BitConnect Ponzi scheme collapses, $2.4 billion wiped in 10 days

In what is believed to easily be the largest MLM cryptocurrency Ponzi collapse, earlier today BitConnect announced they were terminating ROI payments.

In a news post dated January 16th, BitConnet advised affiliates it was “halting” it’s lending and exchange platform.

For those unfamiliar with the company, BitConnect was the first MLM ICO lending Ponzi scheme.

BitConnect affiliates acquired BCC points from anonymous admins (or other affiliates), and then parked the points with the company on the promise of a daily ROI.

The “exchange platform” was an internal exchange BitConnect affiliates were able to cash out through, typically by selling their points to other BitConnect affiliates.

Rather than acknowledge they’d run out of money to pay affiliate ROIs with, BitConnect instead blamed “bad press”, the US government and DDOS attacks for its collapse.

The continuous bad press has made community members uneasy and created a lack of confidence in the platform.

We have received two Cease and Desist letters, one from the Texas State Securities Board, and one from the North Carolina Secretary of State Securities Division.

These actions have become a hindrance for the legal continuation of the platform.

Outside forces have performed DDos attacks on platform several times and have made it clear that these will continue.

These interruptions in service have made the platform unstable and have created more panic inside the community.

The reality is that had BitConnect of actually been deriving profits from a trading bot, as the anonymous owners claimed, points one and two would be a non-issue.

With respect to DDOS attacks, surely a company generating points with a market cap of $2.66 billion ten days could afford enterprise-level DDOS protection?

In the wake of BitConnect’s collapse, public trading of BCC points has plummeted to $30 to $40.

BCC points were always worthless but given they can’t be parked for a Ponzi ROI, the trading value between BitConnect investors is now expected to approach $0.

Ten days ago BCC was trading at $431 dollars. Today an adjusted market cap of just $224 million equates to $2.4 billion dollars wiped.

What this translates into as far as investor losses goes is unknown. Only BitConnect’s anonymous admins truly know how much money they received in exchange for BCC points.

If I had to guess, I’d estimate BitConnect investor losses to run between $500 million and $1.5 billion. $2 billion at a stretch but I’d be surprised.

Sadly going by public discussion of the collapse by BitConnect affiliates, a number of them appear to have been caught off-guard.

For those not just blindly investing however, there were plenty of warning signs leading up to BitConnect’s collapse.

BitConnect’s website went down four days ago. The company claimed this was due to DDOS attacks, however it is far more likely BitConnect’s anonymous admins instead used this time to secure and transfer out what was left of invested funds.

Personally I felt the writing was on the wall after the Texas cease and desist hit.

BitConnect obviously had no trading bot to provide evidence of and far too much investment originating out of the US to ignore.

If they pulled a USI-Tech and cut off the US, there’d be riots and regulators would follow.

So instead it appears BitConnect’s admins took a few days to best cover their tracks, with affiliate funds held hostage under DDOS attack smoke and mirrors.

Ultimately there was no way to put off the inevitable, that BitConnect was paying out more than it was bringing in. Such is the fate of all Ponzi schemes.

No word yet on whether US regulators will pursue the matter. The SEC is believed to be investigating BitConnect and will no doubt receive a flood of complaints from victims.

Whether that escalates the hunt for BitConnect’s admins remains to be seen.

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