The recently shuttered cryptocurrency lending and exchange platform BitConnect has been hit with a class action lawsuit from six investors claiming losses exceeding $770,000. The class action complaint was filed yesterday with the Southern District Court of Florida by cryptocurrency fraud specialist?Silver Miller Law, the attorneys representing the plaintiffs.
All BitConnect investors who suffered losses resulting from the company’s activities and platform closure are entitled to join the lawsuit as Class Members. The complaint lists BitConnect’s three corporate entities in the UK and fourteen individuals, including ten of unknown names, as defendants. The individuals include California-based Glenn Arcaro, the director of BitConnect International PLC, and prominent affiliates and recruiters promoting BitConnect on social media platforms such as Youtube and Facebook.
The complaint lists twelve counts of criminal and civil violations BitConnect is alleged to have engaged in. These include a number of state and federal securities violations in relation to fraud and offering unregistered securities, the rescission of a contractual arrangement between BitConnect and the plaintiffs, deceptive and unfair trade practices, fraudulent inducement, fraudulent and negligent misrepresentation, conversion (exerting unauthorized use or control of someone else’s property), and civil conspiracy.
BitConnect, widely suspected in the crypto-space of being little more than a Ponzi scheme, allowed investors to lend money to BitConnect, which the company would then use to trade in the volatile cryptocurrency market using advanced trading software. It promised investors 40% returns per month and 1% returns per day, regardless of market conditions.
BitConnect loans had to be converted from fiat or bitcoin into the platform’s native cryptocurrency, BCC. Naturally, as investor demand for BCC grew, so did the value of the currency, reaching highs of around $430 with a market cap above $2.6B. When the platform was shuttered on January 16th, its tokens became practically worthless, exposing investors to substantial losses.
BitConnect’s dubious reputation in the industry mirrored its short and incident-plagued history. The company launched through an ICO in 2016-2017. On 5th January 2018, the Securities Commissioner of Texas filed a cease and desist order against the company, accusing it of fraud and selling unregistered securities. North Carolina followed soon after.
BitConnect shut its exchange on January 17th, citing DDoS attacks, regulatory challenges and bad press. Its token plummeted by 90% with the closure of its platform. It promised to continue support for its proprietary currency. However, as the class action suit contends, by shutting its trading and exchange platform, its native currency fell by 90% and the promise of continued support for BCC was ‘hollow; as the only true value the token held was on BITCONNECT’s own platform’.
At the time of writing, BitConnect was proceeding with its planned BitConnect X ICO to launch a new coin, BCCX. Given its checkered past, whether BitConnect will succeed in attracting investor interest remains to be seen.
Featured image from Shutterstock.
Last modified: March 4, 2021 5:03 PM