BitConnect promised 40% a month — until the token met the regulators

BitConnect invited investors to lend it their money in exchange for up to 40 per cent a month plus a 0.2 per cent daily bonus, generated, it claimed, by a proprietary 'volatility software trading bot' averaging around 1 per cent a day. From early 2017 the lending program attracted retail investors worldwide, its token climbed to about $430 with a market value above $2.6 billion, and an affiliate network recruited new lenders for commissions the investors never saw.

In January 2018 the securities regulators of Texas and North Carolina issued cease-and-desist orders against what they deemed an illegal unregistered securities scheme. On 16 January 2018 BitConnect shut down its lending platform and exchange, citing the regulatory notices, 'continuous bad press' and DDoS attacks. Within hours the token collapsed by more than 80 per cent, from over $200 to about $37. Outstanding loans were refunded at $363.62 each — the token's average price over the previous 15 days, a figure the crashing market immediately made worthless.

On 1 September 2021 the US Securities and Exchange Commission charged BitConnect, its founder and its top US promoter with defrauding investors of $2 billion, alleging the money never went to any trading bot: it was siphoned into wallet addresses they controlled. What had been sold as algorithmic trading turned out, in the regulator's telling, to be new lenders' money paying old lenders' returns.