BitConnect, a platform that claimed to be a self-regulated financial platform for peer-to-peer bitcoin lending, announced the immediate, indefinite closure of its lending and exchange services.

In practice, the platform allowed users to loan digital currency to the platform’s anonymous owners with the promise of large returns on their investments. Users made loans on the platform with BCC (BitConnect Coin), a currency purchasable with bitcoin.

In its heydey, BCC reached a value of over $400 USD ($495 CAD) towards the end of 2017. Since the announcement, however, the value of BCC plummeted over 95% in a 24 hour period. At the time of writing, the value had dropped to approximately $9.75 USD ($12 CAD) per coin.

BitConnect’s owners claim recent cease-and-desist letters and negative press as leading factors in their decision to cease the bulk of their services.

‘Bad press’

In an announcement, they refer to ‘bad press’ as a cause of unease within the community and lack of confidence in the platform.

The ‘bad press’ that the organization seems to refer to is the myriad of investigative reports that compared the platform to a Ponzi scheme. Many of these reports also warned users to be wary of numerous warning signs, including the organization’s promise of investment returns that were seemingly too good to be to true.

Included in critics of the platform is Ethereum co-founder, Vitalik Buterin, who echoed statements on Twitter that the organization’s unrealistic investment promises indicated that the platform was likely a Ponzi scheme.

Both regulators and the broader community reflected Buterin’s statements. In a notice issued to BitConnect in November of 2017, the UK Registrar of Companies threatened to dissolve the company if unable to dispute the claims within a two month period.

Additionally, the organization received two cease-and-desist letters from U.S. state regulators in January of 2018, on behalf of North Carolina and Texas.

Moving forward from BitConnect

There are claims from industry experts, investigative journalists, and regulatory bodies that BitConnect is a Ponzi scheme. The organization and its supporting community, however, remain adamant that the platform is legitimate.

Many of BitConnect’s vocal supporters could be found in a Reddit community called /r/BitConnect, although the subreddit has been set to private since the announcement.

With the closure of their lending services, BitConnect will release all active loans. However, BitConnect says it will compensate investors. They claim they will transfer the lending balance of investors to their wallets at a rate of $363.62 USD per coin (based on a 15 day average).

“This is not the end of this community,” said BitConnect in their statement on the 16th of January, 2018. “We are closing some of the services on the website platform and we will continue offering other cyptocurrency services in the future.”

The team promised to make BCC available on other exchanges by releasing their API. They further claimed that a new exchange platform called BitConnect X is in the works. Currently, though, there’s little proof that this claim is true.

 

Image credit: Bitconnect

 

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