Yesterday, a lawsuit was filed against BitConnect by the Texas Securities Authority. The State of Texas accuses the platform of a failure to register and fraud on the one hand. Another case of problems arising from the confluence of institutionalized jurisdiction and decentralized technology.
The promise of BitConnect sounded tempting at first. If you invest a minimum amount of $ 100, the promised returns of 120%. The consensus of the BitConnect Coin (which happens to be abbreviated as Bitcoin Cash) is based on a combination of proof of work and proof of stake. The catch: With an investment of 100 to 1,000 US dollars, the money remains locked for a period of one year.
In addition, the developers promoted with trading bots, which should then invest the money automated and profit-oriented. Another incentive is the referral program, where you recruit new members - a system that looks discreet after a snowstorm.
BitConnect failed to register
Now to the indictment: Above all, the company has not registered in the state of Texas, which is why all previous activities took place outside the legal framework. Thus, neither investments in BitConnect nor the operators of the platform were legitimized by the state. Recruitment of new members by recruiters should also have been registered with the state.
BitConnect has to face the charge of fraud
In addition to the charge of non-existent registration, the crypto-investment platform is accused of promoting false promises. Above all, it is about the denial of essential information. Among other things, they failed to disclose the identities of their members and the location of their company. Furthermore, the plaintiffs complained that neither the developers of BitConnect Coins nor the holders or number of existing coins were disclosed.
Concealment of risk factors
The 9-page omission letter seems to find no end. A promise of maximum profit with minimal risk would knowingly hide important factors. In addition to the well-known high volatility of cryptocurrencies, the incompletely regulated situation for cryptocurrency trading and for ICOs is an important factor that makes the promised "minimal risk" a falsification of facts. In addition, according to the indictment, the contractors also had to point out possible technical failures or cyber attacks. For these and other reasons, it is ultimately misleading to guarantee a (maximum) profit.
Misleading the public
It can be seen from the above points that relevant factors were concealed. Another charge is misleading investors. The fact that the coins of BitConnect are always in competition with other crypto currencies, their course can not be guaranteed under any circumstances. Another problem that can mislead investors according to the indictment is the fact that the acceptance of the coins can not be guaranteed either.
The final point of the injunction is the classification of the offer as securities. The promise of commissions for referral and related investment should have been registered with the State Securities Board in Texas.
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