BitConnect, the alleged Ponzi Scheme has indeed turned out to be one, with the cyptocurrency’s price falling by a whopping 90 per cent in a matter of hours.
While BitConnect price may have reached $74 (as of this writing), it nosedived to $26.00 as closure of its exchange and lending operation were announced. BitConnect has been having legal problems with U.S regulators and according to data from coinmarketcap.com, the cryptocurrency’s market capitalization had fallen to $175,637,617.
On Tuesday BitConnect announced with immediate effect closure of its lending operation and that of its exchange platform in five days. The announcement said the website will remain open for “wallet service, news and educational services.”
While BitConnect has been pegged as a Ponzi scheme by many, the company is still putting up a brave face and blaming regualtory scrutiny, DDoS attacks and bad publicity as the three primary reasons behind its decision.
A Texas securities regulator issued a cease and desist order, claiming the company committed fraud for not clearly identifying its principals and the sources of funds to pay investors 120% interest per year
North Carolina followed Texas by ordering BitConnect to stop soliciting offers to purchase or sell any securities in the state. The Texas and North Carolina cease and desist orders have undermined the platform’s legal continuation, BitConnect stated on its website.
Charlie Lee, the creator of Litecoin, publicly stated in December that he refused to invest in BitConnect, saying it seems like a classic Ponzi scheme.
A month earlier, Ethereum founder Vitalik Buterin indicated the promised returns made BitConnect a Ponzi.
BitConnect said it will continue offering other cryptocurrency services in future and that it will support its digital token after closing its lending platform and exchange, claiming the BitConnect X ICO is still functional.