SEC Sues 5 Over $2B Bitconnect Ponzi

The U.S. Securities and Exchange Commission filed charges against five individuals for their alleged involvement in the Bitconnect crypto platform that collapsed in 2018.

According to the SEC's complaint, filed in the United States District Court for the Southern District of New York, from about January 2017 to January 2018, Bitconnect used a network of promoters to offer and sell over $2 billion in securities without registering the offering with the SEC, and without being registered as broker-dealers as required by the federal securities law.

"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 SEC's New York office. "We will seek to hold accountable those who illegally profit by capitalizing on the public's interest in digital assets."

Bitconnect collapsed in 2018 after state regulators in Texas and North Carolina filed cease-and-desist letters against its lending and exchange platform.

The SEC's complaint charges promoters including U.S.-based Trevon Brown (aka Trevon James), Craig Grant, Ryan Maasen and Michael Noble (aka Michael Crypto) with violating the registration provisions of federal securities laws. The complaint also charges U.S.-based Joshua Jeppesen with aiding and abetting Bitconnect's offer and sale of securities.

The promoters touted the benefits of investing in Bitconnect's lending program to prospective investors, including the use of testimonial style videos and publishing them on YouTube, the SEC said in its release. According to the complaint, the promoters received commissions based on their success in soliciting funds.

The complaint seeks injunctive relief, disgorgement plus interest and civil penalties.

After the complaint was made public, Brown tweeted "I just became a villain again."

While no criminal complaints were filed, the FBI has been investigating Bitconnect for the last three years. Brown said in March 2018 that he had spoken with FBI agents, and the federal investigator posted a notice in 2019 asking for investors to reach out.

A representative of the criminal division at the Department of Justice's Southern District of New York office said no criminal charges were anticipated today.

Promotors of the project have been arrested in other countries as well: Indian police arrested promotor Divyesh Darji in 2018, while Australian authorities filed charges against John Bigatton last year.

UPDATE (May 28, 20:32 UTC): Adds background on case.