Following the sudden closing down of BitConnect, an exchange and lending platform for cryptocurrencies, a group of investors began legal proceedings recently to get back their funds according to a document that was made public.
This is a class action case, and it was filed on January 24, 2018, with the Southern District Court of Florida. It is alleged that the BitConnect platform had been issuing digital tokens that were seen to be unregistered securities and they had also received funds in other ways which made it into a “wide-ranging Ponzi scheme.”
David Silver was the person who filed this lawsuit, a lawyer from Silver Miller based in the state of Florida. The law firm has previously represented crypto consumers who were looking for damages from Giga Watt, a crypto mining company.
Giga Watt had failed to deliver on their platform construction deadlines and did not refund the contributions to the investors as they had promised if these targets had not been met.
Following the issuance of cease and desist orders by United States regulators, BitConnect was closed. The document that was made public details how the company had launched a variety of different projects including a lending system whereby investors would buy BitConnect coins (the company’s platform-generated token) by sending them cryptocurrencies.
The cease and desist orders were issued from security regulators in North Carolina and Texas. As soon as the news of these orders was made public, the BitConnect Coin saw its price collapse by more than 90 percent.
At the beginning of 2018 it had been trading at higher than $400, but since the news was released, it has fallen dramatically and was trading at approximately $7.30 as of January 29, 2018 according to Coinmarketcap.com.
It was then promised allegedly that the trading platform would utilize these funds in order to create returns of 40 percent on a monthly basis or one percent on a daily compound rate that would amount to a 3,000 percent return after 12 months.
The argument from the plaintiffs is that the securities act had been violated as BitConnect had issued securities that had not been registered. They also went into detail about certain claims made on the BitConnect website and how they were not as the promised.
The plaintiffs are additionally alleging that instead of using the funds they had been sent in return for the BitConnect Coins for trading. Instead, the company ran a Ponzi scheme which got funds from newer investors in order to follow through on the promised returns for those who had already invested.
There is a total of six people who are filing this case on behalf of all account holders that transferred either fiat or cryptocurrency funds to the company for investment, as well as all other investors.
There has been no clear declaration as to how much damages the plaintiffs are seeking, but it is claimed in the public documents that the six people who were named had combined losses of $771,000 as a result of their dealings with BitConnect.