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- The U.S. SEC filed a lawsuit against 5 individuals who promoted and helped BitConnect raise over $2B from investors.
- From January 2017 to January 2018, BitConnect used a network of promoters to market and sell unregistered securities.
- The promoters resorted to “testimonial” style videos published on YouTube to advertise the merits of investing in BitConnect’s lending program.
Announced Friday, the United States Securities and Exchange Commission (SEC) recently filed an action against five individuals who allegedly promoted and helped a fraudulent “digital asset securities offering” raise over $2 billion from retail investors.
The BitConnect Promoters
According to the SEC’s press release, from January 2017 to January 2018, BitConnect used a “network of promoters – to market and sell securities.” Filed with the U.S. District Court for the Southern District of New York, the complaint accused Trevon Brown (a.k.a. Trevon James) of Myrtle Beach, South Carolina, Craig Grant of Kissimmee, Florida, Ryan Maasen of Tulsa, Oklahoma, and Michael Noble (a.k.a. Michael Crypto) of Pacific Palisades, California of being involved in the same, luring investors into the “lending program.”
Apparently, the promoters offered and sold unregistered securities and were neither registered as broker-dealers with the Commission themselves. They advertised BitConnect through YouTube using “testimonial” style videos. In return, top promoters get to win cash, luxury cars and even trips to Bangkok, reported The Wall Street Journal.
Program: Operators & Operations
The Manhattan federal court complaint also named Joshua Jeppesen of East Falmouth, Massachusetts, who “served as a liaison between BitConnect and promoters” and “represented BitConnect at conferences and promotional events.” Moreover, the program was found to have been “founded, managed and controlled” by an Indian citizen whose identity remains undisclosed. Through commissions and other payments, they earned “hundreds of thousands of dollars each,” for instance, Jeppesen’s cut totals to $2.6 million.
BitConnect (BCC) was an open-source cryptocurrency created in 2016, sold in exchange for bitcoin (BTC). It promised high profits, around 40% monthly returns, using an automated “trading bot.” Per the regulator, BCC eventually lost 92% of its value, stripping investors of all or nearly all their funds locked in the lending program. In January 2018, the Texas State Securities Board ordered BitConnect to cease trades to residents there, and shortly after, the coin lost most of its value.
“A Massive Fraud”
In response to the state order, Brown uploaded a video advising Texans to use “encrypted virtual private network” to hide their locations and “keep using BitConnect,” added the SEC lawsuit. Not much later, the state regulators called it a “massive fraud.”
2018 also witnessed an investors’ class-action group sue BitConnect in federal court, but the suit was dismissed. So they’ve now appealed to the U.S. Court of Appeals for the 11th Circuit, shared attorney David Silver while expressing his happiness seeing the SEC lawsuit.
Despite all this, the offenders aren’t charged with fraud but rather for violating the federal securities laws. The SEC now seeks to have the defendants pay back the money they made and the civil monetary penalties.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
