U.S. securities regulators charged five people for their alleged role in promoting a global crypto trading scheme that raised more than US$2 billion from investors.
The U.S. Securities and Exchange Commission (SEC) filed a complaint in U.S. district court alleging that the five respondents violated securities laws when they promoted an unregistered scheme for trading digital assets, known as the BitConnect lending program.
According to the regulator’s complaint, between January 2017 and January 2018, BitConnect raised approximately US$2 billion in an unregistered offering, using a network of promoters who touted the program to prospective retail investors.
The investors’ funds were to be used trading Bitcoin, the regulator said. “BitConnect promised to pay investors the resulting profits, which BitConnect promised could be as high as approximately 40% per month,” the complaint said.
The scheme was promoted through promotional videos posted on YouTube, the SEC said. And, it noted that the company paid referral commissions to existing investors who brought new investors to the program.
The five people charged in the SEC’s complaint were allegedly paid approximately US$5.6 million in commissions and other payments.
“We allege that these defendants unlawfully sold unregistered digital asset securities by actively promoting the BitConnect lending program to retail investors,” said Lara Shalov Mehraban, associate regional director of the SEC’s New York office, in a release.
“We will seek to hold accountable those who illegally profit by capitalizing on the public’s interest in digital assets,” she added.
The SEC is seeking injunctive relief, disgorgement plus interest, and civil penalties.
None of the allegations have been proven.