BitConnect (BCC) was an open-source cryptocurrency which has been described as a high-yield investment program and a Ponzi scheme. [6] [8]

Bitconnect closed in January 2018. The BCC token was still in circulation, and crashed in price. As of September 2018, the token has been delisted from the last exchange that traded it, Trade Satoshi. [9]

History

BitConnect was released in 2016 with the goal of allowing users to lend Bitcoin for interest. Though this goal was never realized, BCC acted as an alt-coin but allowed users to earn interest on their own wallet. [4]

November 7, 2017, BitConnect was issued a notice with 2 months to prove its legitimacy. [4]

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. [4] 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. [4]

January 17, 2018, BitConnect shut down, [8] [4] and BCC prices crashed by 92% immediately after. [11] BitConnect announced it would refund its loans. [13] However, the BitConnect X website remained open and operational, having just begun its ICO and allowing users to purchase BCCX coins with their BCC coins. [14]

On January 31, 2018, a temporary restraining order froze BitConnect's assets, expiring on February 13th. [16] An alleged India region leader (one level below founder) of BitConnect, Divyesh Darji, was arrested in Delhi, India in August 18, 2018. [9]

Criticism and collapse

Bitconnect was suspected of being a Ponzi scheme [19] because of its multilevel marketing structure and impossibly high payouts (1% daily compounded interest). [11] [13] [21] The BitConnect Coin was among the world’s top 20 most successful cryptocurrency tokens [22] until its price plunged 65 percent starting on January 3, 2018. After BCC hit an all-time high of US $463 in December 2017, it declined to US $5.92 as of January 30, 2018. Bitconnect has said it will refund all outstanding loans at a rate of US $363.62 to the BitConnect Wallet in form of BCC. However, at the time BitConnect paid outstanding loans, the currency's market price had already declined to less than $10, making the payments largely worthless. [13] [24] [26]

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. [28] [30] [32] [34] On January 31, 2018, the 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." [16]

See also