieved 2018-01-18.
  12. ^ Cheng, Evelyn (2018-01-17). "Digital currency plunge may be healthy for cryptocurrency market". CNBC. Archived from the original on 2018-01-18. Retrieved 2018-01-18.
  13. ^ Williams, Sean (2017-07-20). "The 20 Largest Cryptocurrencies by Market Cap". The Motley Fool. Retrieved 2018-06-22.
  14. ^ "Changes coming for the Bitconnect system - Halt of lending and exchange platform". BitConnect. 2018-01-16. Archived from the original on 2018-01-18.
  15. ^ Bhargav, Sushant (2018-01-16). "Bitconnect Shut Down it's Lending Platform Officially for Good". TechScoop.in. Archived from the original on 2018-01-18. Retrieved 2018-01-18.
  16. ^ McKay, Tom (2018-01-17). "BitConnect, Anonymously-Run Crypto Exchange, Crashes After States Issue Cease and Desists". Gizmodo. Archived from the original on 2018-01-17. Retrieved 2018-01-17.
  17. ^ Kharif, Olga (2018-01-16). "BitConnect Closes Exchange as States Warn of Unregulated Sales". Bloomberg. Archived from the original on 2018-01-17. Retrieved 2018-01-17.
  18. ^ Swearingen, Jake (2018-01-17). "The Rise and Fall of BitConnect, the Sketchiest Crypto Exchange". Select All. New York Magazine. Archived from the original on 2018-01-17. Retrieved 2018-01-17.
  19. ^ "Crypto News Update". NASDAQ.com. 2018-01-17. Archived from the original on 2018-01-17. Retrieved 2018-01-18.
  20. ^ Michaels, Dave (2021-09-01). "SEC Sues BitConnect and Founder, Alleging Massive Cryptocurrency Scam of World-Wide Investors". Wall Street Journal. ISSN 0099-9660. Retrieved 2021-09-02.
  21. ^ https://www.sec.gov/litigation/complaints/2021/comp-pr2021-172.pdf
  22. ^ "Cryptoexchange founder accused of defrauding investors of $2 billion". www.cbsnews.com. Retrieved 2021-09-02.
  23. ^ https://cryptovakil.in/bitconnect-scam-sec-charges-indian-satish/
  24. ^ Paez, Danny. "'Bitconnect Carlos' Meme Is Everything Wrong With Cryptocurrency Hype". Inverse. Retrieved 2019-01-16.

External linksEdit