Reports indicate that the upcoming initial coin offering of BitConnectX is a scam. Some of the reasons that have been put forward as to why it is a scam include the fact that (BCC) BitConnect can be used to contribute. Another reason which has raised red flags is the assertion that by keeping the coins in wallets holders of BitConnectX will be able to earn interest. This is because it effectively means that it will not be possible to mine BitConnectX and this has similarities to how BitConnect, a confirmed scam, was issued.
Initially nearly 15 million coins will be issued leaving a remainder of 34 million coins. The issuers have said that the coins which will remain unsold will be stored in a reserve fund which translates to mean project developers will be in a position to dump coins whenever they want. Another problem for potential investors is that there is no credible exchange which is interested in trading BCCX as well as BCC. At the moment BCC is only trading on platforms that lack credibility.
North Carolina
This comes less than a fortnight since the office of the Secretary of State in North Carolina issued a cease and desist order against investment programs run by BitConnnect. According to Elaine F. Marshall, North Carolina’s Secretary of State, part of the reason why her office had to issue the order was because BitConnect had failed to provider investors with material information.
“These specific BitConnect investment programs are very concerning from a regulatory standpoint. BitConnect offers investment programs whose returns are derived from a secret trading system about which BitConnect has failed to provide material information to investors,” Marshall said.
Securities Act
According to securities officials at the office of the Secretary of State in North Carolina, BitConnect’s investment programs were unregistered securities and were being sold by persons and entities without the authority to do so in the state. And in what amounted to a Securities Act violation, it was discovered that BitConnect was encouraging investors to sell to the unregistered securities to other investors.
In the recent past both the NASAA (North American Securities Administrators Association) and the SEC (Securities and Exchange Commission) have issued investor advisories and alerts with regards to virtual currencies.
