SEC Sues Five People Over BitConnect Lending Program

A Securities and Exchange Commission (SEC) civil lawsuit has been filed against five individuals allegedly involved in promoting BitConnect’s “lending program”. BitConnect shut down it’s main lending platform operations in 2018 after regulatory warnings and allegations of fraud.

In a press release issue today on the SEC website, the body alleges that the individuals contributed to promoting and raising over $2B from retail investors in an unregistered digital asset securities offering. The issued complaint alleges that a network of promoters, four of the five defendants, offered and sold securities as part of the platform’s lending program without being registered broker-dealers, and without registering the securities with the SEC. This includes a flurry of “testimonial” style videos, the press release states, uploaded to YouTube to justify the merits behind the program. Promoters received commissions based around their success of soliciting funds, the complaint states.

The fifth individual listed in the complaint is accused of “aiding and abetting” the unregistered offering and sales, as a liaison between BitConnect and the promoters, and as a company representative at events and conferences.

In the press release statement, New York SEC Associate Regional Director Lara Shalov Mehraban stated “we allege that these defendants unlawfully sold unregistered digital asset securities by actively promoting the BitConnect lending program to retail investors. We will seek to hold accountable those who illegally profit by capitalizing on the public’s interest in digital assets.”

The BitConnect History

The platform initially launched in 2016, paralleled with the BitConnect (BCC); the company leveraged a so-called “trading bot” and offered high-yield returns to users with daily calculated interest. Within the following year, UK government bodies were demanding BitConnect to verify it’s legitimacy, and by 2018, the operations started to shut down following increased government pressure in the U.S.

The BitConnect , at it’s peak trading at nearly $500, immediately dropped over 90% following the shutdown. State securities divisions had started to apply pressure right before the shutdown, including alleging that BitConnect was a Ponzi scheme, and that BitConnect was not registered to sell securities in their respective states. Within weeks, BitConnect’s assets were frozen following a temporary restraining order.

It was undoubtedly a dramatic rise and fall for BitConnect. Take a blast from the past with our NewsBTC write-up following the platform’s shutdown.

SEC Scrutiny

With continued emergence in broader crypto and blockchain technologies, platforms, and projects, the SEC has been active in recent years. Most notably, Ripple’s XRP has been at the forefront of SEC investigation, and is speculated to potentially developing a “Ripple Test”, as the Howey Test could be put to the max as part of the SEC’s review. Generally speaking, many see Ripple Labs as being plenty capable to overcome the SEC’s scrutiny, and Ripple CEO Brad Garlinghouse recently stated that Ripple Labs could very likely go public following the SEC’s resolution. The SEC is alleging that Ripple engaged in lobbying efforts to alter the public’s perception of XRP.

Featured image from Pixabay, Charts from TradingView.com