Bitconnect (stylized ''bitconnect'' and also spelled 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 and view the source code, design documents, or content of the product. The open source model is a decentrali ...

cryptocurrency A cryptocurrency (colloquially crypto) is a digital currency designed to work through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. Individual coin ownership record ...

in 2016–2018 that was connected with a high-yield investment program, a type of

Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays Profit (accounting), profits to earlier investors with Funding, funds from more recent investors. Named after Italians, Italian confidence artist Charles Ponzi, this type of s ...

. 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 to allow 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; Currency symbol, sign: ₿) is the first Decentralized application, decentralized cryptocurrency. Based on a free-market ideology, bitcoin was invented in 2008 when an unknown entity published a white paper under ...

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 issued a

cease and desist A cease and desist letter is a document sent by one party, often a business, to warn another party that they believe the other party is committing an unlawful act, such as copyright infringement, and that they will take legal action if the oth ...

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 the 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, but spread chiefly to the west, or beyond its Bank (geography ...

, India, on August 18, 2018. It is suspected that Darji is connected to well-known criminal entities involved in laundering so-called "

Black Money A black market is a clandestine market or series of transactions that has some aspect of illegality, or is not compliant with an institutional set of rules. If the rule defines the set of goods and services whose production and distributi ...

" 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 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 US$363.62 to the Bitconnect

Wallet A wallet is a flat case or pouch, often used to carry small personal items such as physical currency, debit cards, and credit cards; identification documents such as driving licence, identification card, club card; photographs, transit pass, b ...

in the 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 ( , ; or ) is the most populous U.S. state, state in the South Central United States, South Central region of the United States. It borders Louisiana to the east, Arkansas to the northeast, Oklahoma to the north, New Mexico to the we ...

and

North Carolina North Carolina ( ) is a U.S. state, state in the Southeastern United States, Southeastern region of the United States. It is bordered by Virginia to the north, the Atlantic Ocean to the east, South Carolina to the south, Georgia (U.S. stat ...

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 United States 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. Its primary purpose is to enforce laws against market m ...

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 $2.4 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 United States federal executive departments, federal executive department of the U.S. government that oversees the domestic enforcement of Law of the Unite ...

(DOJ) had initiated criminal charges against Arcaro. On September 1, 2021, Arcaro pleaded guilty of criminal charges pressed by the 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. On January 12, 2023, a federal district court in San Diego ordered that Arcaro pay $17 million in restitution to be distributed to approximately 800 victims. He also agreed to forfeit more than $24 million, which could also be used in the future to repay victims.

Internet meme

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

Pattaya Pattaya is a city in Eastern Thailand, the second-largest city in Chonburi province and the List of municipalities in Thailand, eighth-largest city in Thailand. It is on the east coast of the Gulf of Thailand, about southeast of Bangkok, and h ...

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

New York City New York, often called New York City (NYC), is the most populous city in the United States, located at the southern tip of New York State on one of the world's largest natural harbors. The city comprises five boroughs, each coextensive w ...

gave an exuberant presentation and testimonial about the website, which included him intensely screaming "''Bitconnect!''" several times in a variety of registers; this quickly became an

Internet meme An Internet meme, or meme (, Help:Pronunciation respelling key, ''MEEM''), is a cultural item (such as an idea, behavior, or style) that spreads across the Internet, primarily through Social media, social media platforms. Internet memes manif ...

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

John Oliver John William Oliver (born 23 April 1977) is a British and American comedian who hosts ''Last Week Tonight with John Oliver'' on HBO. He started his career as a stand-up comedian in the United Kingdom and came to wider attention for his work ...

and

Keegan-Michael Key Keegan-Michael Key (born March 22, 1971) is an American comedian, actor, producer, and writer. He and Jordan Peele co-created and co-starred in the sketch series '' Key & Peele'' (2012–2015) for which he received one Primetime Emmy Award from ...

on the program ''

Last Week Tonight A last is a mechanical form shaped like a human foot. It is used by shoemakers and cordwainers in the manufacture and repair of shoes. Lasts come in many styles and sizes, depending on the exact job they are designed for. Common variations ...

''.

References

External links