Cryptocurrency.org / News / The biggest cryptocurrency scams in history (Part 2) - BitConnect

The biggest cryptocurrency scams in history (Part 2) - BitConnect

2020-07-20 | CryptoCurrency.org

Bitconnect launched their ICO on the 15th November 2016. It was owned and operated by Ken Fitzsimmons in the UK. This was likely someone who just stood in, providing anonymity, for the real people behind the company.

January 16th, 2018 - that was the day when BitConnect collapsed. Their announcement stated that they were shutting down their lending and exchange platform on the 21st January 2018. Following this news, BitConnect’s coin value plummeted from a daily open of $255.91 to $19.28 by the end of the day.  By the end of the year, BitConnect was no longer available to trade on any cryptocurrency exchange. At the height of its value, it had a market capitalization value of approximately $2.6 billion (over $430 per coin) - a few weeks later, it was all worthless.

 

The rise of Bitconnect

 

Bitconnect launched their ICO on the 15th November 2016. It was  owned and operated by Ken Fitzsimmons in the UK. This was likely someone who just stood in, providing anonymity, for the real people behind the company. They closed the crowd sale on the 30th of December. Bitconnect only raised 468 Bitcoins, worth around $410,000 at the time. This might not seem that much, but remember: before the ICO bubble in mid-2017, it was quite typical, even though today, projects like this can raise anywhere between $10M and $50M. 

 

Those who took the time to cut through all the marketing BS could see that BitConnect claimed that they could generate daily returns of between 0.5% and 1% by using their trading bot to take advantage of Bitcoin’s (BTC) volatility. In October 2017, they reported an average daily return of 0.89% over the previous 6 months - though it is worth mentioning that this claim was not supported by any evidence whatsoever. Interest was accrued daily and deposited into your BitConnect account every 24 hours. These returns are immediately accessible and can be re-invested or withdrawn (0.005 BTC minimum withdrawal).

And, let us not forget this advertisement video: 

 

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YouTube video link

 

While we’re at it, this is something worth taking a look at as well:

 

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                 YouTube video link

 

Promises, promises

 

On December 2, 2016, Bitconnect released their official timeline with a brief outline for four different project phases from 2016 to 2017. 

Phase 1 – It was announced that ICO marketing efforts were already underway and would run till the end of December 2016. This marketing campaign was accompanied by the giveaway of 4.8 million BCC coins to both the community and cryptocurrency investors.

Phase 2 – scheduled for Q1 of 2017, it involved the launch of the BCC wallet and desktop client to allow for the staking and mining of BCC coins.

Phase 3 – In Q2 2017 Bitconnect planned to push mining live and launch the staking pool. Bitconnect claimed that staking was an incredible opportunity for investors and holders would get a 120% return per year. Furthermore, the project also intended to push additional exchange listings during this quarter too.

Phase 4 – Q3 of 2017 would see the introduction of the ‘Smart Card’ and a drive towards merchant adoption of BCC coin. Essentially, the promise was that BCC coins would be spendable with many different retailers.

Scam Warning Signs

 

The savvier business people at the time listed the following red flags as warning signs to anyone that was considering buying into BitConnect:

  • anything you invested was tied up for between 120 and 299 days.
  • it promised guaranteed returns on investment (nearly 1% daily).
  • the website and advertising were ambiguous, with incorrect spellings and bad grammar too.
  • BitConnect promoters were linked with MMM (a Ponzi scheme) in many Reddit post.
  • their platform’s growth was driven by a lucrative affiliate program.

An affiliate program, in and of itself is not a bad thing. Whenever someone used a referral link which you provided them, you earned 7% of whatever they invested into BitConnect — and, if those people referred someone who then lends on the platform, you earned commission through them.

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The real workings of BitConnect and the tumbling of their prices

 

The way BitConnect worked was like a ponzi scheme: 

 

  • it attracted initial investors with a promise of high daily returns
  • subsidised the withdrawals of capital/returns (i.e. realised gains) of initial investors through themselves (i.e. initial working capital), or existing investors who have not withdrawn capital or returns (i.e. re-invested).
  • encouraged the adoption of the platform by new users via proof that the platform ‘works’ through users who have withdrawn capital/returns, and a percentage-based referral system, which encourages word of mouth.

 

Because the value of BitConnect is tied to the success of their lending platform, it was rendered completely worthless. Anyone who had BitConnect wanted to immediately exchange it for Bitcoin. There was no one looking to buy Bitconnect, since anybody new by that time that it was worthless

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Immediately after the ominous announcement of BitConnect shutting themselves now, their subreddit (which has since been locked down) was flushed with panicked posts. “This can't be it. I lost everything. EVERYTHING,” one thread read. Another one – titled “800-273-8255 is the Suicide Hotline. Money Isn’t everything. Your life still matters after all of this'' – these titles speak for themselves as far as showing how deep the impact of BitConnect’s fraudulent operation was.

 

Did you like our article about The biggest cryptocurrency scams in history - BitConnect? Continue reading the story about "The biggest cryptocurrency scams in history - PlusToken" here. 

 

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