A billion-dollar crypto scam may finally be coming to a close


A billion-dollar crypto scam may finally be coming to a close

A billion-dollar crypto scam may finally be coming to a close | Finshots Daily Newsletter

There’s a lot of conversation surrounding cryptocurrencies and Bitcoin these days. El Salvador just adopted it as legal tender. Bitcoin breached the $50,000 mark for the first time since May. And an infamous crypto scam dubbed the Bitconnect fiasco may finally be coming to a close.

We are going to talk about that last bit in today’s Finshots.


The Story

Bitconnect (not to be confused with Bitcoin) started off with a simple promise. They introduced a new cryptocurrency in an attempt to revolutionize the industry. They called it the “Bitconnect Coin” and nudged people to invest in these new assets using USDs or Bitcoin.

However, this new variant had an ace up its sleeve. Unlike other cryptocurrencies (where you usually make money as the price moves over time), with Bitconnect, you could also lend your coins in exchange for a neat interest income. The platform promised to take your coins and invest them using a “volatility software.”

What’s this volatility software you ask?

Well, nobody knows. Theoretically, it would mean making money off of large price swings. If the price of a commodity were to move wildly in any direction, you could bet on it and cash in on the “volatility” so to speak. But with Bitconnect, nobody could tell for certain what this software did or how it worked. It was just something that the promoters kept talking about and everybody sort of went along with it.

Especially considering the reward on offer.

Bitconnect had a four-tier investment system. The more you invested the better returns you could reap. By putting up anywhere between $10,000 to $100,000, you could make upwards of 40% a month + 0.25% daily.

What’s more — “You could even get your capital back in under 120 days if you were investing a lot of money.”

Which kind of goes against the fundamental principle of money management. It’s harder to extract a higher sum of return over a short period of time if you were dealing with large sums of money. Obviously, that’s not to say that such a scheme is impossible to pull off. It’s just that it would entail a lot of risks — risks that hardly ever featured in Bitconnect’s promo material.

And it didn’t stop at that. Bitconnect promised even higher rewards if you marketed the scheme to your fellow friends and family. You could earn a referral bonus alongside the investment income and you could become a millionaire if you really gave it everything.

And at this point, I am hoping the contours of the scheme are more apparent. Bitconnect was promising the moon, the sun, and the solar system without ever divulging any real details. And they were doing it even as many people publicly questioned their claims. Bottom line — Bitconnect wasn’t revolutionizing anything. It was by all accounts a Ponzi scheme and here’s how it worked.

If you wanted to make money off of this scheme, you had to first buy Bitconnect coins (using Bitcoin or USD) and then wait for your money to compound. The interest income and the principal however would only be paid in Bitconnect coins — which is kind of the catch here. Even if your investment was due, you had to take your Bitconnect coins and convert them back to Bitcoin or USD.

At first, this wasn’t much of a problem since everybody wanted in on the scheme. The value of Bitconnect coins was exploding and you could easily exchange them for something more meaningful. In fact, the scheme worked perfectly until everyone believed Bitconnect coins were worth something. But when that collective faith dropped, everything changed.

Which is kind of what happened when authorities began sending cease and desist letters to the company. Regulators had finally caught up with the company and the scheme wasn’t going to last for long. In fact, as soon as people began finding out that there was no “volatility software” the value of Bitconnect coins plummeted. And those still holding these dud assets hoping their investment would be repaid in full were left in a lurch. They simply couldn’t redeem it for anything worthwhile.

Soon enough the company went bust and 3 years on since the debacle, US regulators are now finally charging Bitconnect founders Satish Kumbhani and promoter Glenn Arcaro with wire fraud.

So yeah, while cryptocurrencies may definitely hold potential, don’t forget that there’s always someone promoting a “get-rich-quick-scheme” in a bid to swindle you off your hard-earned money.

Until then…

Don't forget to share this article on WhatsApp, LinkedIn and Twitter

Have a good day ❤️

Checkout Ditto

You can change your preferences here.

No longer interested? You can unsubscribe here.

