Citing negative press and recent legal troubles, anonymously-run cryptocurrency firm BitConnect has announced the shutdown of its lending program and exchange platform. Users with active loans on the platform have been promised a payback of $363.42 for each of the BitConnect tokens (BCC) that were locked into a loan. The payback per BCC token was calculated from the price of an average BCC coin over the last 15 days.
BitConnect coins aren’t completely disappearing (only BitConnect’s internal lending program and exchange platforms are going.) However, BCC tokens have taken a hit in their valuation to the tune of roughly 90%, falling from roughly $360 to around $20.
Perhaps trying to spin the situation in a more positive light, BitConnect said in a statement that the shutdown of the lending platform will ‘allow BitConnect to be listed on outside exchange giving more options for trading.’ BitConnect also says that its BitConnect X ICO will continue, and that plans to build an exchange platform on the BitConnect X website are underway.
Shutdown Comes After Regulatory Hits, ‘Bad Press’
The shutdown comes in the wake of Texas Securities Commissioner Travis J Iles’s decision to serve BitConnect with a cease and desist order on January 4, 2018. Since BitConnect is legally based in the UK, the order did nothing except to stop the company from dealing directly with Texan residents.
Soon after the Texan regulatory hit, BitConnect received another cease and desist order from the North Carolina Secretary of State Securities Division.
BitConnect cited both of these orders as part of the reason behind the decision to shut down, saying that ‘these actions have become a hindrance for the legal continuation of the platform’
In addition to these regulatory hits, BitConnect also cited DDoS attacks from ‘outside sources’ and the fact that ‘continuous bad press’ had contributed to a sense of unease, creating a ‘lack of confidence’ in community members.
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BitConnect has been suspected to be a scam by members of the crypto community for some time–even Vitalik Buterin, who retweeted a statement by Mike Novogratz condemning the platform.
— Vitalik Buterin (@VitalikButerin) December 1, 2017
BitConnect’s platform had all the trappings of a typical ponzi scheme–in addition to an affiliate program, customers who chose to participate in the BitConnect lending program were promised outrageously high returns. Those who could lend their cryptocurrency to the platform’s trading bots for longer periods of time were promised correspondingly higher amounts of profits.
It’s clear that as cryptocurrency enters further into the world of financial technology, governments and financial institutions are increasingly cracking down on crypto-related practices. While some scams are becoming very sophisticated, shady dealings in the world of crypto are also becoming increasingly hard to get away with.