WASHINGTON – Regulators have sued a group of cryptocurrency promoters who helped raise more than $ 2 billion from investors with the promise of 40% monthly returns, in one of the biggest cases ever to digital assets.
On Friday, the Securities and Exchange Commission sued five people in federal court in Manhattan for their promotion of BitConnect. The SEC said the men broke laws that required them to register as brokers and violated other investor protection rules. He did not charge them with fraud.
The SEC lawsuit seeks to have the defendants return the money they earned and to pay civil monetary penalties.
BitConnect was a digital asset created in 2016 and sold in exchange for Bitcoin, the world’s most valuable cryptocurrency. BitConnect told investors it will profitably trade their bitcoin using an automated “trading bot” and require the currency to be locked in for terms ranging from four to 10 months, according to the SEC lawsuit. BitConnect eventually lost 92% of its value and investors lost all or almost all of their funds in the loan program, according to the SEC lawsuit. Thousands have invested in BitConnect.
The SEC sued BitConnect promoters Trevon Brown of Myrtle Beach, SC, Craig Grant of Kissimmee, Fla., Ryan Maasen of Tulsa, Okla., And Michael Noble of Pacific Palisades, Calif. Regulators also sued Joshua Jeppesen of East Falmouth, Mass., Who was allegedly a liaison between BitConnect and the promoters. Mr. Jeppesen has also represented BitConnect at conferences and other events.
The SEC lawsuit said the founder of BitConnect is an Indian citizen who “founded, managed and controlled BitConnect at all times.” The complaint to the court does not name the person.
The US developers were part of a network that touted BitConnect’s lending program through videos on YouTube. They earned hundreds of thousands of dollars each in commissions and other payments, the SEC said. Mr. Jeppesen earned $ 2.6 million, the SEC alleged. An attorney for Mr. Jeppesen declined to comment.
Mr Brown did not immediately return a message left by a parent seeking comment. MM. Grant, Maasen and Noble could not be reached for comment.
The best promoters were eligible to win trips to Bangkok as well as cash and luxury cars, the SEC said.
Some individual investors poured all they had into BitConnect, at a time when general interest in cryptocurrencies was at its height, the Wall Street Journal reported in December 2018. Texas state regulators called it “massive fraud”.
The Texas State Securities Board ordered BitConnect in January 2018 to cease sales to residents of that state. In response, Mr. Brown created a video that advised Texans to use an encrypted virtual private network to hide their location and “continue to use BitConnect,” the SEC alleged in its lawsuit. BitConnect lost most of its value shortly after the order was issued in Texas.
A group of class-action investors sued BitConnect in federal court in 2018. The lawsuit was dismissed, but the plaintiffs appealed to the U.S. 11th Circuit Court of Appeals, lawyer David Silver said.
“It’s a long time coming but… I’m happy to see the SEC using its force to enforce the law,” Silver said Friday.
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