Bitconnect Is In The News Today. Why?
Yes, you read that right. The Ponzi scheme Bitconnect is making the news today. This time, there is a good outcome for investors.
Covered:
- DOJ v. Bitconnect
- Textbook Ponzi Scheme
- Ongoing Scars Of Bitconnect
DOJ v. Bitconnect
Bitconneeeeeect!
If you haven’t heard of the Bitconnect scam that went viral in 2017, do yourself a favor and enjoy the memes. We won’t get into the full history of the most famous scam in crypto history, but at one point the now-defunct (and prosecuted) crypto project was ranked top 10 by market cap. It is the most meme’d and viral event in crypto history.
And the lore of Bitconnect lives on.
Today, Bitconnect is in the news again. The Department of Justice (DOJ) announced they are selling the seized funds generated by the Bitconnect Fraud scam, to the tune of $56 million dollars in order to compensate victims. This has been a long time coming for the victims of Bitconnect, as litigation has taken a number of years.
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On Friday, “U.S. District Judge Todd W. Robinson granted a request from the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of California for authority to liquidate approximately $56 million in fraud proceeds seized from the self-described “number one promoter” of BitConnect.”
This liquidation is “the largest recovery of a cryptocurrency fraud” in the history of the United States, according to the DOJ. On Sept 1, Glenn Acaro pleaded guilty to a “massive conspiracy” to defraud Bitconnect investors worldwide. From his efforts, investors dumped over $2 billion into the fraud. “The BitConnect scheme is the largest cryptocurrency fraud scheme ever charged criminally.”
Different from a rug pull where devs pull the liquidity, sell, and the token goes to zero like Squid token, this was a more involved scam, and more akin to a typical Ponzi scheme. Mr. Acaro faces up to 20 years in prison and is scheduled to be sentenced in January, closing the book on the wild ride that was the Bitconnect scam.
How Bitconnect Is A Textbook Ponzi Scheme
Representatives from the DOJ spoke on today’s announcement stating: “BitConnect siphoned investors’ funds off for their own benefit, and their associates’ benefit, by transferring those funds to digital wallet addresses controlled by Kumbhani, Arcaro, other promoters, including the Arcaro Promoters, and other unknown individuals.”
Acaro, the main person in the suit, cashed in over $24 million from his role in the scam. The SEC called it a textbook Ponzi scheme “by paying earlier BitConnect investors with money from later investors.” The rise of Bitconnect was monumental. In 2017, the scam coin (BCC) went from $0.17 to $463 in just a couple of months, and it sent ripples across the crypto world. Many saw how suspicious it was, as the cryptocurrency didn’t even have a whitepaper.
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The idea was you would trade your Bitcoin in exchange for the scam coins tokens through their exchange, which promised to “provide the user daily profits in the form of a dividend.” Bitconnect guaranteed investors a 40% return each month, and investors were promised a one-percent return on their investment every day. Many saw the writing on the wall, including Vitalik Buterin who said of Bitconnect at the time:
“If one percent per day is what they offer, then that’s a Ponzi Scheme.”
In early 2018 it all unraveled in a matter of moments, Bitconnect shut down their exchange after receiving legal notices from the State of Texas and North Carolina. When the exchange shut down, users couldn’t withdraw and the price collapsed 100% in a matter of hours. Many people lost their life savings, and the people behind the scam made away with boatloads of money. However, litigation was to follow and the SEC has brought multiple instances of litigation against them, and today, some people will actually get their money back.
Ongoing Scars, DYOR
The Bitconnect scam made many wary of crypto, and the scams we see now are much less visible and typical. We now see scams in the form of smart contract bugs that can steal funds, or lock up tokens, or liquidity pulls by those controlling the protocol.
Bitconnect was the original crypto lesson. It’s almost singlehandedly responsible for the acronym ‘DYOR’.
Bitconnect will always live on in the memes and minds of the crypto community, both through laughter and pain.
The post Bitconnect Is In The News Today. Why? appeared first on CryptosRus.
Text source: CryptosRus
