BitConnect: The Billion Dollar Pump and Dump? Part 6
Many have called BitConnect a scam and a fraud; but do we have the right scam? Maybe BitConnect is simply a pump and dump.
Pump and Dumps
Pump and Dump stock schemes have been around for a long time. People would buy up an old gold mine, a patch of land near some oil wells, or a mostly disproven medical cure and then start a company. They incorporate, heavily advertise the shares pumping (raising) them up; then sell (dump) the shares to the public who want to own the next gold mine, oil company or cure for cancer. Buy, pump and dump. Repeat. Seems to be popular in the Initial Coin Offerings (ICO) now.
This has also been done among legitimate companies as well. They can accumulate an existing company buy a large number of shares, and then sell them to the public. They can artificially create interest in the company through buying up the shares themselves, attracting other investors as chart patterns break.
I feel pretty certain that BitConnect is a Pyramid and Ponzi scheme. But I also think we might have overlooked the pump and dump aspect of this security.
BitConnect has complicated inner workings.
First you convert your USD to Bitcoin, then send your Bitcoin to BitConnect. There they exchange the Bitcoin to BitConnect tokens. Then the USD VALUE of the BitConnect tokens is loaned to the company and given about 1% interest a day.
There are about a dozen red flags any rational investor should realize!
I believe Bitcoin is just used to make it easier for you to lose your money. I think the BitConnect coin is easier to do a Pump and Dump and I think the accounting in dollars extends the life of the scam.
So let’s just go into a little more detail. The BitConnect tokens are used as a way for new investors to pay off old investors in what is clearly a Ponzi scheme. This is one of the very definitions of Ponzi Schemes. Wikipedia has a great entry.
Bitcoin just makes it easier for the company to fold up and run off with your money. Talk about a great currency to disappear with.
The accounting in US dollars helps with a deflationary spiral. When you load the company the BCC coin, they sell it and take out a loan in US dollars for the book keeping. If you loan them 1000 tokens at $10. That is 10,000$. If in 10 days the “price” of the tokens goes up to $100 they give the US value of tokens back. That would 100 tokens. This is interesting accounting; you lent 1,000 tokens but got 100 back. This is what happens when you are dealing with scammers. This also supports the coin price rising.
But backing up again, the BitConnect coin has shot up to $131 on coinmarketcap.com. First off, the promoters control 98% of the coin. By my accounts, there is only 7,500 people at $1400 a piece into the scam.
https://chainz.cryptoid.info/bcc/#!rich
That comes up to a measly 10.5 million. Yet the BitConnet market cap is now about 1 billion. That is because they only “sold” 1 or 2% of the tokens to the public. Now lets get back to the part where customers lend them tokens for 6 months to 300 days and then they only give back a small portion of the tokens. It drives up the price of BitConnect coins.
The Pyramid scheme is simply the front end for the pump and dump! They will pump up the price.
Now they actually own a whole bunch of tokens, which in theory they can sell at any time. This gives them a quick exit. They can sell those tokens at the last minute; from one account to another account and then claim to have lost all their money too! This could give the promoters a “cleaner” exit. They can claim to have lost money from their main accounts, all the while secondary accounts dumped coins, and they are rich.
How will it end?
First you have to get to the end of the idiots who are looking for ridiculous returns. When the inflow of suckers is less than the payouts; (about 1% a day) it will fail. The company has several potential exit strategies. “Fly by Night” and closing up shop and going back to live the big life in Vietnam and or Indonesia off your bitcoin is a good strategy. I am not exactly sure the nationalities of all the originators, and going back to your own country could be bad. The company still has 98% of the BitConnect tokens. So it could actually give those away on the way down. They are all going to end up worthless anyway. The company could also one day decide its algorithm no longer works, and give all customers all their tokens back, which they can then trade on the free market. The market would instantly crash as the tokens are worthless; but this would have a small level of “fairness” about it. It would make it easier to sucker people again. “We gave you your tokens back. We can’t help it they crashed afterwards.” “That is just the stampede of people exiting.” “When we gave them back they were worth this high point.” Does this logic hold up? Well, it doesn’t matter because logic has not gone over real well with this crowd. They don’t care about logic. They want to get rich quick.
Feelings of those Involved
When I started investigating BitConnecct I recognized it as fishy right from the start. I was sort of fascinated by how a Ponzi Scheme could work today, with the internet, free information and a block chain. One thing that has amazed me most is people promoting the scam don’t care. Some of them knew it was risky and are using it as a Las Vegas style of gambling. It gives them excitement and feeling like they are going to win. Some people seem to be set on getting in as many people in as possible. They believe it and are great salesmen. Some have made huge kickbacks, -I mean referral bonuses- on you tube for getting lots of other suckers to sign up with their referral code. Others have called me a “hater.” Some of the logic is crazy, You just hate it because you are not in it. Do I need to be in a scam to call it a scam? Others got in and want it to stay alive long enough to get out. They may know it is a scam now, have a case of buyer’s remorse, but the fact that they have a monetary incentive to hope it stays alive as long as possible; actually buys their silence! Incredible!
