Every other day, there is a new scam targeting cryptocurrency investors. These scams are often hyped up online on various social media platforms and once a substantial sum of money pours in, they disappear equally quickly. The scammers are always hunted by the relevant authorities after they manage to pull off a heist. A new ruling, however, may blame the online promoters of such scams equally from now on.
The lawsuit, which may lead to a common practice around the world, addresses the BitConnect scam in 2018. The Ponzi scheme siphoned off more than $2 billion of investors’ money by running a pyramid scheme that promised exponential returns on investments, as well as bonuses on referrals and other activities.
Those affected by the scam filed a class-action lawsuit in 2018 that blamed both BitConnect and its prominent promoters. The stand-out name in the allegations was that of Glenn Arcaro, former director and promoter of BitConnect, who claimed himself to be the “number one promoter” of the crypto coin. Allegations against Glenn, however, were dismissed by a district court earlier, as it mentioned that Arcaro did not actively persuade the victims to invest.
In a U-turn on this decision, the 11th Circuit Court of Appeals has now reinstated the claim by the investors, allowing them to pursue the legal case against Arcaro and another regional promoter, Ryan Maasen.
Role of promoters in Ponzi crypto schemes
In a new statement, the United States Court of Appeals for the eleventh circuit acknowledges that the initial dismissal by the district court on the allegations against the BitConnect promoters will be reversed. The court also highlights the reason behind it.
As per the new notice filed on Friday and spotted by The Verge, the court mentions that the defenders (Glenn Arcaro and Ryan Maasen) had earlier insisted that they cannot be held liable for BitConnect’s promotion because “the Securities Act covers sales pitches to particular people, not communications directed to the public at large.”
The court has now denied this outright, stating that there is no such clause on the act. “Not so—neither the Securities Act nor our precedent imposes that kind of limitation.” The court notes “solicitation has long occurred through mass communications, and online videos are merely a new way of doing an old thing.”
The court also highlights Arcaro’s “significant role” in BitConnect’s pyramid-on-Ponzi scheme. “He was the national promoter for the United States, which meant that he managed a team of regional promoters.” Citing examples of how the marketing around the Ponzi scheme worked, the court mentions fake promises like “passive income was merely “a click away”.” “Millions of views led to millions of dollars,” the court notes.
This is the first notable move against online influencers who often engage in promoting projects around new cryptocurrencies. With the US court setting a definitive way in which these promoters will be held responsible, the pact may well be replicated by other agencies around the world which are looking to regulate the cryptocurrency industry.
