Bitconnect Explained

Currency Name:Bitconnect Coin
Image 1:BitConnect.svg
Image Width 1:150px
Image Title 1:Bitconnect logo
Code:BCC
Ticker Symbol:BCC
Initial Release Date:February 15, 2016[1]
Status:Discontinued
Programming Languages:C++ C#
Operating System:Windows, OS X, Linux, Android, iOS
Author:Satish Kumbhani
Source Model:Open source
License:MIT License
Timestamping:Proof of stake/Proof of work (hybrid)
Block Time:60 seconds
Block Reward:0.42% every 15 days; 10% inflation per year
Total Supply:28,000,000
Website: (last archived version, 28 November 2018)

Bitconnect (also spelled BitConnect and KimConnect; stylized bitconnect, ticker code BCC) was an open-source cryptocurrency in 2016–2018 that was connected with a high-yield investment program, a type of Ponzi scheme.[2] [3] [4] After the platform administrators closed the earning platform on January 16, 2018, and refunded the users' investments in BCC following a 92% coin value crash, confidence was lost and the value of the coin plummeted to below $1 from a previous high of nearly $525.

History

Bitconnect was released in 2016 to allow 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. The liquidity of the BCC cryptocurrency funded users' ability to exchange their earnings for Bitcoin.

On November 7, 2017, the government of the United Kingdom issued Bitconnect a notice with two months to prove its legitimacy.[5]

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. 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.

On January 17, 2018, Bitconnect shut down, and BCC prices crashed by 92% immediately after. Bitconnect announced it would refund its loans.

On January 31, 2018, a temporary restraining order froze Bitconnect's assets, expiring on February 13.[6] 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 the founder) of Bitconnect, Divyesh Darji, was arrested in Delhi, India, on August 18, 2018.[7] It is suspected that Darji is connected to well-known criminal entities involved in laundering so-called "Black Money" after the Indian government's demonetization of the rupee. In 2019, Darji was arrested and released on bail in connection with a similar scam called Regal Coin.[8]

Criticism and collapse

Bitconnect was suspected of being a Ponzi scheme[9] because of its multilevel marketing structure and impossibly high payouts (1% daily compounded interest).[10] [11] [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 US$363.62 to the Bitconnect Wallet in the form of BCC. However, soon after that news the internal exchange price and liquidity collapsed resulting in a nearly complete loss of value.[14] [15]

Legal issues

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".

In September 2021, the U.S. Securities and Exchange Commission sued Bitconnect, alongside its founder Indian Satish Kumbhani, American Glenn 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 $2.4 billion.[20] [21] [22] [23]

Parallel to SEC civil charges, the United States Department of Justice (DOJ) had initiated criminal charges against Arcaro. On September 1, 2021, Arcaro pleaded guilty of criminal charges pressed by the DOJ which includes conspiracy to commit wire fraud and criminal forfeiture.[24] The DOJ also indicted Kumbhani on various federal charges in February 2022, including money laundering and fraud.[25]

On January 12, 2023, a federal district court in San Diego ordered that Arcaro pay $17 million in restitution to be distributed to approximately 800 victims. [26] He also agreed to forfeit more than $24 million, which could also be used in the future to repay victims. [27]

Internet meme

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 in a variety of registers;[28] this quickly became an Internet meme. Both the Internet meme and the questionable practices of Bitconnect were profiled by John Oliver and Keegan-Michael Key on the program Last Week Tonight.[29]

