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  • Writer's pictureHB Wallet Team

Bitconnect - The biggest scam of 2018

Updated: Aug 22, 2019

Bitconnect (BCC), one of most successful cryptocurrency tokens with a $3 Billion market cap, abruptly collapsed in 2018. What is the reason behind?

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Why did Biconnect shut down?

What is Bitconnect?

Bitconnect (BCC) is a company, an exchange, and a Blockchain-based cryptocurrency. Bitconnect is used to be described as a high-yield investment program. Guaranteed to earn investors up to 1% total return everyday or about 3,780% profit per year, Bitconnect offered an incredibly high interest rate to investors who would "lend" funds in Bitcoin (BTC) to various projects. These funds were converted to BCC. Furthermore, Bitconnect followed a multi-level marketing structure - the more new users you invite, the higher profit you receive.

According to the enticing offer, if you exchange $1,000 in Bitcoin for BCC tokens, it could net your more than $50M within 3 years. The company also claimed that the profit was generated via an investment algorithm that invested in Bitcoin when it was low and sold when it is high.

Nevertheless, investors couldn't withdraw the new amount of Bitconnect tokens before the due time. They could only withdraw their initial investment plus received interest, meaning they would lose most of the tokens.

Launched in February 2016, BCC hit an all-time high of $463 in December 2017 and a market cap of about $2.7 Billion. Bitconnect was also among the world’s top 20 most successful cryptocurrency tokens at that time.

However, the company didn’t provide any details on how the algorithm worked and made predictions as the investment pool kept growing. The practice soon turned into a huge concern, the community started to find the number extremely suspicious.

The matter became worse when multiple Youtube crypto individuals heavily advertised the BCC’s ‘Referral Bonus’ program in order to claim their benefits. Aforementioned, the Bitconnect platform was built to encourage their existing users to recruit new users, by paying the existing users a percentage of their “recruits” sales.

Adding to the fame, a video of speech by Carlos Matos at their Thailand conference had gone viral and became the source of a Bitconnect meme.

At first, the idea of BitConnect might sound like a great plan to make fast profits. However, it was later labeled as a Ponzi Scheme - a deceitful investment operation. The operator generated returns for older investors through revenue that paid by new investors, rather than from authentic business activities or profit of financial trading.

Shortly after reaching their all-time high price, Bitconnect received a cease and desist order from Texas and North Carolina security regulators in January 2018, and abruptly announced it is shutting down its lending and exchange services. Thousand of people lost everything because they couldn’t withdraw their money from exchanges. The collapse of BitConnect also crashed the price of BCC, which could only be traded in 4 exchanges.

The crash of BCC in January 2018
The crash of BCC in 2018

The train wreck of Bitconnect even triggered a chain of reaction to the entire crypto market. As a result, billions of US Dollar were wiped out from the Crypto Market.

Law enforcement believes that the promoters of BitConnect gained roughly $14.5 million US Dollar from "thousands of investors" before fleeing. In August 2018, Divyesh Darji, the Indian head of BitConnect and believed to be a core promoter of the scheme, was arrested by the Gujarat Criminal Investigation Department (CID) in Delhi, India. It is suspected that Darji is connected to various criminal entities that involved in laundering (so-called "Black Money").

Divyesh Darji was arrested in August 2018 by CID
Divyesh Darji was arrested in August 2018 by CID

Why Bitconnect is troubling

Apparently, Bitconnect made vague at the very beginning. Their website extremely heavily obscured information surrounding their services. Instead of explaining the concept of making money from lending on their platform, they dodged the details by promoting a Youtube video claimed that “Trading and Lending are self explanatory”. To the people who don’t understand the terms and conditions of this “Trading and Lending”, it is hard to determine whether this is a good or bad practice. Besides, the company had none of the elements below that could tell it is a good ICO:

  • A complete Whitepaper

  • A transparent business model

  • Team's qualification

  • Goods and services description

  • Long-term development

  • Location and registration

  • Giving customers full access to the tokens

  • Use of funds


If companies sincerely look to last long in the market, they will try to make their plans as transparent and logical as possible, and make sure that their investors understand what they are investing in. Therefore the companies can gain trust and loyalty from their investors in the long term.

In contrast, Bitconnect created a confusing business model which focused all of their energy into attracting users to invest by promising a large profit with no risk. These profits in fact relied on new investments to continue to provide returns to older investors. This is exactly how a Ponzi Scheme works.

What is lending in cryptocurrency?

Lending in cryptocurrency came from a dignified idea of providing financing for world areas, where finding bank loans might be challenging or impossible. It is also a tool for traders who want to sell borrowed cryptocurrencies at a high price and then buy them again to return the loan.


There are risks that exist in any business. BitConnect is one demonstration of problems occurring in the ICO space. The fact that the crypto market is extremely volatile, when many people become overnight millionaires, there are still other people who lose everything. If someone promises incredible rewards with little to no risk at all, and doesn’t explain how or why it works, you should be extremely aware and spend time figuring it out.

Cryptocurrency is a new and dynamic form of investment with so many potential alternatives. Investing in cryptocurrency is an opportunity, but we should be sober, be wise, and the most important is to be prudent.

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