FBI Takes Interest in Bitconnect Cryptocurrency Scheme

Laura BednarFraud

Bitconnect Ponzi Scheme

The recent Bitconnect scheme has left investors broke and searching for a scapegoat. The FBI has taken an interest in the case that lost investors between $2.5 and $3.5 billion. This is not the first issue that has arisen regarding cryptocurrency markets The FBI is turning a corner by legitimizing this case as a serious problem in the money market.

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The Bitconnect Ponzi-Scheme

Bitconnect began their cryptocurrency exchange in January 2017 and required an investor to send in Bitconnect bitcoin in exchange for Bitconnect coin. Once the investor had coin, they were guaranteed a 1% daily investment return and a 10% investment return every month. Their investment structure was based on the principle that the more money you invest, the larger profits you could get back in a faster amount of time. For those that invested $10,000 or more, they were promised capital after 120 days.

Bitconnect had a large gathering of multi-level affiliate marketers to bring in a constant stream of new investors. Multi-level marketing is when a distributor recruits someone to be an investor or distributor. The new recruits will make money from both the products a company sells as well as the income generated by new recruits. Though the majority of the income came from affiliates instead of investors, people were still drawn to the idea of making millions in digital currency.

Their whole process is what is known as a Ponzi-scheme. In this type of investment fraud, investors are paid with the money brought in from new investors. Participants in this situation believe that they are earning returns from their investment. In a pyramid scheme, the participants know that they are only making money by finding new participants.

Exposing the Truth

The investment opportunity that seemed to help investors get rich in an unbelievable amount of time aroused concerns with the authorities. Bitconnect received two ceases and desist letters from the Texas State Securities Board as well as the North Carolina Secretary of State Securities Division. These letters ask that the company stop their proposed illegal activity with no attempt to resuscitate it or else the party that sent the letter will sue. As a result of the cease and desist orders, many supporters removed any marketing materials for the exchange.

Soon after the letters and negative press, Bitconnect made the announcement that they would be shutting down their lending and exchange platform. The company stated that they were closing because of bad press, the cease and desist letters, and DDos (denial of service attack) attacks that according to their previous website, “disrupted the platform… [and] created more panic inside the community.”

They still operate their website and a bitconnect wallet service, but the current value of a Bitconnect coin is less than $1. In their prime, the value was one of the highest in the market at well over $400. They released any outstanding loans that users had and transferred any lending wallet balances to the Bitconnect wallet balance at 363.62 U.S. dollars.

National Security Legitimizes Technology Crimes

In the past, these types of proposed illegal activities were met with a warning and press coverage with little federal intervention. Richard Gardner is the CEO of Modulus, a developer of high performance exchange technology. He stated that even if the FBI doesn’t come out of the investigation with a name of the perpetrator, they will be further prepared for other schemes like this in the future. Due to the fact that cryptocurrencies use blockchain technology, it is difficult to track down the specific investors involved in the scheme. The FBI has issued an announcement on their official website that they are looking for potential victims to provide them with more information. They are asking anyone who invested in Bitconnect to fill out this form .

At SecureForensics, our private investigators have decades of experience investigating fraud. They can go through computers, mobile phones, and other devices to find court-admissible evidence to prove that you were a fraud victim. For more information on your options call 1-800-288-1407.