One of my favorite comments to date was a response to a comment I posted. A believer had just argued it was legitimate after reading several articles or warning signs. Realizing a lost cause I reposing with
“I am so glad you stopped by to look at the warning signs. Here on steemit we try to look out for each other. We are all adults, and can live with the consequences of the choices we make. I feel better better knowing people are aware of the risks.”
The response was...
“Obviously you dont get it.. and 9/11 is also inside job...”
Wow! Obviously he guy is totally right… I don’t get it. The amount of cognitive dissidence is huge.
I understand that Bitcoiners, are a bunch who hate big government, the Federal Reserve and Fiat currencies, but I do find it utterly amazing how much some people can fool themselves. I enjoy a good conspiracy theory too... once in a while, but wow.
While the BitConnect coin primarily trades on its own exchange I hope there is no exchange out there foolish enough to allow margin trading on the BitConnect Coins. Because if there was, the fraudsters could deposit a bunch of BCC, margin it up, buy bitcoin and then run off with the Bitcoin leaving the exchange to suffer a liquidity crisis and fail. Some of the exchanges may well already have liquidity issues because of things like this.
I have probably spent over 40 hours of my life investigating, thinking about and writing about BitConnect. Primarily, I did it for self-education. I wanted to see how these scams worked. That way I would know more of the signs when I saw them next time. I also wanted to share. If I keep a few other people from investing that could be worthwhile.
Anyway, it has taken me the better part of a week to get my head around how I believe the BitConnect Ponzi Scheme works. Block Chain doesn’t work if no one checks what is in the chain. Garbage in Garbage out. I don’t proclaim to be an expert here. It is crazy, because I have a couple of degrees in business, experience in the stock market, and previous experience investigating stock market pump and dump scams. Once this thing collapses someone will be like; why didn’t we see it coming? Well note: some of us did, a lot of us did. But people did not want to hear.
Well what are your thoughts? Does this explain BitConnect successfully? Am I missing a something? When do you think it will fail? Upvote and share your thoughts in the comments!
Previous Articles in Series:
Post 1: Ponzi Scheme?
https://steemit.com/fraud/@cryptick/is-bitconnect-a-ponzi-scheme-post-1
Post 2: Trading Bots
https://steemit.com/bitconnect/@cryptick/bitconnect-scam-inside-the-bitconnect-trading-bot-post-2
Post 3: Taking bets on implosion
https://steemit.com/bitconnect/@cryptick/when-will-the-bitconnect-scam-implode-post-3
Post 4: How many People
https://steemit.com/bitconnect/@cryptick/bitconnect-scam-how-many-people-are-involved-post-4
Post 5: Social Proof: Facebook Profiles
https://steemit.com/bitconnect/@cryptick/bitconnect-scam-inside-the-facebook-profile-of-a-scammer-part-5
Another blogger explains the inner workings of the lending scheme:
https://steemit.com/life/@libertyteeth/bitconnect-is-gaming-the-system-btc-will-keep-rising-and-they-transact-in-dollars
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Wow. So I just figured out another part of the scam. 20% of the website traffic comes from an adbtc dot com website where they pay people bitcoin to visit websites. This drives up the web traffic to the site and make it look a lot more popular. People like me will look at web traffic to see how popular the site is. Well those numbers are rigged too! This explains the difference in numbers between the various domains. .com has 4700 unique visitors (maybe real) while .co has 600,000 unique visitors a day. (probably have bots that visit that one too).
That is insane about the web traffic because I was looking at Alexa rankings as well.
These ponzi's in the digital age are way more advanced than the wall street or real estate ponzi's. They can literally disappear in the middle of the night and they created so many levels of people promoting and organizing stuff that no one will really be able to trace it all the way back. And then they will one day be gone and bitty rich!
Yeah. These people are good. They have had plenty of time and experience to sharpen up the con game!
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Telegram:
https://t.me/JokerCryptoPump
https://t.me/moonpumpteam
Video:
I do love the length of your article and I up-voted you but most of what you say here is more on emotion and not facts. Its a shame everything is so one sided . So I will reply with a post showing both the bad a good and future thoughts and comparison of bitconnect. Will tag you also.
Bless your heart. I do not feel I need to show both sides when dealing with con men and thieves. On the plus side the robber needed your money? I pull in a lot of facts, but as has been admitted, all the numbers are really sketchy. It has been an interesting journey in peoples reactions and lack of interest. If I try to get peoples emotion it is because it is needed. BitConnect is currently feeding emotional frenzy. Remember that video from Thailand where money came from the ceiling? Any way good luck!
