Shady Dealings Revealed in Connection With the Demise of Bitconnect

Since 2018, there has been a question lingering over what happened to the Bitconnect platform that folded in 2018 after operating as an exchange as well as a lending facility for traders. Many of the rumors discussed by members of cryptocurrency trading forums suggested that Bitconnect was a Ponzi scheme, and a recent press release issued by the United States Securities and Exchange Commission seems to confirm those suppositions.

Trevon Brown and Joshua Jeppesen, two American blockchain developers, have been formally charged by the SEC for running BitConnect as a Ponzi scheme. In total, five defendants are being charged in a civil lawsuit that has potential for resulting in a criminal investigation.

The SEC says the other three defendants were involved in transactions between Bitconnect and promoters or broker-dealers between January and April of 2017. The agency alleges that the defendants violated the investment recordkeeping requirements of the investment laws. The company did not pay or disclose the payment of payments made by these individuals.

In each case, the defendants were charged with violations of the federal Investment Advisers Act and Title 11 of the Code of Federal Regulations, which are considered to be the federal securities laws governing investment services in the United States.

It wasn't the first time in recent years that defendants had been caught lying under oath. They were also charged for lying on the federal securities exchanges to hide the fact that they had sold large sums of non-liquid securities.

The SEC was able to prove with the assistance of a former SEC commissioner that Bitconnect's promoters had violated their promise to report suspicious transactions through the investment industry when they failed to do so. They also were able to show that its traders made a series of false statements and that they failed to meet their own investment objective, in violation of federal rules for all investment advisers.

The SEC, meanwhile, has not yet taken any action to sanction Bitconnect but it has indicated that it will issue a notice to investors demanding the payment of taxes due to Bitconnect for all profits related to Bitconnect's investments.