A lot of money can be made with crypto investments. Businessmen know that too. The US authorities are now looking for a particularly bold guy. He had done more than $ 2 billion in damage using a crypto pyramid scheme.
Fourfold growth this year alone – those who invested in currencies such as Bitcoin or Ether in good time could look forward to a rapid increase in value. No wonder that cryptocurrencies arouse a longing for quick wealth in many. A recent case in the USA shows that the complex matter also makes the game easy for fraudsters.
Bitconnect had promised its customers an incredible 40 percent return – per month. And largely without risk. To do this, the investors had to buy their own crypto currency Bitconnect Coin and leave it to them, according to the operators. According to US authorities, special software can be used to take advantage of the high volatility of Bitcoin in a “loan program” by buying when the levels are low and selling when the levels are high. In fact, there was something else behind it.
Classic scheme
Because the money that the investors got paid simply came from the pockets of new investors they had recruited. “A pyramid scheme as it is in the book,” one of the prosecutors told the Reuters agency. The alleged supercoin quickly gained wide recognition due to aggressive advertising on YouTube and other social media, and for a short time belonged to the cryptocurrencies with the highest total value (market cap). The over-enthusiastic appearance of a promoter, during which he repeatedly shouted the name of the coin into the microphone, even became an Internet meme for a short time. In the end, there was the rude awakening: The Bitconnect Coin crashed by 92 percent in January 2018, almost two billion dollars (currently just under 1.7 billion euros) were gone.
No wonder the courts are now dealing with the fraud. Those involved are accused of having built an unregistered bank network and cheating on customers in the process. Prosecution is not that simple: The whereabouts of the presumed company founder, Satish K., are unknown and he is believed to be in his native India. The promoter Glenn A. is accused in pending lawsuits of having collected $ 24 million in agency fees from the fraudulent deal. He pleaded guilty to wire transfer fraud and criminal conspiracy on Wednesday.
Aggressive advertising strategy
A. with his company Future Money was one of the most successful recruiters for the pyramid scheme. They aggressively solicited further investors on social media and at trade fairs. Five of the sellers were charged as early as May. In addition to indicting the perpetrators, the authorities are also trying to compensate the number of fraud victims, which number in the thousands. But they will probably never see the entire investment again. So far, repayments worth nearly $ 14 million have been ordered.
Many observers already noticed during the high phase that something could not be right with Bitconnect. “If someone promises a 1 percent return per day, it’s a pyramid scheme,” said Ethereum developer Vitalik Buterin as early as 2017. Even the authorities around the world were uncomfortable with the alleged business model. Shortly before the crash, the UK government set a deadline: Bitconnect had two months to prove that the deal was not a fraud system. The project did not live to see the deadline.
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