Bitconnect Crumbles Under Regulatory Pressure

ICO News

In what had been earlier identified as a scam and Ponzi scheme, Bitconnect finally submitted their lending and exchange platform following pressure from regulatory bodies.

Lending Platform and Community

When Bitconnect (BCC) launched their ICO in late of 2016, they earned a substantial amount of attention from the crypto community. After quickly rising to $1 at the start of 2017, the firm then skyrocketed up to nearly $286 in early November the same year. Along the way, however, the company was also the center of much controversy.

The proposed ICO offered investors a community to both educate themselves on the liberating features of BCC, as well as find investment opportunities that promised one percent daily returns via its trading bot. While these daily returns, over the long-term, may pale in the face of the massive average return accumulated by both Bitcoin and Ethereum, it was the consistency and early promises that sparked critical speculation.

Bitcoin Evangelist, Andreas Antonopoulous, has warned members of the community of investments that promise stable daily returns. It wasn’t until Ethereum cofounder Vitalik Buterin simply applied this wisdom to BCC.

“Yeah, if 1% is what they offer then that’s a ponzi,” the Canadian-Russian developer tweeted on November 3, 2017. Concern mounted in the same month, as they company was dissolved by the UK Companies House registrar until reappearing under two new Bitconnect listings shortly thereafter. When investors attempted to contact the anonymous owners to voice their opinions, the listed addresses revealed the lending firm was not located at either address.

Red Flags Turn to Legal Action

It isn’t uncommon to encounter red flags in the ICO sector, especially if one considers the amount of money earned in 2017 alone from the venture. The task for early investors is thus to sift between the real innovation and the get rich quick schemes. While the latter isn’t necessarily illegal, though the SEC has already acted firmly on a few occasions, Bitconnect’s warning signs eventually amounted to legal action.

The Texas State Securities Board (TSSB) ultimately lanced a Cease and Desist order against Bitconnect on January 4, 2018. The order outlined the mechanism in which the firm was recruiting “associates” and having information about the company to be disseminated via all forms of social media. The formal allegation by the American legal body concluded that:

“Investments in the BitConnect Lending Program and Staking Program have not been registered by qualification, notification or coordination, and no permit has been granted for their sale in Texas.”

The North Carolina Secretary of State’s office issued a similar order and demanded that the firm “stop trying to sell these investment products or trying to get others to sell the investment products.” Both Cease and Desist orders allowed for compliance within 30 days of the announce.

Naturally, these two orders confirmed communal suspicion in the company and generated further pressure for the firm to come clean. Under these pressures, the company finally dissolved their lending and exchange platform. Consequently, the price of BCC plummeted 90 percent and causing panic for respective investors.

Despite these final breaths, a new ICO is scheduled to launch under the name BitconnectX and it’s hard to look past the company up to yet another illicit scheme.