How BitConnect pulled the biggest exit scheme in cryptocurrency

In a menacing turn of events yesterday, Bitcoin investment lending platform BitConnect abruptly announced it is shutting down its lending and exchange services. But while this sudden “curveball” might have come as a massive surprise for thousands of gullible investors, the writing was on the wall all along.

The company, which made its foray into the cryptocurrency scene with an initial coin offering (ICO) in late December 2016 , swiftly cemented its position as one of 2017’s best performing currencies on CoinMarketCap. Indeed, during its heyday, BitConnect boasted a market cap of over $2.6 billion and a value exceeding the $400 mark.

But despite its meteoric growth and burgeoning user base, the investment platform attracted a swarm of naysayers with its suspicious business model, which vocal critics repeatedly labeled a Ponzi scheme .

Guaranteed to earn investors up to 40 percent total return per month, BitConnect followed a four-tier investment system based on the sum of initial deposit – the more cash you put down, the bigger and faster profits you could rake in.

Regardless of the stake though, investors were promised a one-percent return of investment (ROI) on a daily basis. To this end, the company had developed its own proprietary “trading bot and volatility software” that would turn your Bitcoin investment into a fortune. Or so the information provided on the website suggested.

This meant that salting $1,000 away into your BitConnect investment account could net you more than $50 million within three years, assuming the scheme does indeed live up to its promise for one-percent interest compounded on a daily basis. Needless to say though, many deemed this model unsustainable.

Among the first ones to voice his concern with the company was Ethereum founder Vitalik Buterin. “If [one percent per day] is what they offer,” he said on Twitter back in November, “then that’s a [P]onzi [scheme].”

Despite these warnings, BitConnect continued to pick up momentum.

Indeed, the company relied on an aggressive marketing strategy on all fronts. Putting aside its extensive digital and event marketing efforts, the company had enlisted a large army of multi-level affiliate marketers to recruit new investors, who could then work their way up by bringing in even more new investors – and so on and so on. In the real world, we call this a pyramid scheme .

Other than “educating” prospective investors about BitConnect, the sketchy marketers engaged in copious amounts of blatant shilling for the dodgy investment platform and its BCC coin.

The tactic, which the promoters employed across multiple channels and social media platforms, essentially involved ballyhooing the Bitcoin investment service by touting screenshots of the impressive “profits” BitConnect has brought them; that is despite the fact that most of their winnings came from affiliates – not investing.

Still, BitConnect was thriving with this disingenuous approach, attracting hordes of naive backers willing to put down their money. Indeed, the ingenuity of this method became most apparent when the platform began facing its first legal troubles.

As one of the 20 biggest cryptocurrencies by marketshare, by that time the bullish investment service had expanded enough to attract the attention of the authorities. Following an investigation in November, the British Registrar of Companies served BitConnect with a strike-off notice, threatening to shut it down and dissolve its operation unless further action is taken.

“ Upon dissolution all property and rights vested in, or held in trust for, the company are deemed to be bona vacantia, and accordingly will belong to the crown,” the filings read.

Within a week, the news had reached mainstream media, with numerous outlets reporting on the affair and thousands of spooked investors speculating about the implications on Reddit. This is when the promoter emergency task force stormed in, spewing all sorts of mindless crap to dispel this “fake news.”

In fact, TNW was the star of one of these videos, created by a promoter better known as Ryan Hildreth. Hildreth has since wiped the video from his own YouTube channel , but someone was thoughtful enough to save and re-upload it . ( Update: the video has since been deleted again )

Downplaying the legal threats, the promoters stuck to the script and continued to shill BitConnect. Instead, they suggested that the strike-off notice affected only a limited division of the company ( BITCONNECT LTD ), and thus would bear no repercussions for its main registration ( BITCONNECT INTERNATIONAL PLC ).

Following a closer look at the multiple instances under which the company was listed on the British Companies House website, it became clear that BitConnect had concealed – and possibly lied about – numerous material facts about its operation, including its location and the identity of its founding members.

