What is BitConnect and how people lost all their money on it?

BitConnect was a ponzi scheme using their own cryptocurrency, the BitConnect coin. Ponzi scheme means that a company offers a supposed investment opportunity to its customers, promising above-average returns (in this case 40% per month). They intend to make good on that promise by attracting more and more investors, so that the payouts can be paid by an ever increasing stream of money. In order to make this possible, they rely on multi-level marketing: They encourage the investors to do the marketing for them, by telling their friends, family and online communities.

The end-game for a ponzi scheme is that at some point, when no more people come in and investors start demanding money, they go bust. But not before the people who created it all siphon away all the money they can.

The way this worked here was that people bought the BitConnect coins with BitCoins, and then “lent” it to the BitConnect platform. At the end of it, investors wouldn’t get back their money in BitCoins, but the BitConnect coin – which is pretty much worthless everywhere else.

So what happened was that BitConnect grew so big that it attracted media attention, and people rightfully called it out for what it was. Due this and the recent Bitcoin crash then, they decided to close their platform, presumably keeping a lot of the Bitcoins that people gave them for their worthless cryptocurrency.

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