Securities & Exchange Commission files major suit against BitConnect promoters for $2 billion digital currency offering without proper registration

The Securities and Exchange Commission filed a lawsuit Friday in federal court in Manhattan alleging that five individuals promoted a global unregistered digital asset securities offering that raised over $2 billion from retail investors.

According to the SEC’s complaint, filed in the United States District Court for the Southern District of New York, from approximately January 2017 to January 2018, BitConnect used a network of promoters, including U.S.-based Trevon Brown (a.k.a. Trevon James), Craig Grant, Ryan Maasen, and Michael Noble (a.k.a. Michael Crypto), to market and sell securities in its “lending program.” The SEC’s complaint alleges that these promoters offered and sold the securities without registering the securities offering with the Commission, and without being registered as broker-dealers with the Commission, as required by the federal securities laws.  The promoters advertised the merits of investing in BitConnect’s lending program to prospective investors, including by creating “testimonial” style videos and publishing them on YouTube, sometimes multiple times a day. According to the complaint, the promoters received commissions based on their success in soliciting investor funds. Another U.S.-based individual, Joshua Jeppesen, served as a liaison between BitConnect and promoters and represented BitConnect at conferences and promotional events.

The SEC’s complaint charges the promoter defendants with violating the registration provisions of the federal securities laws, and Jeppesen with aiding and abetting BitConnect’s unregistered offer and sale of securities.  The complaint seeks injunctive relief, disgorgement plus interest, and civil penalties.

The promoters touted the benefits of investing in BitConnect’s program, creating testimonial-style videos and publishing them on YouTube, sometimes multiple times a day, according to the regulators. The promoters allegedly received commissions based on their success in bringing in money from investors.

The suit is the latest in a series of enforcement actions involving digital assets that the SEC has taken starting in 2013. The actions against cryptocurrency issuers, brokers and exchanges have come as digital currencies like Bitcoin have exploded in popularity in recent years amid extreme price volatility. The SEC has collected an estimated $1.77 billion in penalties in settlements of these cases, according to financial experts.

Digital currencies aren’t tied to a bank or government and allow users to spend money anonymously. The Biden administration is looking at tightening regulation of Bitcoin and other cryptocurrencies, with an eye toward preventing the growing incidence of ransomware attacks that demand payment in the currencies.