BitConnect's national promoter in Australia, John Pygaton, has pleaded guilty to his role in promoting the scam three and a half years after being charged. He promoted the fraudulent cryptocurrency scheme on social media, hosted seminars across the country, and held face-to-face meetings with victims to convince them to invest in the scheme.
Pegaton pleaded guilty to a criminal charge of providing unlicensed financial services in the Sydney District Court on May 16, and will receive his sentence on July 5. He faces a financial penalty in addition to a prison sentence of up to two years.
A $2.4 Billion Crypto Scam
BitConnect was one of the largest cryptocurrency scams, defrauding investors of approximately US$2.4 billion globally. This scheme attracted victims with absurdly high fixed interest rates.
As the Australian Securities and Investment Commission (ASIC) explained, the fraudulent scheme provided a lending platform that was promoted as an investment opportunity. Investors need to have the platform's native BitConnect token to participate in the investment scheme. Investors can invest or lend these tokens to receive promised fixed returns.
However, the platform did not allow investors to withdraw any of their loan amounts until the end of the lending period.
BitConnect promoted its scheme heavily in 2016 and 2017 globally. The scheme incentivized invitations and referrals to grow its network of investors, or rather, victims. The cryptocurrency scheme suddenly evaporated in 2018, with its websites and social media disappearing, leading to investigations by agencies in several countries.
Promoting BitConnect in Australia
Bigatton, the Australian promoter of the scheme, has been promoting BitConnect locally in the country. According to ASIC, he promoted the scheme, lending platform and tokens. He conducted four seminars across the country and promoted the scheme through two social media posts.
Although it is unclear whether Pegaton was aware of the fraudulent nature of the scheme, ASIC has accused him of offering financial services products without obtaining a licence. ASIC's first action against the Australian promoter of BitConnect was to ban it from providing financial services for seven years. He was later arrested for his role in promoting the scheme.
“The charge relating to operating an unregistered managed investment scheme was withdrawn following Mr Pigaton’s guilty plea to the charge for which he will be sentenced,” the regulator noted.
Meanwhile, the US stock market regulator indicted BitConnect's founder, Satish Company, and its chief US promoter, Glenn Arcaro, and subsequently obtained a restitution judgment and civil penalties. The US agencies also settled with other BitConnect promoters.
Last year, a San Diego federal district court ordered the distribution of more than $17 million in compensation to 800 BitConnect victims in more than 40 countries.
This article was written by Arnab Shomi at www.financemagnates.com.
