Shuttered Cryptocurrency Exchange Bitconnect Hit with Securities Class Action Following Ponzi Scheme Revelations

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A proposed class action lawsuit filed in Florida hopes to take Bitconnect and a number of individuals involved in its operation to task following this month’s revelations that the now-defunct cryptocurrency lending and exchange platform was reportedly no more than a Ponzi scheme through which “thousands upon thousands” of investors lost more than 90 percent of their holdings. The defendants named in the lawsuit include Bitconnect International PLC, Bitconnect Ltd., Bitconnect Trading Ltd., and at least five named and yet-to-be-identified recruiters. 

Filed by six plaintiffs nationwide who claim they collectively lost $771,000, the 50-page lawsuit says Bitconnect, whose market cap exceeded $2.5 billion, promised investors up to a 40 percent total return per month on their investments via a four-tier system based on their total initial deposit. The more money an investor threw in, the suit says, the greater the return the individual could expect to receive each month over a scheduled period. Perhaps what most attracted investors to Bitconnect was another promise, the suit continues, that investors would reap rewards “regardless of market performance or the fluctuating price of cryptocurrency.” And none of this is to mention the defendants’ assurance that, on top of the monthly returns, backers would receive a one percent return on investment on a daily basis, the complaint says. 

The lawsuit effectively argues that the too-good-to-be-true aurora around Bitconnect’s seemingly untenable growth model was in fact just that:

“On January 17, 2018—as the unsustainable growth of Bitconnect’s scheme grew larger, and the sound of government regulators coming to take a closer look into Bitconnect’s operations grew louder—Bitconnect suddenly shut down its trading platform and lending program, a maneuver that precipitated an almost immediate ninety percent plummet in the value of Bitconnect’s investors’ $2.5+ billion holdings.”

The plaintiffs further call out Bitconnect on yet another promise it supposedly made to investors—that, despite the termination of its trading and lending services, the exchange would still support the cryptocurrency it created.

Per the plaintiffs’ Ponzi scheme charge, the complaint alleges the investment returns for Bitconnect’s investors were not legitimately generated in that the defendants “simply used new Bitconnect investors’ money to pay the promised returns on outstanding Bitconnect investors’ investments.”

The full complaint is below.