These Crypto Investors Want Revenge on the Scammers Who Ripped Them Off (bloomberg.com)
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They’re angry. They say they got ripped off.
Six of the alleged victims filed a federal lawsuit against BitConnect, the company they say roasted them on a multi-level-marketing cryptocurrency deal. Their lawyer says they may be able to recoup some of their $771,000 investment, but even after state regulators in Texas and North Carolina banned BitConnect, it’ll be difficult.
So they decided to take justice into their own hands. They’re calling themselves Crypto Watchdogs, and while they’re being secretive about their identities, they’re offering a bounty for information on anyone involved with BitConnect. Eventually, they say, payment will be made in JusticeCoins, which they will mint.
“We are coming for every one of you!” Crypto Watchdogs says on its website, where it posts videos of people it believes are linked to BitConnect. “We know where you are, what you’re doing and when!”
Alleged victims describe BitConnect as multi-level, or pyramid, marketing, with participants earning commissions for recruiting others. Attempts to contact the company for comment were unsuccessful.
The frustration isn’t limited to BitConnect. In Crypto World, which suffers from a pandemic of scams, it’s not difficult to get suckered. Many crypto investment sites don’t supply contact information, and many of their owners are based outside the U.S.
Less Oversight There’s also the issue of oversight. Crypto World has very little, a fact that concerns Jay Clayton, chairman of the Securities and Exchange Commission.
“There is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation,” Clayton said in prepared remarks for a Feb. 6 hearing of the Senate Banking Committee.
At the same time, Crypto Watchdogs’ call for crowd-sourced justice can backfire, with innocent people getting hurt. And the retribution may not fit the transgression. It’s entirely possible that BitConnect’s alleged wrongdoing doesn’t rise to the level of crime.
BitConnect's Market Cap Hits Bottom It fell after regulators banned it from Texas and North Carolina
With BitConnect, new users would deposit Bitcoin and receive BitConnect coins they could lend at interest rates of more than 40 percent a month. The interest they earned would be higher if they recruited others to invest their Bitcoins in BitConnect.
American Jurisdiction “Multi-level marketing is not illegal,” said Peter Henning, a former Securities and Exchange Commission and Justice Department lawyer who is now a professor at Wayne State University Law School in Detroit. “My guess is the top people are far beyond American jurisdiction.”
While crypto-boosting fund manager Michael Novogratz warned that BitConnect looked like a Ponzi scheme, the high and quick profits proved irresistible to many -- often people who invested their retirement money or mortgaged their home to participate.
“I think of young techies, big hedge funds as investing in coins,” said Joe Rotunda, director of enforcement at the Texas State Securities Board. “But these are things that have reached the demographic of elderly persons, retirees.”
‘Not Extortion’ A letter sent to BitConnect employees and promoters and posted on the Crypto Watchdog site says the group has accumulated 350 “evidence files” and lists law-enforcement and intelligence agencies that will receive the damning information if the recipients fail to pay them back.
“This is not an extortion letter,” it says, “but an invitation for settlement, which offers you the opportunity to negotiate the possibility of refunding your former investors.”
Some BitConnect promoters have added their names to the list of victims posted on the site, prompting an online outcry.
BitConnect’s top people have so far eluded unmasking. The company is registered in the U.K. and lists names of directors, but U.K. rules don’t require directors of registered companies to provide identification.
Two BitConnects Documents show four different companies registered with the name.
The named founder of Bitconnect Ltd., Ken Fitzsimmons, registered an address in Ashford, about an hour outside of London. But neither the building’s receptionist nor another business owner based there had ever heard of a Ken Fitzsimmons or the company.
Bitconnect International Plc was established by Le Thi Thannh Huy, who listed two different addresses on the same street in East London. Neighbors said they’d never heard of a Le Thi Thannh Huy. One of the houses appeared to be uninhabited.
The Crypto Watchdogs are going after about a dozen promoters, including Trevon Brown, also known as Trevon James, who touted BitConnect on his YouTube channel, which has about 135,000 subscribers.
Brown/James has become a favorite target for the group and its allies, who have published pictures of his car and his family and speculation about where he lives.
Signs of Strain As Crypto Watchdogs and others post more messages abou...