Influencers beware: promoting the wrong crypto could mean facing a class-action lawsuit
The story of BitConnect doesn’t include any rapping Forbes bloggers slash money launderers or dubiously-obtained ape JPGs, but this “pyramid-on-Ponzi” case has spawned a court ruling (PDF, embedded below, via @stephendpalley) that should serve as a warning for influencers: they could be held liable for peddling shady crypto investments.
In case you’ve forgotten this particular scam, BitConnect’s promoters told its victims that if they handed over their Bitcoin for a period of time, their crypto would be used by an automated trading bot that would return huge profits. None of that was true, and the operators instead paid off older investors with funds from the new ones, bringing in $10 million per week at its peak. All told, the scam took in more than $2 billion worth of investments.
In 2018, some investors filed a class-action lawsuit against BitConnect and several of its most prominent promoters, attempting to hold them liable under a violation of the 1933 Securities Act that blocks soliciting investments in unregistered securities. Glenn Arcaro, who had called himself BitConnect’s “number one promoter” and has already pleaded guilty to federal wire fraud charges, argued successfully in district court to dismiss the case, as the court ruled that the investors’ allegations did not amount to Arcaro actively trying to persuade them to invest.