Bitconnect, which had long been suspected of being a Ponzi scheme, has announced that it will be shutting down its lending and exchange platforms. The news was followed by a massive sell-off, resulting in BCC (the platform’s native token) dropping to $21.67 from a high of $431 just ten days ago.

The official announcement posted on their website cited the following reasons for the closure:

  • The continuous bad press has made community members uneasy and created a lack of confidence in the platform.
  • We have received two Cease and Desist letters, one from the Texas State Securities Board, and one from the North Carolina Secretary of State Securities Division. These actions have become a hindrance for the legal continuation of the platform.
  • Outside forces have performed DDos attacks on platform several times and have made it clear that these will continue. These interruptions in service have made the platform unstable and have created more panic inside the community.

The update also added that all users will be getting their lending balances refunded to their Bitconnect wallets at a rate of 363.62 per token, but given how the BCC tokens are worth a mere fraction of their value, the refund will do little towards reimbursement.

The Bitconnect platform basically allowed users to lend cryptocurrencies for set profit percentages, including daily bonuses for higher amounts. Anyone putting in from a $100 to $1,000 was eligible for a 40% return per month, while loaning $10,010 to $100,000 would get you 40% plus 0.25% daily.

While these loans were pledged in USD, users had to purchase BCC tokens to participate, which naturally drove the price up. However, the high returns offered and the very lucrative referral program are reminiscent of HYIPs (High Yield Investment Programs), most of which were, and are Ponzi schemes, where older users are paid via new sign ups for a while before the scammers decide to shut down and disappear with the accumulated pool.

In Bitconnect’s case, the company says that they will still go ahead with their Bitconnect X ICO, but it is unlikely that they will see an overwhelming response given the latest developments.