The State of North Carolina on Tuesday ordered Bitconnect to cease and desist from selling any securities related to its staking and lending programs, until the organization and its representatives in the state obtain the necessary licenses.
Texas last week issued a similar ban.
Meanwhile, Bitconnect’s latest project, the BitconnectX Initial Coin Offering (ICO), launched today. US residents and taxpayers are barred from participating in the ICO, presumably because Bitconnect’s operators don’t want to run afoul of American securities laws. Many other ICOs have also excluded taxpayers from the USA, China and Singapore for similar reasons.
The temporary cease and desist order was issued by the North Carolina Secretary of State Securities Division, and lists the three company names Bitconnect has operated under since its launch in 2016. As with the Texas order, the North Carolina CDO gives Bitconnect’s representatives 30 days to appeal the ban.
BitConnect was ordered to cease and desist from offering for sale, soliciting offers to purchase or selling, in or from North Carolina, any securities unless and until such securities have been registered and BitConnect, and any person or entity under the direction or control of BitConnect, is properly registered as a securities dealer or salesman. The Temporary Order to Cease and Desist found that BitConnect. was not registered as a dealer or salesman of securities in North Carolina and offered investments called the BitConnect Lending Program and the BitConnect Staking Program. The Temporary Order to Cease and Desist also found that BitConnect had omitted to disclose material facts when offering these investments in North Carolina. These activities are in violation of the North Carolina Securities Act. The Temporary Order to Cease and Desist gives BitConnect thirty (30) business days in which to request an hearing. If no such request is made during that time, the Temporary Order to Cease and Desist shall become final. Click here to view the Temporary Order. [NOTE: I have embedded the CDO below.]
Bitconnect offers several means for investors in its platform to earn returns: lending to a “market volatility software” bot, staking Bitconnect Coins, mining Bitconnect Coins, and earning referral bonuses. The worldwide program has been in operation since late 2016, and has been heavily promoted on websites and especially on YouTube. While it has been successful and lucrative, some critics doubt the program is entirely legitimate, accusing it of being a Ponzi or pyramid scheme.
Now that two states have initiated legal action against Bitconnect, it should be interesting to see how the fairly secretive organization reacts. While it has representatives listed in its UK business license, who seem primarily to be promoters of the platform, its developers and operating officers remain unknown. Its listed office is in a shared office complex outside London, and there is no known world headquarters.
In another mystery surrounding the organization, one of its primary promoters, Glenn Arcaro, has pulled down his very active YouTube channel for obscure reasons.
I will follow this story as it develops. Here is the North Carolina CDO: