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    BitConnect Closes Exchange as States Warn of Unregulated Sales

    (www.bloomberg.com)
    389 points JumpCrisscross | 13 comments | 17 Jan 18 01:04 UTC | HN request time: 0.001s | source | bottom
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    ve55 ◴[17 Jan 18 01:56 UTC] No.16164829[source]▶
    For those unaware, Bitconnect was a Bitcoin-based ponzi-scheme that had operated 'successfully' for quite some time. I don't say 'ponzi' as an insult in the way some do for cryptocurrencies, it was quite literally just a bare-bones ponzi scheme, where you deposit your money (Bitcoin) on their website, buy their token, 'lock' your funds for some amount of time, and you are promised very high interest rates while encouraged to re-invest your returns.

    What has happened today is Bitconnect has closed the exchange on their website, and so users flocked to some of the only other exchanges (of dubious reputation, since no reputable exchange wanted to list the BitConnect coin) in order to sell their now-worthless tokens, resulting in losses of around 90% today: https://coinmarketcap.com/currencies/bitconnect/

    Many famous Youtubers and other individuals with influence convinced hundreds of people to put their money into BitConnect in order to profit off of referrals, leading to a lot of unfortunate losses and a lot of delusion and misinformation among devoted investors. The general sentiment towards those that lost money due to BitConnect has been a mocking attitude in the cryptocurrency investment communities, as BitConnect has been referred to by many as a blatant ponzi scheme for months.

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    JumpCrisscross ◴[17 Jan 18 02:03 UTC] No.16164865[source]▶
    > Famous Youtubers and other individuals with influence convinced hundreds of people to put their money into BitConnect in order to profit off of referrals

    If you lost money in this scheme and are in the United States or Canada, contact your state securities regulator [1]. Mention any such referral sources. Those individuals may be liable for securities fraud under state and federal law.

    If you're in the United States, send a copy to the SEC [2]. If you lost more than a token amount, I would also recommend contacting an attorney.

    [1] http://www.nasaa.org/about-us/contact-us/contact-your-regula...

    [2] https://www.sec.gov/complaint/select.shtml

    Disclaimer: I am not a lawyer. This is not legal advice.

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    closeparen ◴[17 Jan 18 02:36 UTC] No.16165014[source]▶
    Doesn’t fraud require deception? Wasn’t this pretty upfront about being a Ponzi scheme?
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    1. everdev ◴[17 Jan 18 05:47 UTC] No.16165764[source]▶
    Ponzi scheme work because people believe the fraud (promise of high returns).

    If they said, deposit your money and we'll pay you back only if enough people after you also deposit their money then you'd have an interesting point, although I'm sure it's still illegal even if you announce your intentions before doing something illegal.

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    2. conanbatt ◴[17 Jan 18 06:11 UTC] No.16165846[source]▶
    > Ponzi scheme work because people believe the fraud (promise of high returns).

    Lotteries work the same way and are legal.

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    3. haimez ◴[17 Jan 18 06:49 UTC] No.16165990[source]▶
    Lotteries are also illegal to operate privately, which makes them completely irrelevant to this conversation.
    replies(1): >>16168065 #
    4. skgoa ◴[17 Jan 18 08:31 UTC] No.16166380[source]▶
    With Ponzi schemes the situation is even wrose for the perpetrator: they are explicitely illegal and you can't get out of legal ramifications even if you are completely honest and upfront.
    5. beefield ◴[17 Jan 18 09:22 UTC] No.16166599[source]▶
    My understanding is that lotteries are quite open about the expected return that is heavily negative (and most people do understand that the expected return is negative). So they do not work the same way.
    replies(1): >>16172217 #
    6. saas_co_de ◴[17 Jan 18 13:26 UTC] No.16167670[source]▶
    > Ponzi scheme work because people believe the fraud

    That is not always the case. Sometimes you have a Ponzi like Madoff where it may seem legit to investors but most ponzis are blatant and the people involved know it is a ponzi but think they can profit by selling it to greater fools.

    Of course they will all express shock and feign ignorance when they are trying to get their money back or defend themselves from the angry people they hustled.

    replies(1): >>16168102 #
    7. Sean1708 ◴[17 Jan 18 14:25 UTC] No.16168065{3}[source]▶
    > Lotteries are also illegal to operate privately

    I didn't know that. Does that mean that raffles are technically illegal? Or is there some kind of special-case about winning money?

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    8. mannykannot ◴[17 Jan 18 14:30 UTC] No.16168102[source]▶
    In the US, as the Madoff case showed, if it can be shown that you are a sophisticated enough investor to realize that it is probably a Ponzi scheme, your profits can be clawed back and used as partial restitution for the victims. Any scheme that is upfront about what it was doing would significantly lower the bar on making that case.
    replies(1): >>16169998 #
    9. amdavidson ◴[17 Jan 18 14:54 UTC] No.16168308{4}[source]▶
    Raffles guarantee a winner. Picking a single person from a group of people have a very different probability profile than picking a number from a set of numbers that may not have associated lottery tickets.
    10. Nursie ◴[17 Jan 18 15:13 UTC] No.16168532{4}[source]▶
    In the UK there are special rules about raffles and lotteries on a small scale, and apparently they are only legal when for "a good cause" - http://www.gamblingcommission.gov.uk/for-the-public/Fundrais...
    11. tialaramex ◴[17 Jan 18 15:29 UTC] No.16168665{4}[source]▶
    In different places (states, countries) there are a variety of rules, the goal of which is generally to let people have things like a fun Xmas raffle without opening up the opportunity to run "The Numbers Game" or similar.

    To allow a raffle, dodges often enshrined in law include:

    * Very low prize limits (e.g. max $100) but donated prizes don't count towards that limit. So your local charitable raffle has no problem getting a nice bottle of Scotch, dinner for two with wine at a nice place, family portrait, whatever local merchants want to donate, and it's all fine, so long as they don't buy it.

    * Exemptions if you can only buy tickets in one place, or if you only sell them to members of your organisation that exists for some other purpose (e.g. a local church, employees at a factory)

    * Exemptions if the profits of the gambling go to a recognised charitable organisation.

    * Exemptions if there's no profit at all, all is spent on prizes that go to ticket buyers randomly, so the whole operation only moves money around randomly inside a group of participants.

    12. sseveran ◴[17 Jan 18 17:45 UTC] No.16169998{3}[source]▶
    In fact this is the case even if you are not a sophisticated investor, since the profits are not yours and are really just stolen property.
    13. conanbatt ◴[17 Jan 18 21:43 UTC] No.16172217{3}[source]▶
    Even if you are open to being a Ponzi, it is illegal in the U.S.

    As another user says, the only legal Lottery is the one that is run by the State.

    Isn't it interesting.