The US Securities and Exchange Commission (SEC) has sued five individuals for promoting BitConnect Initial Coin Offerings (ICO) via various mediums that helped the firm raise $2 billion. The five individuals are accused of promoting unregistered security, a common theme among many ICOs from 2017.
The chief regulatory body in a Friday briefing mentioned the promoters of the scheme received commission based on the cash and investment they brought in, and one of the promoters had allegedly bagged a commission of $2.6 million.
Lara Shalov Mehraban, an associate regional director for the SEC’s New York office said,
“We allege that these defendants unlawfully sold unregistered digital asset securities by actively promoting the BitConnect lending program to retail investors,”advertisement
Bitconnect was one among many ICO-era projects that managed to raise $2 billion from retail investors, but the exchange closed down soon after in January 2018, after receiving two cease and desist notices from state authorities over the sale of an unregistered security.
The SEC has continually sounded warnings for retail investors to refrain from investing in such projects as they qualify as a security. New projects that qualify as security are required to register with the chief regulatory body and get the approval of operations
BitConnect one of Many ICO-Era Projects to Face SEC’s Wrath
The ICO-era of 2017 was seen as a revolutionary way for new projects to raise capital and many including the likes of Telegram, Kik, and Bitconnect raised millions and in certain cases even billions of dollars from investors promising high returns once the project goes live. However, ICOs also became a target of scammers who used the popularity of cryptocurrencies in that time to raise millions of dollars for projects that would never make it to the listing stage.
Many countries including South Korea and few others banned ICOs completely in 2018 after research data indicated more than 90% of ICO projects turned out to be scams. Even the likes of BitConnect that did open up their platform didn’t register as Security and faced the wrath of the SEC. Telegram and Kik met a similar fate and were asked to return billions in raised funds to investors.