You are receiving this email because you have subscribed via our website

Our mailing address: Finception, Ideapad, CIIE, IIM Ahmedabad, Ahmedabad 380015, India

Key phrases

Older messages

Is Amazon entering the agri-tech space?

Tuesday, September 7, 2021

Finshots Is Amazon entering the agri-tech space? In today's Finshots we see why Amazon may be flirting with the idea of venturing into the ambitious farm to fork business Business The Story Amazon

Understanding p2p lending

Monday, September 6, 2021

Finshots Understanding p2p lending There's a lot of talk about p2p lending these days. So we thought we could see what the fuss is all about Business The Story Peer-to-peer lending or p2p lending

Weekly Wrapup - The illusion of control

Saturday, September 4, 2021

Finshots Weekly Wrapup - The illusion of control In this week's wrapup, we talk about urban cooperative banks, India's investments in Afghanistan, camel conservation efforts, Chinese tech

What does the GDP growth figure tell us?

Friday, September 3, 2021

Finshots What does the GDP growth figure tell us? In today's Finshots we talk about how India's GDP grew by a whopping 20.1% during the first quarter of FY2022, when compared to the same period

The Chinese Blitzkrieg on its own companies

Thursday, September 2, 2021

Finshots The Chinese Blitzkrieg on its own companies In today's Finshots we provide a new explanation on why China may be attacking its own homegrown companies Business The Story Chinese tech

💸 Money Cheat Sheet: Ask for More!

Thursday, October 21, 2021

Including a new calculator to help you do it. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Credit Suisse’s healthcare advisory unit suffers mass exodus

Thursday, October 21, 2021

Managing director Maneet Singh resigned Wednesday... View in browser INSIDER INSIDER Subscribe Insider Exclusive ENTERPRISE Credit Suisse's healthcare advisory unit suffers mass exodus Credit

Exporters in China are raising prices by 10% or more, adding to inflation risk on top of the existing shipping crisis

Thursday, October 21, 2021

Rising input cost are prompting Chinese exporters to hike prices, adding to global inflation risk amid the global shipping crisis. View in browser Business Insider Business Insider Business Insider

Fintech News Issue #334

Thursday, October 21, 2021

The Other Side of Pandemic See Online Issue #334 2021-10-21 COVID-19 reshaped our financial world. From the way we transact, to our digital knowledge, now it seems like if we can't use cash as we

The Daily StockTips Newsletter 10.21.2021

Thursday, October 21, 2021

I've Screened the Market for what I Consider the Best, Safest, & Most RELIABLE Profit Opportunities! (Paid Subscriber Service) ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Apollo CEO talks culture — Credit Suisse’s talent exodus — PayPal considers Pinterest purchase

Thursday, October 21, 2021

View in browser Insider Finance Insider Finance Subscribe Hi, and welcome to Insider Finance. This is deputy editor Meredith Mazzilli. Some news before we dive in: This is the second-to-last edition

Crimes against humanity

Wednesday, October 20, 2021

View in browser Bloomberg The White House outlined a plan to vaccinate younger children against Covid-19 once the shots are approved by regulators, a critical next step for the US to beat back the

👻 Did you miss WeWork?

Wednesday, October 20, 2021

Nestle's nothing if not a grinder | Don't call this WeWork's comeback | Finimize Hi Reader, here's what you need to know for October 21st in 3:02 minutes. 🤘 Everyone knows that stock

FTT Update: This Newsletter Will Not Be Changing Its Name

Wednesday, October 20, 2021

​ ​ Hi all, Julie here. Our first Crypto Tonight newsletter went out (twice) yesterday thanks to my fat fingers lol. Sign up here if you haven't yet, and I promise I won't make a habit of

Issue #116: My Coke Zero addiction just changed my stock strategy

Wednesday, October 20, 2021

plus Ronald McDonald + Halloween at the zoo October 20, 2021 • Issue #116 Dollar Scholar Dollar Scholar Hi y'all — Did you know there's a hamster who trades cryptocurrency? His name is Mr. Goxx