Victims of crypto pyramid scheme BitConnect will receive more than $17 million in compensation, according to a press release from the US Department of Justice. A federal district court in San Diego ruled that the amount of compensation will be distributed among about 800 victims of BitConnect from more than 40 countries.
The BitConnect case is one of the most famous examples of fraud in the cryptocurrency market. An anonymous team of developers (the main one calling himself Satao Nakamoto) offered to invest in the BCC token created by BitConnect and receive a steady income from it. For example, the scammers promised users who invested $10,000 an annual income of 90%.
The project also advertised BitConnect’s allegedly patented technology, known as “BitConnect Trading Bot” and “Volatility Software”, as capable of generating significant and guaranteed profits by exploiting the volatility of the crypto market, the agency said.
The company was using a classic Ponzi scheme for pyramid schemes and did not disclose where the money was coming from to pay out bonuses. In fact, BitConnect was paying out money to earlier investors to those who came later.
Vitalik Buterin was the first to call the project a pyramid scheme. In late January 2018, securities regulators from Texas and North Carolina also recognised BitConnect’s business model as a classic pyramid scheme, and the project was halted. Following the shutdown, the value of the BCC token instantly plummeted by 92%, and by September 2018 it had been removed from all exchanges.
