The Rise and Fall of BitConnect: An Internet Famous Ponzi Scheme


Every week, a new individual or company becomes the joke of the internet. Now, the wrongdoings or mistakes made by prolific people or businesses can be spread rapidly around the world online, and cryptocurrency scams are a new favorite in this field.

In 2018, a huge Ponzi scheme carried out within the relatively new company BitConnect came to light, and shook the internet for weeks, months, and years to come. So, what was BitConnect, and where did it all come crashing down?

Suspicious Origins

The entire idea behind BitConnect seemed unusual to many from the start. BitConnect provided a lending platform, where users could lend the value of BitConnect coin, and then receive investment payments in return.

Essentially, as a BitConnect user, you would send your Bitcoin to them (yes, your Bitcoin, we’ll come to that later), and then they would use a “trading bot” to make huge returns on your investment. BitConnect were promising returns of up to 40% every month, allowing for users to make huge profits.

On top of this 40% monthly return, BitConnect was also offering daily bonuses of 20% to users. So, on paper, it seemed like a good deal, a very good deal.

line of code in a vacuum

A big point of controversy even before the reveal of the Ponzi scheme was BitConnect’s use of the trading bot. This was unusual because BitConnect was interested in receiving Bitcoin from users to generate these supposed huge returns, not its own coin.

So, this cryptocurrency was relying on another cryptocurrency all together to make money. Red flag?

Related: What Is Crypto Mining and Is It Dangerous?

Another unusual element of BitConnect was their total lack of whitepaper. Whitepaper is essentially a research report or guide, that can be used commerically to advise or influence customers’ decision making in relation to a company.

What’s more, BitConnect was run anonymously! Unlike other major cryptocurrencies, no one actually knew who was behind BitConnect while it was in business. Would you trust a company with a big wad of your cash if you couldn’t even find out who owned it?

In short, this was all very unusual to crypto veterans and financial experts who knew what to look for, or what to avoid.

The Rise of BitConnect

While some were incredibly suspicious of BitConnect, this didn’t stop people from investing. Many believed that this company could make them millionaires, with their huge return promises and daily bonuses.

As BitConnect began to become more and more popular, more and more people began talking about it. YouTubers, Instagram influencers, and other prolific individuals, were being used to promote this coin, allowing it to sky rocket online.

a rising graph animation

Because of this huge popularity surge, the value of Bitconnect rose drastically, with its post ICO price soaring from just $0.17 to $463 in just a couple of months. And, with its ever-increasing value, more and more people invested.

Enter Carlos Matos

Most people know of BitConnect from the infamous video of a guy yelling “BITCONNEEEECT” at a crowd. That’s Carlos Matos. Carlos was one of BitConnect’s investors, and took to the stage in Thailand to promote it to the masses.

To many, this video was just an overly-enthusiastic guy making silly noises on stage. However, it now stands as a huge lesson to those looking to invest in crypto.

After the BitConnect scam was revealed, Carlos disappeared for a long time. Not only was he recovering from his experience, but the internet pressure was also substantial. Some even believed Carlos was in on the scam, though he was, in fact, an investor who truly believed in the company.

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In a recent podcast interview, Carlos spoke about his experience with BitConnect, and the money he risked to invest in it. While Carlos fortunately got back what he invested, he believes that his experience taught him some valuable things, and that, surprisingly, he doesn’t regret it.

Of course, Carlos wasn’t the only one who got tricked into investing in BitConnect. He was one of many. In total, around $250 million was put into BitConnect from its investors, before everything went wrong.

What Is a Ponzi Scheme?

Before we go into the details on the BitConnect scam, let’s quickly go over the nature of Ponzi schemes.

A Ponzi scheme, in its essence, is a scam that involves tricking investors into thinking they will receive big returns on their investment, while the scam runners are simply using the money from previous investors to pay fake returns to the next set of investors.

This scam is named after Charles Ponzi, an Italian con-artist who lived in the late-nineteenth and early-to-mid twentieth century.

While most Ponzi schemes don’t last too long, some last for years. Bernie Madoff, one of the most famous Ponzi scheme runners, spent 17 years scamming people out of huge amounts of money, and ruining lives. Fortunately, BitConnect only lasted a fraction of this time.

Where BitConnect Came Crashing Down

BitConnect didn’t last for long, like many other major cryptocurrencies out there today. The company was founded in February of 2016, and, in January of 2018, less than two years after its establishment, Texas State Securities Board issued BitConnect a cease and desist.

The board did this because it was convinced that BitConnect was, in fact, a Ponzi scheme. Along with this BitConnect had failed to remain transparent about user earnings, raising suspicions even more. Then, just two weeks later, BitConnect shut down officially.

skull in computer code graphic

Following the cease and desist, all of BitConnect’s assets were frozen for two weeks. However, BitConnect technically never existed, and so no one knew what assets it actually had.

Related: Bitcoin vs. Bitcoin Cash: Solving Bitcoin’s Scalability Problem

And, yes, BitConnect was absolutely a Ponzi scheme. It was eventually revealed that Divyesh Darji, alleged India-region leader, was one of the owners of BitConnect. Darji was arrested at Indira Gandhi International Airport in New Delhi in August of 2018.

Since then, Darji has been arrested in connection to another cryptocurrency scam called Regal Coin, highlighting that he has been deeply involved in scamming people out of millions.

While BitConnect Is Gone, Crypto Scams Are Not

While it’s fun to chuckle over Carlos Matos’s dramatic promotions, or even roll our eyes at those who invest millions in what seem to be obvious scams, none of us are protected from crypto scams in general.

Since BitConnect, a number of other scam-coins, or as some call them, sh**-coins, have been exposed, and more are popping up all the time.

If you’re ever looking to invest in a cryptocurrency, do your research! Even if it’s a well known, or reputable coin, understanding the risks and market trends might save you from losing a lot of money. Crypto has opened up a new world to all of us, but we’ve just got to be careful.


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