HomeLegal & RegulationUS SEC charges promoters of BitConnect ponzi scam linked to Surat

US SEC charges promoters of BitConnect ponzi scam linked to Surat

The U.S. Securities and Exchange Commission on May 28 announced filing charges against five individuals based in the USA for their alleged involvement in the investment platform BitConnect, a high-yield investment program that was suspected of running a Ponzi scheme. The platform announced an abrupt shutdown in January 2018. The current charges are filed in the U.S. District Court for the Southern District of New York.

The company was incorporated in the UK and had a branch office in Surat. An initial coin offering (ICO) was launched in December 2016 to issue BitConnect coin. At its peak, the cryptocurrency was valued at above the US$ 400 mark.

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The SEC complaint alleges that four persons (promoters) without being registered as broker-dealers with the SEC offered and sold the securities. The fifth person (by name Jeppesen) served as a liaison between BitConnect and the other four persons.

The press release alleged that the promoters advertised the merits of investing in BitConnect’s lending program to prospective investors, including by creating “testimonial” style videos and publishing them on YouTube, sometimes multiple times a day. The complaint charges the promoters with violating the registration provisions of the federal securities laws, and Jeppesen with aiding and abetting BitConnect’s unregistered offer and sale of securities.

The timing of the ICO coincided with the 2016 demonetization announced by the Indian government with many Indian investors flocking in expectation of good returns. In August 2018, the Gujarat CID arrested Divyesh Darji, the Asia head of BitConnect for duping investors. According to Gujarat CID, Darji and his team offered a high interest rate on investment – up to 1% daily interest. The other Indian accused include Satish Kumbhani, Dhaval Mavani, Mahendra Chaudhari, and Suresh Gorasiya.

Kumar manages the tech backend at Crypto Vakil. He intends to work at the intersection of law and technology.

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