Unfortunately, none of these warning signals seemed to have instilled a sense of doubt in the minds of the numerous investors. In the meantime, BitConnect was tirelessly working on upscaling its reputation and building up its brand worldwide to distract naive backers from the real troubles it was facing.

The company had signed a partnership with Blockchain Expo where it had its own stand in California , it attended the ICO EVENT conference in Amsterdam as a sponsor, and even hosted its own gaudy suit-and-gown gala night in Thailand. In fact, the last venue was where the notorious BitConnect meme was born.

Things would soon begin taking a turn for the worst though.

Less than two weeks ago, BitConnect got slapped with a cease and desist letter from the Texas Securities Board, ordering the company to close down its operation and cut distribution of BCC – at least until it had worked out an agreement with the Securities Commissioner or was granted the necessary exemptions to continue its business.

The notice from the Texas Securities board was followed by yet another cease and desist letter a week later – this time around from the North Carolina Securities Division .

Both filings insisted BitConnect was running a potentially fraudulent operation, implicating the company in a series of violations. Interestingly though, the North Carolina notice also suggested that the BitConnect promoters – who had accumulated thousands of dollars in profits – were also breaking the law.

Shortly after this news, the once-devoted promoters began distancing themselves from the platform, claiming they never endorsed it in the first place. Some of them went on to purge their entire YouTube channels, while others simply moved on to shilling other cryptocurrencies.

In the meantime, BitConnect had come up with a creative approach to distracting users away from the litany of “bad press” it was bombarded with.

The company had launched its own news segment – perhaps as a strategy to raise its SEO profile. But its content output was steady enough for Google to list the platform as a “legitimate” news source, displaying it in the dedicated news carousel on Search – side by side other credible medias.

This might seem like a harmless little change, but the outcome was thoroughly sinister.

Now that BitConnect had a regular stream of content, anyone Googling the company would be met with news bits produced by BitConnect itself. What was particularly problematic is that legitimate news pieces were now slumped under a pile of meaningless content.

Just like this, BitConnect had found a way to sweep all negative coverage under the rug by simply churning out more content – as far as Google search went at least.

It was only yesterday when BitConnect’s shenanigans were finally starting to catch up with them.

Following a streak of server downtime, the company revealed that it was shutting down its lending and exchange platform. Above anything else, it attributed its fall to “bad press.” Though it did acknowledge that legal troubles and continuous DDoS attacks had also played a role in this decision.

“ We are closing the lending operation immediately with the release of all outstanding loans,” the statement read. “With release of your entire active loan in the lending wallet we are transferring all your lending wallet balance to your BitConnect wallet balance at 363.62 USD [sic].”

“ In short,” it continued, “we are closing lending service and exchange service while BitConneco website will operate for wallet service, news and educational purposes.”

In the aftermath of the announcement, BCC collapsed almost in an instant, plunging all the way down to under $30 – a monstrous 96-percent decrease in value.

Immediately after the ominous announcement began spreading across the net, hives of freaked out investors flocked to the BitConnect subreddit (which has since been locked down). The segment was flush with panicked posts.

“This cant be it. I lost everything. EVERYTHING,” one thread read. Another one – titled “800-273-8255 is the Suicide Hotline. Money Isn’t everything. Your life still matters after all of this” – encouraged distraught investors to stay calm and not do anything drastic. This is how deep the impact of BitConnect’s fraudulent operation is.

If that hadn’t become apparent by now, BitConnect was extremely popular across the board.

To give you a better perspective on the magnitude of damage BitConnect’s shifty business has caused to its thousands of investors, its site has been translated to several different languages – including Vietnamese, South Korean, Indian, Indonesian, Japanese, Thai, Cambodian and Filipino.

So why is it important to document the trickeries BitConnect resorted to? Because the signs were always there.

