The securities regulator in Texas has issued a cease and desist letter to cryptocurrency investment group Bitconnect, accusing it of fraud and prohibiting it from selling “unlicensed securities” in the state. In November, the company was also threatened with dissolution and its assets ceded to the government in the U.K., where it is registered.
Bitconnect presents itself as “an open source all-in-one bitcoin and crypto community platform, designed to provide multiple investment opportunities”. Bitcoin logos and branding pepper the site, and the company accepts BTC for a number of investment, lending and mining-related offerings. But the main product is Bitconnect coin (BCC), its native token.
According to the Texas State Securities Board cease and desist order, the company recruits “sales agents” to sell mining contracts and encourage participants to offer their own funds for loan at up to 40 percent per month interest.
The Bitconnect Lending Program and Staking Program count as unlicensed securities, the regulator said. Its insinuations the investments are safe and guarantee large returns are misleading, deceptive and even fraudulent, the document added.
Bitconnect’s slickly-produced (and sometimes-mocked) marketing videos, stage presentations and parties target young customers in Southeast Asia with images of fun and luxury lifestyles. However since launching, it has also faced repeated accusations that it is a MLM, a Ponzi scheme, or even an outright scam.
U.K. regulators have agreed, giving Bitconnect two months from November 7th, 2017 to prove it is a legitimate investment platform, or face mandatory dissolution.
It’s unclear what impact the Texas order will have on Bitconnect’s business, given the state is likely not its primary market base. And even if it’s wound up in the U.K., if its assets are largely held in bitcoin in an unknown location, it could easily spring back up elsewhere.
The BCC token does trade on a handful of third-party exchanges, including the popular HitBTC. At press time, one BCC still trading for $415 USD with a market cap of $2.5 billion — still somewhat respectable figures after BCC crashed to around $220 in late December. (Bitconnect’s own exchange makes up 37.57 percent of the total volumes).
In late December, the Texas State Securities Board also issued an emergency cease-and-desist order for another bitcoin-related high-yield investment program, USI-Tech. That order accused USI-Tech of making similarly fraudulent claims, and mentioned promoter Michael Rivera — who also happens to promote Bitconnect.
Additional research by Akshay Makadiya
Is Bitconnect a fraudulent or misleading investment scheme, or still legit? Lets hear your thoughts.
Images via YouTube, Bitconnect