SEC Files Act Against Promoters of BitConnect Encryption Scheme
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Topline
The Securities and Exchange Commission has taken legal action against five people for allegedly promoting BitConnect digital asset securities without proper registration, raising more than $ 2 billion from retail investors.
London, UK – 5/20/12: In this photo illustration a person holds a collection of … [+]
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Highlights
Between January 2017 and January 2018 or so, BitConnect, an open source cryptocurrency, used a network of promoters to market and sell securities in its “loan program” without registering the offer through the agency, the SEC said. in a complaint filed in the United States. District Court for the Southern District of New York.
Four US-based promoters – Trevon Brown (aka Trevon James), Craig Grant, Ryan Maasen, and Michael Noble (aka Michael Crypto) – have not registered as brokers with the SEC, as required by law federal securities.
The promoters, who advertised BitConnect’s lending program on various ‘testimonial’ style videos that frequently appeared on YouTube, received commissions based on their ability to solicit funds from investors.
A fifth defendant, Joshua Jeppesen, has been charged with aiding and abetting the unregistered offering of BitConnect securities by serving as a liaison between BitConnect and the promoters, while representing BitConnect at conferences and promotional events.
Crucial quote
“We will seek to empower those who profit illegally by capitalizing on the public interest in digital assets,†said Lara Shalov Mehraban, associate regional director of the SEC’s New York regional office.
Key context
BitConnect, which debuted in 2016, shut down its main lending platform in early 2018 after securities regulators warned investors of the “Ponzi-type nature†of the business. a price as high as $ 400, tech news site NextWeb.com reported. Investors were promised a 1% return on investment on a daily basis, according to the BitConnect website – which meant that an initial investment of $ 1,000 would turn into $ 50 million in three years. One of the earliest opponents of BitConnect was Ethereum founder Vitalik Buterin, who condemned it as a “Ponzi scheme” in November 2017. Nonetheless, BitConnect has gained more interest in part thanks to its program aggressive marketing, which included digital and event marketing strategies as well as marketers tasked with finding new investors. In late 2017, the UK Companies Registrar threatened to dissolve BitConnect, followed shortly after by a letter from the Texas Securities Board and the North Carolina Securities Division ordering the company to shut down. The North Carolina agency also alleged that the promoters of BitConnect were acting illegally.
What we don’t know
While the SEC said it was seeking “an injunction, restitution plus interest and civil penalties†in the litigation, it did not specify a financial sanction.
Further reading
China clamps down on crypto trading, says’ speculative trading ‘seriously breaches’ financial order (Forbes)
Bitcoin bounces three months lower as Elon Musk denies Tesla sold crypto assets (Forbes)
Tesla will stop accepting Bitcoin as payment due to environmental concerns, says Musk (Forbes)