Bitconnect (also spelled BitConnect and KimConnect; stylized ''bitconnect'', ticker code BCC) was an

open-source Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use the source code, design documents, or content of the product. The open-source model is a decentralized sof ...

cryptocurrency A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It i ...

in 2016–2018 that was connected with a

high-yield investment program A high-yield investment program (HYIP) is a type of Ponzi scheme, an investment scam that promises unsustainably high return on investment by paying previous investors with the money invested by new investors. Mechanics Operators generally se ...

, a type of

Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are comin ...

. After the platform administrators closed the earning platform on January 16, 2018, and refunded the users' investments in BCC following a 92% coin value crash, confidence was lost and the value of the coin plummeted to below $1 from a previous high of nearly $525.

History

Bitconnect was released in 2016 with the goal of allowing users to lend the value of Bitconnect Coin in return for interest payments. The marquee program was the so-called lending platform where users traded

Bitcoin Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...

for Bitconnect Coin and could lock in the instantaneous value of the coin for a set period of time while earning interest calculated daily. The interest payouts were determined by a so-called "trading bot". The trading bot was the most controversial piece of the Bitconnect.co system. The liquidity of the BCC cryptocurrency funded users' ability to exchange their earnings for Bitcoin. On November 7, 2017, the government of the United Kingdom issued Bitconnect a notice with two months to prove its legitimacy. On January 3, 2018,

Texas State Securities Board The Texas State Securities Board is a Texas state agency headquartered in Austin, Texas. The Board enforces the Texas Securities Act (TEX. REV. CIV. STAT. ANN. art. 581-1) and maintains programs for enforcement, registration of securities, regist ...

issued a

cease and desist A cease and desist letter is a document sent to an individual or business to stop alleged illegal activity. The phrase "cease and desist" is a legal doublet, made up of two near-synonyms. The letter may warn that, if the recipient does not dis ...

to the company, calling it a Ponzi scheme, and citing failings in user earnings transparency, and misleading statements. Texas State Security Board and North Carolina Secretary of State Securities Division warned that Bitconnect was not registered to sell securities in their respective states. On January 17, 2018, Bitconnect shut down, and BCC prices crashed by 92% immediately after. Bitconnect announced it would refund its loans. On January 31, 2018, a temporary restraining order froze Bitconnect's assets, expiring on February 13. However, Bitconnect as an entity never actually existed, so it is unclear what assets Bitconnect has (or ever had). An alleged India-region leader (one level below founder) of Bitconnect, Divyesh Darji, was arrested in

Delhi Delhi, officially the National Capital Territory (NCT) of Delhi, is a city and a union territory of India containing New Delhi, the capital of India. Straddling the Yamuna river, primarily its western or right bank, Delhi shares borders w ...

, India, on August 18, 2018. It is suspected that Darji is connected to well-known criminal entities involved in laundering so-called " Black Money" after the Indian government's demonetization of the rupee. In 2019, Darji was arrested and released on bail in connection with a similar scam called Regal Coin.

Criticism and collapse

Bitconnect was suspected of being a

because of its

multilevel marketing Multi-level marketing (MLM), also called network marketing or pyramid selling, is a controversial marketing strategy for the sale of products or services in which the revenue of the MLM company is derived from a non-salaried workforce selling th ...

structure and impossibly high payouts (1% daily compounded interest). Bitconnect interest fluctuated greatly with the volatility of Bitcoin, which its value was tied to. The Bitconnect Coin was among the world's top 20 most successful cryptocurrency tokens until its price collapsed after traders began losing confidence. BCC rose from a post ICO price of $0.17 to an all-time high of US$463 in December 2017; it declined to US$0.40 as of March 11, 2019. Bitconnect released outstanding loans at a rate of US$363.62 to the Bitconnect

Wallet A wallet is a flat case or pouch often used to carry small personal items such as paper currency, credit cards; identification documents such as driver's license, identification card, club card; photographs, transit pass, business cards and oth ...

in form of BCC. However, soon after that news the internal exchange price and liquidity collapsed resulting in a nearly complete loss of value.

Legal issues

On January 16, 2018, Bitconnect announced it would shut down its cryptocurrency exchange and lending operation after regulators from

Texas Texas (, ; Spanish language, Spanish: ''Texas'', ''Tejas'') is a state in the South Central United States, South Central region of the United States. At 268,596 square miles (695,662 km2), and with more than 29.1 million residents in 2 ...

and

North Carolina North Carolina () is a state in the Southeastern region of the United States. The state is the 28th largest and 9th-most populous of the United States. It is bordered by Virginia to the north, the Atlantic Ocean to the east, Georgia and So ...

issued a cease and desist order against it. On January 31, 2018, a U.S. District Court, Western District of Kentucky, granted a temporary restraining order freezing Bitconnect's assets and "to disclose cryptocurrency wallet and trading account addresses, as well as the identities of anyone to whom Bitconnect has sent digital currencies within the last 90 days". In September 2021, the

U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...

sued Bitconnect, alongside its founder Indian Satish Kumbhani, American Glenn Arcaro who served as Bitconnect's lead national promoter in the United States from August 2017 to January 2018, and Future Money LTD, a company Arcaro created to lure into Bitconnect's lending program. The SEC alleged that Bitconnect defrauded U.S. investors a total of $2 billion. Parallel to SEC civil charges, the

United States Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United State ...

had initiated criminal charges against Arcaro. On September 1, 2021, Arcaro pleaded guilty of criminal charges pressed by DOJ which includes conspiracy to commit wire fraud and criminal forfeiture. The DOJ also indicted Kumbhani on various federal charges in February 2022, including money laundering and fraud.

Internet meme

On October 28, 2017, Bitconnect held its first (and only) annual ceremony in

Pattaya Pattaya ( th, พัทยา, , ) is a city in Thailand. It is on the east coast of the Gulf of Thailand, about southeast of Bangkok, within, but not part of, Bang Lamung district in the province of Chonburi province, Chonburi. Pattaya City ( ...

, Thailand. During the event, an investor named Carlos Matos from

New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...

gave an exuberant presentation and testimonial about the website, which included him intensely screaming "Bitconnect" several times; the scene quickly became an

Internet meme An Internet meme, commonly known simply as a meme ( ), is an idea, behavior, style, or image that is spread via the Internet, often through social media platforms. What is considered a meme may vary across different communities on the Internet ...

. Both Matos' meme and the questionable practices of Bitconnect were profiled by

John Oliver John William Oliver (born 23 April 1977) is a British-American comedian, writer, producer, political commentator, actor, and television host. Oliver started his career as a stand-up comedian in the United Kingdom. He came to wider attention ...

and

Keegan-Michael Key Keegan-Michael Key (born March 22, 1971) is an American actor, comedian, screenwriter, and producer. He co-created and co-starred alongside Jordan Peele in Comedy Central's sketch series ''Key & Peele'' (2012–2015) and co-starred in USA Netw ...

on the program ''

Last Week Tonight A last is a mechanical form shaped like a human foot. It is used by Shoemaking, shoemakers and cordwainers in the manufacture and repair of shoes. Lasts typically come in pairs and have been made from various materials, including hardwoods, cas ...

''.

References

External links