According to a press release from the FBI’s Cleveland Field Office, agents are investigating Bitconnect Coin (BCC), a cryptocurrency first released in 2016 through an ICO. Promoters guaranteed investors up to a 10 percent total return per month on investment, leading to its classification by multiple state-level securities regulators as a Ponzi-type scheme. Bitconnect then shut down its exchange, which, according to the press release, “eliminat[ed] the market for the cryptocurrency and strand[ed] investors with near-worthless cryptocurrency.”
“The existence, in and of itself, of the investigation, is a good sign,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance exchange technology. “In the past, regulatory bodies and enforcement agencies often proceeded solely with a cautionary warning for investors. This investigation is a sign that we’re beginning to turn the corner on the industry’s Wild West days. Government is finally catching up with technology.”
According to the statement, investors in BCC are requested to complete a voluntary survey, which aims to help the investigation and identify potential victims. Those that participate may be contacted as part of a follow-up.
“Modulus has been advocating for standardized regulation for quite some time, and this investigation should give potential investors comfort. As the United States’ principal federal law enforcement agency, the FBI gives this investigation teeth. Regardless of whether funds are recovered, it is likely that this episode will be utilized as a case study, better-preparing law enforcement to apprehend future bad actors,” noted Gardner.
Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and exchanges. Over the past twenty years, the company has built a client list which includes Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, NASA, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.
“The safety of this industry depends entirely on risk assessment. When bad actors evaluate potential targets, they take a long look at the associated risk. As investigators become more familiar with the industry, the risk of prosecution increases. As that risk increases, the industry will find itself less likely to be targeted,” explained Gardner. “Given that calculation, those rooting for the long-term success of digital currencies should be laser-focused on engaging bureaucrats to settle on a commonsense regulatory rulebook to govern the sector.”
