Five people were charged by the SEC for promoting BitConnect. It alleges that BitConnect was an unregistered digital security offering that raised more than $2B from retail investors.
Davor Coin, a cryptocurrency company, promised that users would be able to borrow their money and win $1,000,000. Although optimists put cash into the platform, a week later everyone had a cease-and-desist letter from Texas.
Some people took out loans to purchase the digital currency as cryptocurrency prices soared in the last months of 2017. Some others invested in lenders such as Davor Coin that accept real money to pay “interest” in fringe cryptocurrency. As long as cryptocurrency prices keep rising, the lending scheme will work. However, cryptocurrency values are falling and lending companies are running with the money or being issued cease-and-desist notices by government regulators alleging securities fraud.
Davor Coin flew high a week before it was closed on Wednesday.
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“WELCOME to THE ‘BE a MILLIONAIRE ‘LENDING LOTTERY!” In a Medium post, the company shouted “We will offer an amazing $1,000,000 to someone from the Davor community and many more prizes!” “We will give an incredible $1,000,000 to someone in the Davor community, and many other prizes!”
Users simply had to loan Davor Coin money. Davor Coin promised customers huge returns on their loans in the form of Davor Coin’s own cryptocurrency, even if they didn’t win a million dollars.
Although the investment was risky for some buyers, it was almost a money-maker for Davor Coin. One study shows that bitcoin buyers are happy to enter loan programs for digital money. They believe it will rise in value.
More than 18% of respondents to a December survey on bitcoin buyers said that they borrowed money to buy bitcoin. 22 percent of those who purchased bitcoin using borrowed money told LendEDU they hadn’t paid off their debt. More than 70% of those who didn’t pay off their bitcoin debts agreed with the statement, “I believe that owning Bitcoin is worth it.”
discussion threads are common on cryptocurrency forums. One user claims that he took out a title loan for his Honda to purchase cryptocurrency. He expects the value to rise until he can afford a Lamborghini. companies such as Shift Cash offer cryptocurrency-based car title loans.
“More than 70% of respondents agreed with the statement, ‘I believe that owning Bitcoin is worthwhile the interest expense.’
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This is a buyers market for those who are willing to spend their money on digital currencies that may be worth little next week.
Davor Coin had another reason for optimism. Just two weeks before Davor Coin announced its million-dollar jackpot winner, another of its largest competitors collapsed.
Bitconnect, one of the largest crypto-lending firms, was long accused of being a Ponzi scheme because of its aggressive marketing, encouraging customers to refer other users. The company’s management remained anonymous. Experts dismissed their promise of a 1-percent daily return on investment.
Despite the red flags, Bitconnect continued to borrow money from investors until Bitconnect was shut down by the Texas State Securities Board in January and North Carolina Secretary of State in January. The cease-and-desist letters were sent by the Texas State Securities Board and North Carolina secretary of state accusing Bitconnect of securities fraud. Bitconnect announced that it would be closing down on Jan. 16. It blamed ” constant bad press has made the community members uneasy.”
Bitconnect’s cryptocurrency lost its value, and people like this Reddit user claimed to have taken out $500,000 in business loans and loaned the majority to the now-defunct company.
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The close-identical Davor coin celebrated Bitconnect’s closing instead of being nervous. Davor Coin said that Bitconnect’s closing “does not change anything.” Davor Coin had just been named “the largest lending platform worldwide!” !”
These boasts were noticed by the Texas authorities that issued a cease and desist order to Bitconnect. Texas sent Davor Coin a cease-and-desist on February 2, asking it to stop selling in Texas until it was registered as a securities company.
Five days later, Davor Coin declared it would be closing down its loan platform. Customers were left with only the cryptocurrency of the defunct company, which plummeted from $177 per coin to just 1 cent.
Facebook was used by buyers to report their losses. He said that one of the buyers, who had borrowed $4,000 from Davor Coin, ended up with $9. Another complaint about loaning Davor Coin $20,000 and then receiving $23.50 when trying to cash out.
However, as the swindled investors lamented on Twitter their losses, other crypto companies raced to replace them.
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A Twitter user without a profile picture tweeted “Good news for you guys” at hundreds of people complaining about losing their money to Davor coin. The “good news” was an advertisement for a new cryptocurrency-lending company that launched on Saturday.
