Recently, a class action lawsuit was brought against BitConnect, after a group of investors sued the cryptocurrency exchange platform alleging they are nothing but a “wide-reaching Ponzi scheme.” The BitConnect Lawsuit is seeking potentially hundreds of millions of dollars in damages.
Per Fortune, it was reported that BitConnect invited people to exchange their Bitcoins for its own digital currency. Those coins would subsequently be lent out, and investors would collect the interest. But according to a class action complaint filed Wednesday in federal court in West Palm Beach, Florida, “things at BitConnect weren’t what they seemed to be.” The site’s promoters “illogically promised” monthly returns of 40 percent, and 1 percent compounding interest daily, regardless of market performance, the plaintiffs said.
The investors’ world exploded this month after authorities in North Carolina and Texas issued cease-and-desist letters warning BitConnect that it wasn’t authorized to sell securities in those states. BitConnect shut its lending business down, blaming the regulators and “continuous bad press,” sending the value of its coins into a tailspin. On Jan. 6, its market cap was $2.6 billion; it’s down to $128 million now, according to CoinMarketCap.
In the complaint, investors compared the business to “Wonderland,” a short-lived Broadway show based on Lewis Carroll’s Alice stories. They say they brought the case “to prevent the wrongdoers from simply turning off the lights and dancing away singing: ‘Ciao, baby, gotta run!’”
The plaintiffs say they lost a total of $771,000 to BitConnect and are asking to sue on behalf of investors nationwide. They accused the company and its directors and promoters of violations of state and federal securities laws and deceptive trade practices, among other claims.
The lawsuit was filed by David Silver, a Florida lawyer who focuses on cryptocurrency-related litigation. No lawyer for BitConnect or the other defendants is listed in the case docket.
BitConnect’s backers have been hard to locate. The company site doesn’t list contact details or provide information about its team. Nor did the firm issue a white paper describing its business model, standard practice for most coin startups. But people poured money in it anyway.
There has been no response to messages submitted through the platform’s website seeking comment on the lawsuit. Company records in the U.K. don’t include a phone number.
BitConnect Isn’t Alone
BitConnect isn’t the first crypto firm to be tripped up by the authorities. Last year, Munchee Inc. refunded investors in its ICO after Securities and Exchange Commission said the company’s token sale constituted an unregistered securities offering. Its website has been taken down. The SEC went after PlexCorps for promising investors in PlexCoin a 1,354 percent profit in less than a month. The agency called it a “fast moving” ICO fraud. “PlexCoin is not a fraud,” the company said on Facebook last month.
Some ICOs plunged in value after founders and early investors cashed out. Other firms have been accused of copying other companies’ white papers and websites to bilk investors.
Despite the turmoil, BitConnect is still in business. Its offshoot BitConnectX is holding an initial coin offering restricted to buyers outside the U.S.
If BitConnect’s actions have affected you, please don’t hesitate to reach out to us. We’d be happy to help you take a step in the right direction to fight this issue, and even help you join the class action. Please send an email to ConsiderTheConsumer@gmail.com, find us on Twitter or Facebook, or even connect with us directly on our website! We look forward to hearing from you all.