BitConnect securities fraud cease and desist issued in North Carolina

With just hours to go before the launch of BitConnectX, the next incarnation of the BitConnect Ponzi scheme, North Carolina has issued an emergency cease and desist against the company.

Filed by the North Carolina Securities Division on January 9th, the cease and desist requires BitConnect immediately ‘cease and desist
offering unregistered securities to the residents of North Carolina.

Following an internal investigation into BitConnect by the Securities Division the regulator concluded that, if left unchecked, BitConnect would result in “irreparable harm to the public”.

The cease and desist names BitConnect Trading LTD, BitConnect LTD and BitConnect Trading LTC as respondents. All three entities are shell companies incorporated in the UK.

The North Carolina Securities Division identifies BitConnect as an investment opportunity that promises a monthly ROI of up to 40%.

The regulator’s investigation reveals that BitConnect “willfully fails to disclose”

  • the identity of the Principals of Bitconnect and the true location of BitConnect’s operations and management
  • information about the assets and liabilities of BitConnect and any other information that indicates the means by which BitConnect will provide investors with a guaranteed daily return, regardless of the value of Bitcoin
  • Information about the proprietary, secret trading system that it calls its “volatility software,” details of its trading records and historical performance, proof of its existence, and the risk factors associated with its use
  • that the BitConnect investments are securities and are not registered with the Administrator or any other governing regulator
  • that only registered dealers or agents can be paid commissions for referrals or sales of securities
  • that affiliates who receive such commissions for their sale of BitConnect investments without being properly registered are in violation of the Securities Act

Of note is the emergency order is a temporary cease and desist, likely meaning further litigation against BitConnect is yet to come.

BitConnect has thirty days to respond to the order, failing which the cease and desist order will become final.

North Carolina’s cease and desist comes hot on the heels of a similar order issued by Texas last Thursday.

BitConnect responded to the Texas order by prohibiting Texas residents from investing in its platform. US residents as a whole were also banned from investing in the BitConnectX ICO launch.

With two states having issued separate cease and desists against BitConnect, it’s likely there are more to follow. And of course an eventual federal lawsuit from the SEC itself.

A copy of the North Carolina emergency cease and desist can be accessed from the Securities Division website (scroll down to the January 9th administrative action , link is at the end of the paragraph).

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