BitConnect, Cryptocurrency Ponzi Scheme, Shuts Down BCC Exchange

By | 2018-03-27T17:02:29+00:00 January 17th, 2018|Categories: BitConnect, Cryptocurrency, ICO, Multi-Level Marketing|

Earlier today, the anonymous leaders of Bitconnect announced that they would be shutting down their lending and exchange platform that was based on the cryptocurrency BCC (or BitConnect Coin). BitConnect has promised to pay out remaining wallet balances in, you guessed it, BCC which as of writing has lost 90% of its value. Given that the exchange has closed and BitConnect has drawn the attention of regulatory agencies in Texas and North Carolina, you can assume that the majority of the money you’ve invested in the platform or currency is gone for good.

bitconnect collapse closes

From their website (emphasis added by them):

This is to inform all community members that we are closing the Bitconnect lending and exchange platform. We are closing the lending operation immediately with the release of all outstanding loans. With release of your entire active loan in the lending wallet we are transferring all your lending wallet balance to your BitConnect wallet balance at 363.62 USD. This rate has been calculated based on last 15 days averages of the closing price registered on coinmarketcap.com. You are free to withdraw your BitConnect coin currently in QT wallets that was used for staking as well. We are also closing BCC exchange platform in 5 days.  In short, we are closing lending service and exchange service while BitConnect.co website will operate for wallet service, news and educational purposes.

Like many failed MLMs, BitConnect is blaming outside factors like bad publicity and technical issues like DDoS attacks on why they are deciding to shut down now. But, if you’ve been watching the MLM industry over the past few decades, you would know that the much more likely reason is that the comany over-promised its returns and struggled to recruit enough new members to fill the gap.

New Cryptocurrency MLM Tactics

BitConnect employed a new tactic by creating an exchange where users could lend the company their cryptocurrencies (like Bitcoin) in return for BCC tokens. Depending on the length of the loan, users were promised large returns with the idea that cryptocurrencies valuations would continue to rise. One such promise was that a $10,000 loan for 180 days would yield 40% returns each month. As long as cryptocurrency prices continued to rise, these returns were at least partially sustainable. However, when there are prolonged drops like the entire crypto industry has seen since December, these returns quickly become unsustainable.

In addition to to this lending program,  it looks like BitConnect was relying on a Ponzi scheme where it enticed users to sign up their friends and family so that earlier users could get their promised payouts. It looks like in the past few days BitConnect struggled to pay back these returns and so decided to shut down and take the loaned cryptocurrencies (and U.S. dollars) with them while their customers were left holding quickly depreciating BitConnect Coins. Though a class-action lawsuit is likely, usually there isn’t a whole lot of money left for users once the lawyers get paid.

We’ve seen a startling spike in new MLMs trying to capitalize on the cryptocurrency craze, and this seems to be one of the first high-profile ones to shutdown amid volatility in the market and an inability to continue attracting new “investors”.

Will Anyone Be Punished?

BitConnect is just one of many cryptocurrencies that will eventually collapse in the coming weeks, months, and years, but its difficult to predict exactly who or how the people connected with the fraudulent currency will be punished. Will the FTC and other regulatory agencies treat the collapse of these exchanges as a collapsed ponzi scheme akin to Bernie Madoff? Will they treat them like an MLM where most of the time the leaders get away with small fines and investors get back pennies on the dollar? Will they charge leaders with securities fraud? Since the BitConnect leaders have chosen to remain anonymous, it will be interesting to see how this all unfolds.

As far as promoters of BitConnect, we’ve already seen some quick pivots by shills like CryptoNick and Trevon James. Noted cryptocurrency YouTuber CryptoNick began wiping his account today of all videos in which he promotes the failed ponzi scheme. It’s been pretty clear for weeks that users were on to the scheme and drew stark contrasts between BitConnect and other non-MLM based currencies like Bitcoin and Ether. It’s unclear how much CryptoNick actually had invested in BCC (he claims he lost over $100,000 due to the shutdown) or if he was purely peddling the failed scheme for the affiliate fees. Either way, he seems to have moved on quickly.

cryptonick youtube cryptocurrency star

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