A crypto lending platform BitConnect is sued by the U.S. Securities and Exchange Commission for over $2 Billion Token Sale almost three years after its shut down.

The SEC has targetted not only Satish Kumbhani, BitConnect’s founder, Glenn Arcaro, its promoter, and his firm Future Money for violating the Securities Exchange Act. According to this act, any company selling investment-related products in the U.S. is mandatorily required to register with the SEC.

The SEC has already sued three BitConnect promoters earlier this year. Those promoters had gotten BCC tokens for drawing in new financial investors to the plan. In August, the litigants Joshua Jeppesen, Laura Mascola, and Michael Noble had settled with the SEC for 190 Bitcoin which is valued at $3.5 million in cash. This is the first action of the U.S. against BitConnect's administration.

Glenn Arcaro of Los Angeles was confessed in government court for his investment in the conspiracy. In a parallel action, the U.S.Securities and Exchange Commission has announced civil charges against Arcaro and 3 others in connection with the same conduct. The sentencing is scheduled for November 15, 2021, at 9:30 a.m. before Todd W. Robinson, the U.S. District Judge.

Bitconnect also announced that it would transfer any left funds in the users' lending wallets to their BCC wallets at a rate of $363.62 per BCC. The platform's token was rapidly seen falling to fall in value by a whopping 96% after they had announced its shut down. On the same day of its announcement, investors wanted to cash out the BCC in their wallets as fast as they were receiving it. 

How did Bitconnects get into trouble?

Bitconnect announced its sudden shutting yesterday. Durning, its bright days, Bitconnect has easily exceeded the value mark of $400.With its suspicious business model, Bitconnect promised its investor on its website that it would turn its Bitcoin investment into a fortune. Bitconnect was acquiring new investors by affiliate marketing scheme rather than traditional marketing efforts which also attracted the attention of authorities. 

Despite receiving several legal notices to shut its operation, the promoters carried on with their fraudulent operation. Bitconnect tried to dissolve the matter by simply churning out more content, only until yesterday that they announced its immediate shutdown. “we are closing lending service and exchange service while BitConnect.co website will operate for wallet service, news, and educational purposes.”

The SEC lawsuit has imposed fines, recoup ill-gotten gains, and other relief. BitConnect, founded in 2016, had created a digital token named as BitConnect Coin that could be exchanged for the popular cryptocurrency, bitcoin.

Prosecutors accepted that BitConnect was running a "textbook Ponzi scheme" by paying its earlier investors with new investor money.

On May 28, the SEC has sued five other BitConnect promoters.

It has obtained judgments requiring two promoters, Joshua Jeppesen and Michael Noble. Jeppesen's fiancee has to pay more than $3.5 million and 190 bitcoin. Other promoters have not responded to the lawsuit yet or have not been served.

Rushali Das

CBW - External Analyst

INDIA