So I was listening to another commentator the other day and he brought up a couple of interesting points that made me think. He said that the bitconnect team had claimed to split the bitcoin in half, using half for trading and half for investing in BitCoin. I don't know how bitconnect is managing the money, but if bitcoin keeps shooting up and if they are keeping the money in Bitcoin, bitconnect could continue for a long time. Years and Years. Most of my analysis has assumed that a they would turn the all or most of the investments into US dollars -or other stable fiat currencies- relatively quickly. If they are in fact holding large amounts of BitCoin in a bitcoin rally Bitconnect could run for a long time. That said, one has to look at the people, their history and other circumstatial evidence. While it would be great to track down all the invested bitcoin- and see if it was sold- or if it is being held- I have not done so. I do suspect that whatever there grand strategy is some BTC is going to be held. We have not had a significant correction in BTC sense BitConnect started. Certainly, I could see BitConnect surviving until a Big correction comes. (Ultimately, it was the 2008 stock market crash that exposed Madoff)
Now before anyone comes out and says I am endorsing BitConnect or changing my mind, I am just trying to be honest here. All of my data and investigation comes from analysis of what I -as an outsider- can see. I do not like BitConnect -and think it is a fraud. It is obviously well run as it got this big. The people behind it (IMO) are clever and deceiving. It is an interesting setup. If they were smart enough to hold onto most of the BitCoin; it could run a long time. Still, if they are smart -and I think they are- they would run away -with all the bitcoin- at the moment they have most -or a lot- of the bitcoin. That would maximize their take. If they are smart- they have already diversified to some extent. It is also really easy to hide, steal and keep bitcoin. That said, I will watch this one from a distance.
It looks like coinmarketcap changed the available supply to reflect that about 70% isn't in circulation. This seems consistent with removal of the CryptoID data you found showing the concentration of wealth in the top wallets of about 70%. Unfortunately, I feel this may help rather than hurt the scheme. BCC had been closing in on the top, having briefly passed DASH to make it to the #6 largest market cap (per CMC). Being pushed down the list likely gives the price more room to rise, without looking completely absurd.
They could be holding half in Bitcoin. They could have a sophisticated "trade bot". There could be an invisible pink unicorn orbiting Saturn. Unfortunately, these all must be relegated to the list of assertions lacking evidence that can only be believed on faith alone. At least Bernie Madoff released periodic audited financial statements purporting to show exactly how much was invested/held in cash/spent on overhead. These statements were false/fraudulent, but Bitconnect on the other hand has released no information whatsoever about their assets/liabilities/revenues/expenses/equity. It's a black box.
If some person setup an opaque cardboard box in the middle of the room that operated like Bitconnect, I would watch that one from a distance too. How much cash is in that box? Enough to pay everyone today? For a week? A month? A year? Only the organizer might know, and they're not telling.
Interesting. Very valid observation. Yeah. coin market cap love them or hate them need to a least appear to be keeping accurate tally. Wanting to be near the top of the CMC isa ll about wanting to look good to newbies.
It is interesting you mention Bernie Madoff, because I was in the stock market at that time and although he released financial statements; they regulators were also at fault. If I told you a 14,097 clowns in my car you would know I was lying because everyone knows clown cars at the circus only hold about 30. Well Bernie was claiming to trade securities (option contracts specifically) with billions of dollars there were beyond the publically disclosed holdings of the stock market. (A simplied example would be buying 100,000 million shares of XYZ stock on tuesday when the volume of the stock was 5 million). This evidence was all delivered fully explained to the regulators years ahead of time and they did not read, understand or do anything about it.
We do have proof. It is in the Bitcoin block Chain. But it is not worth my effort to dig it out. The interest, readership and upvoting of this topic has been beyond pitiful in that none of the articles really gets any attention. People want to believe what they want to believe.
Yeah, there might be invisible pink unicorns orbiting saturn, just wait they implode.
Great article,...explains a lot of stuff!
Here is a link to another article... https://steemit.com/cryptocurrency/@mstraney/bitconnet-bcc-is-it-scam-is-it-the-mother-of-all-scams
Just for the record I saw a new video by CytpoNick that showed he had 12.5 million in referal volume and 4,900 people under him. That would be $2,500 per person. As I have stated again and again, I don't trust any of the numbers from bitconnect. The above site now lists 12,483 people on it. I don't know if this is accurate. If both these numbers are accurate cyrptonick is resposible for 39% of all enrollments. I just don't think that is likely. If we use the $2,500 average I get instead of $1,400 used above now, BitConnect has a 31.2 million of real USD involved. That is about three times what I came up with above. What number should we be using. Take your pick! I think the you tube numbers are probably more accurate, but that doesn't leave me with an accurate way to estimate the overall size.
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