While the Bitcoin investment platform is practically defunct now, it has inspired a slew of copycats – including EthConnect (based on Ethereum ), XRPConnect (based on Ripple ), and NEOConnect (based on NEO ). It is also important to remember that its BitConnect X ICO continues to be active.

Ignoring the fraudulent tactics that made BitConnect the behemoth that it was is tantamount to risking falling victim to the same scheme again – and we should do our best to avoid such traps.

So instead of writing it off, BitConnect must live on as a cautionary tale to every cryptocurrency rookie placing all of their eggs in a bottomless basket. You know what they say: All that glitters is not gold.

Stormy Daniels is adding cryptocurrency to her website — and it isn’t Verge

It appears that the romance between pornography and cryptocurrency industries is just getting started.

Popular adult film star Stormy Daniels today announced a cryptocurrency-based reward program on her website stormydanielom (warning: NSFW).

Darkreach Communications, the company which manages Daniels’ website, has partnered with Vice Industry Token (VIT), a blockchain startup that allows adult film producers to monetize their content by rewarding viewers with VIT tokens just for watching content.

The VIT token will also be integrated with 20-plus other pornography websites managed by Darkreach Communications.

It is worth noting that this is not the first time a cryptocurrency is being integrated with porn websites.

Pornhub announced a partnership with privacy-oriented cryptocurrency Verge in April.

The association was mired in controversy, especially because of Verge’s bizarre appeal to its users to donate $3 million to reveal the potential partnership. Critics also raised concerns over the choice of partner for Pornhub — given the well-documented technical shortcomings of the cryptocurrency. Verge has suffered two 51 percent attacks , with nearly $3 million hacked.

Many businesses claim cryptocurrencies make it easier for them to incentivize their users to participate on their platforms.

I mean, not that people need reasons to watch porn, but getting paid to do so is definitely an incentive to stay a little longer.

But we all know there’s no such thing as a free lunch. The price you’ll pay for your “freebie” comes in the form of your personal data, which VIT is more than happy to profit off of .

These get-paid schemes might seem alluring — but as Apple CEO Tim Cook once noted — if it’s free, that’s because you are the product.

‘Not a Lambo’ is a meme for broke Bitcoiners

There’s a new game for Bitcoin enthusiasts on Reddit: poking fun at what they have or – rather – have not been able to buy with their cryptocurrency.

Members of the r/Bitcoin subreddit have been posting pictures of what their Bitcoin has enabled them to buy for a number of months now. Most of them seem like fairly honest, humble braggings from those who have made a few dollars from trading cryptocurrencies.

Take redditor shewnn, who bought some custom Nikes with BTC and ETH etched on the back.

Or take a look at DontTellSmokey, who bought some sweet Ray-Bans with their crypto-riches

But over the weekend it exploded to new levels when Redditor itschrisolson posted a picture, presumably of them sitting in the driving seat of a Ferrari, with the title “It’s not a lambo, but mine thanks to BTC.”

Obviously, this is the internet, so we can’t verify the poster owns the Ferrari pictured, so naturally, other redditors took the opportunity to join in a bit of mindless trolling.

If you dive on to the Bitcoin subreddit r/bitcoin , the thread is becoming awash with other “It’s not a lambo, but…” takes on the above. It really would seem that BTC can buy you anything, everything and nothing these days.

Perhaps you might be able to afford some dental work thanks to your HODLing .

Or maybe you just want to up your culinary game with some chicken flavour ramen noodles.

You might even have enough money now to get that pink push car that you alway wanted!

Or maybe, your forays into the world of cryptocurrency trading just didn’t pan out the way you imagined and you’ve been left with nothing more than an empty wallet .

The Bitcoin community has always had a strong meme game, and maybe the posts in this subreddit are a sign that Bitcoin really hasn’t been all that great recently. But there’s still plenty of opportunity to show the community what you’ve been able to afford with your BTC lately.

Head over to r/Bitcoin and keep the meme alive!