SEC sues 5 people for Bitconnect Ponzi scheme, involving $2 billion

The U.S. Securities and Exchange Commission (SEC) has charged five individuals for their alleged involvement in the Bitconnect cryptocurrency platform that collapsed in 2018.

According to the SEC's indictment filed in the U.S. District Court for the Southern District of New York, from January 2017 to January 2018, Bitconnect used a promotional network to issue and sell more than $2 billion in securities without registering with the SEC and failed to register as a broker-dealer as required by federal securities laws.

“We allege that these defendants actively promoted the Bitconnect lending scheme to retail investors and illegally sold unregistered digital asset securities,” said the SEC’s Deputy Regional Director in the New York Office. “We will hold accountable those who exploit the public’s interest in digital assets for unlawful profit.”

In 2018, Bitconnect collapsed after state regulators in Texas and North Carolina filed cease-and-desist letters against its lending and trading platforms.

The SEC charged Trevon Brown (aka Trevon James), Craig Grant, Ryan Maasen, and Michael Noble (aka Michael Crypto) with violating the registration provisions of the federal securities laws. The indictment also charges U.S.-based Joshua Jeppesen with aiding and abetting Bitconnect’s offering and sale of securities.

The SEC said in its press release that promoters touted the benefits of investing in the Bitconnect lending program to potential investors, including using testimonial-style videos and posting them on YouTube. According to the complaint, promoters received commissions based on their success in raising funds.

The complaint seeks injunctive relief, damages plus interest, and civil penalties.

After the complaint was made public, Brown wrote on Twitter: "I am a villain again."

While no criminal charges have been filed, the FBI has been investigating Bitconnect for the past three years. Brown said in March 2018 that he had spoken with FBI agents, and federal investigators issued a notice in 2019 asking investors to contact them.

A representative of the U.S. Justice Department's criminal division in the Southern District of New York said no criminal charges are expected at this time.

Bitconnect promoters have also been arrested in other countries: Indian police arrested promoter Divyesh Darji in 2018, and Australian authorities charged John Bigatton last year.

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