See also

External links

Notes and References

  1. Web site: What is BitConnect (BCC) and how does it work? . January 2, 2018 . Finder.com . https://web.archive.org/web/20180125020326/https://www.finder.com/uk/bitconnect . January 25, 2018 . live . January 30, 2018.
  2. News: How BitConnect pulled the biggest exit scheme in cryptocurrency. Mix. January 17, 2018. The Next Web. January 30, 2018. en-US. live. https://web.archive.org/web/20180131080920/https://thenextweb.com/hardfork/2018/01/17/bitconnect-bitcoin-scam-cryptocurrency/. January 31, 2018.
  3. News: Wieczner. Jen. Bitcoin Crashes to Below $10,000 as Cryptocurrency Scams Scare Investors. February 10, 2018. Fortune. January 17, 2018. live. https://web.archive.org/web/20180127005114/http://fortune.com/2018/01/17/bitcoin-bitconnect-price-scam/. January 27, 2018.
  4. Web site: Seeking Victims in Bitconnect Investigation. January 4, 2021. Federal Bureau of Investigation. en-us. July 4, 2022. https://web.archive.org/web/20220704110923/https://www.fbi.gov/resources/victim-services/seeking-victim-information/seeking-victims-in-bitconnect-investigation. live.
  5. Web site: BITCONNECT LTD - Filing history (free information from Companies House). beta.companieshouse.gov.uk. January 4, 2019. November 11, 2017. https://web.archive.org/web/20171111121215/https://beta.companieshouse.gov.uk/company/10278342/filing-history. live.
  6. Web site: SEC.gov BitConnect, et al. . 2023-12-23 . www.sec.gov.
  7. Web site: Alleged head of BitConnect cryptocurrency scam arrested in Dubai - ZDNet. Osborne. Charlie. ZDNet. October 27, 2018. November 8, 2018. https://web.archive.org/web/20181108132235/https://www.zdnet.com/article/alleged-bitconnect-head-arrested-in-dubai/. live.
  8. Web site: Bitcoin millionaire 'on the run' after second cryptocurrency scam. Independent.co.uk. June 5, 2019. November 25, 2019. July 11, 2019. https://web.archive.org/web/20190711044954/https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-scam-bitconnect-cryptocurrency-regal-coin-a8945291.html. live.
  9. News: Bitcoin Falls Below $10,000 as Virtual Currency Bubble Deflates. Popper. Nathaniel. 2018. The New York Times. January 18, 2018. Bowles. Nellie. en-US. 0362-4331. live. https://web.archive.org/web/20180118010804/https://www.nytimes.com/2018/01/17/technology/bitcoin-virtual-currency-bubble.html. January 18, 2018.
  10. News: BitConnect, Alleged Crypto Ponzi Scheme, Shutters Its Lending and Exchange Services and Plunges 92% . Williams . Sean . The Motley Fool . January 18, 2018 . https://web.archive.org/web/20180118025950/https://www.fool.com/investing/2018/01/17/bitconnect-alleged-crypto-ponzi-scheme-shutters-it.aspx . January 18, 2018 . live . en.
  11. News: Bitconnect, which has been accused of running a Ponzi scheme, shuts down. Tepper. Fitz. TechCrunch. January 18, 2018. en. live. https://web.archive.org/web/20180118001059/https://techcrunch.com/2018/01/16/bitconnect-which-has-been-accused-of-running-a-ponzi-scheme-shuts-down/. January 18, 2018.
  12. News: Digital currency plunge may be healthy for cryptocurrency market. Cheng. Evelyn. January 17, 2018. CNBC. January 18, 2018. live. https://web.archive.org/web/20180118012442/https://www.cnbc.com/2018/01/17/digital-currency-plunge-may-be-healthy-for-cryptocurrency-market.html. January 18, 2018.
  13. News: The 20 Largest Cryptocurrencies by Market Cap. Williams. Sean. July 20, 2017. The Motley Fool. June 22, 2018. en. April 16, 2018. https://web.archive.org/web/20180416012442/https://www.fool.com/investing/2017/07/20/the-20-largest-cryptocurrencies-by-market-cap.aspx. live.
  14. Web site: Changes coming for the Bitconnect system - Halt of lending and exchange platform. January 16, 2018. BitConnect. https://web.archive.org/web/20180118030000/https://bitconnect.co/system-news/94/changes-coming-for-the-bitconnect-system-halt-of-lending-and-exchange-platform. January 18, 2018. live.
  15. News: Bitconnect Shut Down it's[sic] Lending Platform Officially for Good]. Bhargav. Sushant. January 16, 2018. TechScoop.in. January 18, 2018. https://web.archive.org/web/20180118181133/https://techscoop.in/2018/01/bitconnect-officially-shut-down-lending-platform.html/. January 18, 2018. dead.
