A group of investors in the USA have filed a lawsuit in a federal court in West Palm Beach, Florida alleging that the cryptocurrency exchange platform was "wide-reaching Ponzi scheme", according to Bloomberg reports. These investors are now seeking millions in potential damages.
BitConnect invited investors to exchange their bitcoins for "BitConnect Coins", its own cryptocurrency. As per BitConnect's official website, "BitConnect Coin is an open source, peer-to-peer, community driven decentralized cryptocurrency that allow people to store and invest their wealth in a non-government controlled currency, and even earn a substantial interest on investment."
The promoters of the site had promised monthly returns of 40% and 1 % compound interest daily regardless of market performance.
After authorities in North Carolina and Texas issued cease-and-desist letters to BitConnect as a warning that it wasn't authorised to sell securities in those states, it had to shut its business down as the value of its coins slumped down to $128 million from $128 million (Coin MarketCap) from $2.6 billion in the beginning of this month.
BitConnect promoters have blamed regulators and "bad press" for its failure.
The six investors who filed the lawsuit have claimed to have lost $771,000 and are asking to sue on behalf of investors in the whole of USA.
It is hard to locate BitConnect's backers. The company's website doesn't list contact details or provide information about its team. The firm has also not issued a white paper describing its business model which is a standard practice for most coin startups. Regardless, people had poured money into it.