So, what is BitConnect?
BitConnect is a bitcoin-lending platform using BitConnect Coin (BCC), a cryptocurrency launched in February 2016. Users are able to lend Bitcoin and earn interest via this platform, self-regulated and peer-to-peer. Transactions made on the BitConnect platform are faster in comparison with the BitCoin platform. This is through using Scrypt as an encryption algorithm instead of the SHA-256 used by the BitCoin platform, as it is easier for miners to decode.
BCC Ownership Structure
There seem to be a total of three companies registered in the U.K that have the name “Bitconnect” in their company name that are linked to the actual BitConnect. One of them is Bitconnect Ltd, registered in the UK with 75 percent or more of shares being held by a British man named Ken Fitzsimmons. There is not much more we know about this man and he might not even exist.
Instead, BitConnect may be the brainchild of individuals named Yurish Prasetya and Satishkumar Kumbhani but there is no certainty for now. The second related company is registered as Bitconnect International Plc with 13 filed officers who allegedly are active with the aggressive promotion of BitConnect including the likes of Glenn Arcaro. Another director is a motivational consultant but is not reachable on the phone number listed on his website. Lastly, there is also Bitconnect Trading, the third related company that runs Bitcoin mining. These confusing company set-ups will come into play later.
The Gleaming Pyramid Structure
These officers are Country Directors based in London but from all over the world including Vietnam and India, recruiting affiliate promoters and marketers for BitConnect in their assigned country, and rewarding them via a pyramid scheme.
BitConnect’s website have dedicated global sites (all defunct now) for visitors and members from different countries including Vietnam, South Korea, India, Indonesia, Japan, Thailand, Cambodia, and the Philippines. Generally illegal, members of the pyramid scheme are rewarded through recruitment of new members and not through sales of product and/or services.
Guaranteed 1% return per day!!!
To join BitConnect, there is a four-tier investment system with the more you invest, the faster and bigger the profits you will reap. Guaranteed at least one-percent return of investment (ROI) daily, investors can earn up to 40 percent ROI monthly. Not just that, the interest is compounded daily which would mean an investment of $100 today can grow up to $5 million in only three years’ time. If it sounds too good to be true, it probably is.
The promoters of BitConnect are surely a class of its own with their blatant promotional efforts. Throughout various social media platforms and channels, promoters bragged about the impressive “profits” they have made through BitConnect. In October last year at Pattaya, Thailand, one of their promoters Carlos Matos gave a performance in their company event that even turned into an Internet meme. Not just that, they also have their own music video!
Despite warnings from around the market place, BitConnect managed to achieve notable success and reached a market capitalization of as much as USD $2 billion by November 2017. This positions BitConnect as one of the top cryptocurrencies by market share and inevitably attracted the attention of regulators as well. By end 2017, BitConnect was given the strike-off notice by the British Registrar of Companies. The news filtered down quickly to mainstream media, alarming thousands of investors.
In spite of that, BitConnect held on to their “legitimacy” with promoters concocting various reasons for such bad press. For example, they claimed the strike-off notice was only intended for a division of their company, Bitconnect Ltd and does not affect the main company, Bitconnect International Plc. Putting together the bits and pieces of the BitConnect jigsaw makes it glaringly clear that they have misrepresented themselves in many ways. There is no clear information on who exactly are the founding members or where is the location of their operation. And despite all these misgivings, investors still leaped in.
Very shortly after, BitConnect received cease and desist letters from the Texas Securities Board and followed by the North Carolina Securities Division. This time around the news affected some of the BitConnect promoters who reacted either by disassociating from BitConnect or just moving on to tout other cryptocurrencies. The company however continued to deny any wrongdoings and came out with a renewed strategy of creating lots of content on their website likely to lift their search engine optimisation (SEO) profile. This resulted in the Google search for BitConnect leading to supportive contents produced by the company itself alongside other legitimate sources.
Millions lost and no trace of the perpetrators
Eventually BitConnect announced that they are shutting down the lending and exchange platform, blaming the bad press as well as legal issues and constant DDos attacks. This eventuated in BCC’s collapse by 96 percent followed by the devastation of investors involved – we are looking a high of 2.77 billion to a low of 12 million. Investors are given a useless coin, BCC in exchange for Bitcoin (BTC). Pretty much the case of a Ponzi scheme here with perpetrators not being accountable for their actions. Many take it online such as on Reddit expressing panic and even suicidal thoughts – one of them with username Litecoin lost his entire life savings, which includes a $500k business loan. Others got into BitConnect through recommendations by their friends and lost their entire family’s savings in the process.
The lesson learnt here is that it can easily happen to anyone. As with all new and emerging technology, cryptoenthusiast better beware – Do not invest in what you cannot understand and heed the warning signs!