The saga of the Ponzi operation run by BitConnect has taken an unexpected twist as the US Federal Bureau of Investigation (FBI) is now appealing for assistance from BitConnect backers. A statement published on their site reveals that the federal law enforcement is requesting those who acquired the BitConnect Coin (BCC) to aid the investigation by completing a voluntary survey hosted on their website.
The FBI highlights that while participation in the survey is not mandatory, the details provided would be 'beneficial' in building the case. Moreover, feedback from participants might lead to further inquiry by the agency, as stated on their website.
Unregistered Securities
BitConnect operated a cryptocurrency lending service which was forced to shut down in January 2018, after facing multiple cease and desist orders from state securities regulators in North Carolina and Texas, arguing that the enterprise was distributing unregistered securities within these jurisdictions.
These directives had a catastrophic impact on the token, resulting in a massive drop in its market value. In the month of January alone, the coin plummeted by approximately 90%, nosediving from $400 to $20.
Owing to the abrupt depreciation of BCC and the abrupt closure of the company's platform, the investors initiated a collective lawsuit against the firm in a move to recuperate their loss. The legal action was filed in the Southern District Court of Florida, asserting that BitConnect introduced unregistered securities and solicited more investments from individuals in what was described as a 'comprehensive Ponzi fraud.'
Court documents indicate that the complainants claim BitConnect designed a loan scheme requiring participants to contribute cryptocurrencies in return for BCC tokens, promising either a 40% return or a 3,000% annual compounded rate.
According to the plaintiffs, instead of allocating funds for trading purposes, BitConnect allegedly ran a complicated Ponzi operation, remunerating early investors with money obtained from new ones.
Regulatory Bodies Home in on Ponzi Scheme's Facilitators
One BitConnect promoter based in Australia, John Bigatton, had his account frozen and had his travel restricted by an order from the Australian Federal Court this January.
The travel embargo and asset freeze were enforced by Australia's financial authority ASIC, which began compiling evidence against Bigatton last December. Respective US states, Illinois and Arizona, also executed measures to curb promoter activities in India. The regulators urged India's Criminal Investigation Department (CID) to impound the assets of BitConnect's advocates, accused of amassing $5 billion from investors.
So far, authorities in India have arrested detained the head of BitConnect in India, Divyesh Darji. Darji, from Surat city, was already listed in an alert, ultimately being arrested at Delhi airport on August 18, 2018, after immigration flagged him to the CID of Gujarat police.
Currently, the BitConnect litigation progresses as a consolidated case in the United States. Back in October 2018, the US District Court for the Southern District of Florida sanctioned an Amended Consolidated Class Action Complaint involving more promoters and proprietors of BitConnect previously not listed.
This enhanced class action incorporated new defendants, including YouTube, which faced litigation for allowing the dissemination of over 70,000 of promotional content.
The consolidated class lawsuit demanded a jury trial, reimbursement of all the investments made by the plaintiffs, as well as additional financial compensations.
