SEC Charges Promoters Of Now Defunct Ponzi Scheme BitConnect

U.S. Security Exchange Commission announced yesterday that it has charged five individuals involved in the BitConnect cryptocurrency lending program in 2017, for promoting unregistered digital asset securities. The five U.S. citizens include Trevon James, Craig Grant, Ryan Maasen, and Michael Noble.

BitConnect held its ICO in December 2016, raising $2 billion, and then became a very popular crypto trading and lending program. It was promoted regularly by its leaders on social media in 2017 and 2018 as a “trading bot and volatility software”. It went to hit charts as one of the best performing cryptocurrencies on CoinMarketCap in 2017. It once boasted a market cap of $2.6 billion and a price of over $400 mark at the start of 2018.

The trading and lending platform then shut down abruptly in January 2018 after receiving cease and desist letters from financial regulators in the U.S. Investors had poured their money into the project with expectations of large profit, having been promised a return of 40 percent total return per month from their investments and one percent ROI.

The commission complained that the individuals promoted BitConnect and sold the service to investors without registering the company and the asset with the commission as required by the federal asset security laws.

Trevon James said in a YouTube interview with Cofeezilla in January this year that he wouldn’t call BitConnect a Ponzi scheme, adding that “it was going good” until the cease and desist. He added that “all crypto is probably a Ponzi scheme”, except Bitcoin because of the pumps and dumps mostly happening via paid YouTube influencers. James said in the interview that BitConnect started with Craig Grant who founded the Ponzi scheme. He confessed the scheme promised people interest.

“There were days when we didn’t get any interest,” he said. James said he started with 100 bucks and then made a lot of money, so as a YouTuber he then started telling people “how good it was going.” He said he “was not out to hurt people”

According to the charges by the commission, the promoters got a financial benefit by illegally soliciting funds from investors by selling financial security. It said the promoters earned “illegal profit” from the public’s interest in digital assets and therefore, they must be held accountable.

The promise in a high rate of return and profits made it to be labeled a Ponzi scheme, which attracted regulatory scrutiny. Even before closure, popular crypto figures had raised concerns about BitConnect being a Ponzi scheme. They included Ethereum founder Vitalik Buterin, Litecoin founder Charlie Lee, and Chairman of Galaxy Digital Michael Novogratz.