While the SEC drags its feet, Texas continues to lead the charge against MLM cryptocurrency fraud in the US.

The latest from the Texas Securities Board is an emergency cease desist issued against BitConnect.

Issued on January 4th, the cease and desist identifies BitConnect’s ICO lending scheme, staking program and upcoming BitConnectX ICO as unregistered securities offerings.

BehindMLM came to the same conclusion in our Bitconnect Review (published April, 2017), going one step further and identifying BitConnect as a Ponzi scheme.

The Texas Securities Board accuses BitConnect of securities fraud, by way of the company not being registered to offer securities in Texas.

Doing so would require BitConnect to provide evidence it uses external revenue to pay affiliate lending ROIs, something the company has failed to provide to investors since launch.

In addition to not registering to offer securities, the Securities Board accuses BitConnect of fraud in relation to failing to

  • identify its principals (who owns and is running the company)
  • provide a physical address and identifying its principal place of business
  • disclose its assets and liabilities, or financial information about the business
  • disclose who developed BitConnected Coins, including the number of BitConnect Coins owned by these persons or entities, and the number of BitConnect Coins owned by the owners of BitConnect itself and
  • disclose the identity and qualification of the person(s) who developed BitConnect’s purported trading bot

The Securities Board also takes BitConnect to task for misrepresenting the ICO lending investment opportunity:

BitConnect is representing the BitConnect Lending Program is “a safe way to earn a high rate of return on your investment without having to undergo a significant amount of risk,” wish is a misrepresentation of a relevant fact because BitConnect acknowledges significant risks associated with virtual currencies.

With respect to BitConnect’s staking program, the Securities Board points out BitConnect

intentionally fail(s) to disclose … the source of funds that will be used to pay investors interest at a rate of up to 120% per year.

Concluding that BitConnect is ‘engaging in fraud in connection with the offer for sale of securities’ and deceiving the public, the company is ordered to immediately cease and desist from

  • offering for sale any security in Texas until the security is registered with the Securities Commissioner
  • acting as a securities dealer in Texas until BitConnect is registered with the Securities Commissioner
  • engaging in any fraud in connection with the offer for sale of any security in Texas

BitConnect has thirty-one days to respond to the Securities Board’s cease and desist, failing which BitConnect will be certified illegal in the state of Texas.

Affiliates who continue to promote BitConnect in Texas risk a fine of $5000 and two years imprisonment.

This is the second cease and desist issued by Texas in as many weeks. On December 20th a similar emergency cease and desist was issued against USI-Tech.

As with USI-Tech, it is assumed that the SEC is also investigating BitConnect at a federal level.

BitConnect and USI-Tech are currently two of the largest Ponzi schemes operating in the MLM cryptocurrency niche.


Update 5th January 2018 – A top US based BitConnect affiliate, purportedly with over half a million dollars in his backoffice, has declared the Texas Securities Board “idiots” and instructed Texas BitConnect affiliates on how to circumvent the issued cease and desist.