Long accused of being a Ponzi-scheme, Bitconnect shut down its cryptocurrency exchange and lending service this week. As stated on their website, Bitconnect had received cease and desist letters from two American securities regulators – leading to the closure of their lending and exchange platforms. Still, Bitconnect will continue to run its website and wallet service.
Sketchy ‘Ponzi’ offerings
Since its inception in January 2017, many were skeptical about Bitconnect services. In essence, one needed to send Bitconnect Bitcoin in exchange for Bitconnect Coin (BCC) on their exchange.
Once you had BCC, you were guaranteed “up to 120 percent return per year.” Users were told they were earning interest by holding their coin “for helping maintain the security of the network.”
Bitconnect’s lending platform is what really led to accusations of a Ponzi scheme, as well as cease and desist orders from regulators.
As the above illustration explains, users bought BCC with Bitcoin and then lent out their BCC on the Bitconnect lending software.
Users would receive varying percentages of interest depending on the amount of BCC they had lent.
Add in the referral system seen in many other Ponzi schemes and the fact that the operation was run anonymously; it’s hardly surprising that this whole endeavor has ended in tears.
The lending scheme was the main draw card of Bitconnect because of its huge promise of returns. In order to participate in the scheme, you had to buy BCC – which saw the token hit an all-time high of $437.31 per BCC before it plummeted in value following the closure this week.
That being said, the cryptocurrency is still alive and trading at around $35 at the time of writing…