BitConnect was abruptly taken offline on Tuesday following multiple cease and desist orders in two U.S. states. North Carolina and Texas authorities have long suspected that the controversial crypto exchange has been designed as a Ponzi scheme from the very beginning.
According to Bloomberg, two top regulators in the said states warned BitConnect that it lacks a license to trade securities across the states. Regulators also noted that the exchange had been touted the operations as “safe” ways of earning big returns, but it has so far failed to provide investors with the necessary info about the algorithms powering the Trading Bot.
In response, the company complained that the “continuous bad press” had eroded the public’s trust in the platform. It also placed the blame on numerous “DDos attacks” that had weakened the platform and panicked the community. It assured users that the BitConnect Coin (BCC) could still be traded on other platforms.
An Exchange Run Like a Ponzi Scheme
BitConnect traders first needed to invest real money in BCC to access the platform. The company has long promised high returns if the loans were long-term enough. However, many analysts accused the platform of running a Ponzi scheme-like business by funding the big returns from new BCC investments from new users.
BCC has started shedding value this month and analysts expect a big crash just around the corner.
Tech Crunch reported that while the platform has been refunding older loans at $363.62 per BCC over the last 15 days, BCC is worth less than $40. So, many users have reported “severe financial losses” in lost Bitcoins or U.S. dollars. Most of the original investments were made in Bitcoins.
TNW confirmed that BCC’s value jumped to $425 about a week ago, but it is now hardly worth $30, and its value continues to plummet.
Image Source: Bitconnect.com
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