Cryptocurrency

BitConnect shuts down amid controversy

BitConnect shuts down
(C) iStock.com/shank_ali

BitConnect, the UK based cryptocurrency lending and exchange platform, has closed down its operations amid a storm of controversy.

The company’s token, BCC, which according to CoinMarketCap was trading above $400 at the start of the year tanked more than 90% as a result of the announcement.

The company had promised big returns for users, so its closure has raised a few eyebrows. The anonymously-run platform allowed users to loan their cryptocurrency to the company in exchange for interest. The company also looked to bring in new customers by loaning them BCC and offering them more if they could bring in new users.

In a statement on its website, the company said:

“The current BCC price drop is the direct result of us releasing all of our members coins at one time. We will do our best to honor the value of BCC as close to what it has been holding during past several months. At this time, we are closing the lending platform only. The BCC Exchange will work as usual from tomorrow and the wallet service will remain operational to hold your BCC on the website.”

The company also said that it had received two cease-and-desist letters, one from the Texas State Securities Board and the other from the Securities Division of North Carolina’s Security of State. The letters accuse the company of fraud and misleading investors and of purporting to offer an “extremely unusual” annual returns of 3,000%.

Ponzi scheme?

The company has been mired in controversy for some time now, with many people, including Ethereum founder Vitalik Buterin, accusing it of being a Ponzi scheme.

The reason for the suspicion was the company’s business model, which offered around 1% daily returns on investments. In November 2017, the company was officially warned by the UK Registrar of Companies that threatened to dissolve the company.

Twitter detectives also found that a large number of the people listed as stakeholders in BitConnect appear to have been registered with inconsistent addresses, birth dates and additional details.

While all loans from the company were denominated in US$, the platfrom meant users had to make them in BCC. This meant that users looking to make a loan would have to deposit Bitcoin into the platform in exchange for BCC. They could then convert the BCC back into another currency once the loan term had finished.

The company says that it will refund its outstanding loans. But with BCC losing so much of its value, many users are certainly going to suffer heavy losses.

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