  16. News: BitConnect, Anonymously-Run Crypto Exchange, Crashes After States Issue Cease and Desists. McKay. Tom. January 17, 2018. Gizmodo. January 17, 2018. https://web.archive.org/web/20180117061255/https://gizmodo.com/bitconnect-anonymously-run-crypto-exchange-crashes-af-1822144652. January 17, 2018. live. en-US.
  17. News: BitConnect Closes Exchange as States Warn of Unregulated Sales. Kharif. Olga. January 16, 2018. Bloomberg. January 17, 2018. https://web.archive.org/web/20180117001520/https://www.bloomberg.com//news/articles/2018-01-16/bitconnect-closes-exchange-as-states-warn-of-unregulated-sales. January 17, 2018. live.
  18. News: The Rise and Fall of BitConnect, the Sketchiest Crypto Exchange. Swearingen. Jake. January 17, 2018. Select All. January 17, 2018. https://web.archive.org/web/20180117144452/http://nymag.com/selectall/2018/01/ponzi-scheme-bitcoin-site-bitconnect-shuts-down.html. January 17, 2018. live. New York Magazine. en.
  19. News: Crypto News Update. January 17, 2018. NASDAQ.com. January 18, 2018. en-us. live. https://web.archive.org/web/20180117173753/http://www.nasdaq.com/article/crypto-news-update-20180117-00663. January 17, 2018.
  20. News: Michaels. Dave. September 1, 2021. SEC Sues BitConnect and Founder, Alleging Massive Cryptocurrency Scam of World-Wide Investors. en-US. Wall Street Journal. September 2, 2021. 0099-9660. September 1, 2021. https://web.archive.org/web/20210901233854/https://www.wsj.com/articles/sec-sues-bitconnect-and-founder-alleging-massive-cryptocurrency-scam-of-world-wide-investors-11630535853. live.
  21. Web site: Complaint against BitConnect, Satish Kumbhani, Glenn Arcaro, and Future Money Ltd. . Securities and Exchange Commission . September 1, 2021 . dead . https://web.archive.org/web/20210902114638/https://www.sec.gov/litigation/complaints/2021/comp-pr2021-172.pdf . September 2, 2021 .
  22. Web site: Cryptoexchange founder accused of defrauding investors of $2 billion. September 2, 2021. www.cbsnews.com. September 2021. en-US. September 1, 2021. https://web.archive.org/web/20210901232858/https://www.cbsnews.com/news/bitconnect-satish-kumbhani-sec-lawsuit-ponzi-scheme-two-billion/. live.
  23. Web site: 2022-02-25 . Office of Public Affairs BitConnect Founder Indicted in Global $2.4 Billion Cryptocurrency Scheme United States Department of Justice . 2024-03-12 . www.justice.gov . en . March 6, 2022 . https://web.archive.org/web/20220306210627/https://www.justice.gov/opa/pr/bitconnect-founder-indicted-global-24-billion-cryptocurrency-scheme . live .
  24. Web site: September 5, 2021. US SEC charges Indian citizen for bitcoin scam. dead. September 6, 2021. September 6, 2021. https://web.archive.org/web/20210906071840/https://cryptovakil.in/bitconnect-scam-sec-charges-indian-satish/.
  25. Web site: 2022-02-25 . BitConnect Founder Indicted in Global $2.4 Billion Cryptocurrency Scheme . 2022-03-06 . www.justice.gov . en . March 6, 2022 . https://web.archive.org/web/20220306210627/https://www.justice.gov/opa/pr/bitconnect-founder-indicted-global-24-billion-cryptocurrency-scheme . live .
  26. Web site: 2023-01-12 . Crypto Fraud Victims Receive Over $17 Million in Restitution from BitConnect Scheme . 2023-05-12 . www.justice.gov . en . May 12, 2023 . https://web.archive.org/web/20230512064612/https://www.justice.gov/opa/pr/crypto-fraud-victims-receive-over-17-million-restitution-bitconnect-scheme . live .
  27. Web site: Riggins . Alex . 2023-01-13 . San Diego judge orders $17 million restitution payment in BitConnect pyramid scheme . 2023-05-12 . San Diego Union-Tribune . en-US . May 12, 2023 . https://web.archive.org/web/20230512064612/https://www.sandiegouniontribune.com/news/courts/story/2023-01-13/restitution-biconnect-cryptocurrency-ponzi-scheme . live .
  28. Web site: 'Bitconnect Carlos' Meme Is Everything Wrong With Cryptocurrency Hype. Paez. Danny. Inverse. February 2, 2018. en. January 16, 2019. January 16, 2019. https://web.archive.org/web/20190116201103/https://www.inverse.com/article/40894-bitconnect-carlos-meme-cryptocurrency. live.
  29. Web site: Cryptocurrencies. Oliver. John. Youtube. en. July 11, 2022. July 11, 2022. https://web.archive.org/web/20220711085925/https://www.youtube.com/watch?v=g6iDZspbRMg. live.

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