The Sydney District Court has convicted John Bigatton, an Australian promoter of the now-defunct crypto exchange platform BitConnect, for providing unlicensed financial advice. 

Meanwhile, the conviction follows charges from the Australian Securities and Investments Commission (ASIC), highlighting the regulatory body’s commitment to safeguarding Australian investors.

John Bigatton promoted BitConnect extensively through seminars and social media between August 2017 and January 2018. ASIC’s investigation revealed that Bigatton’s activities included making substantial claims about the potential returns on investments in BitConnect Coin (BCC), which he alleged could increase in value to at least $1,000. 

Despite disclaimers, the court ruled that his statements constituted unlicensed financial advice, violating Australian financial regulations.

Bigatton’s conviction carries a penalty of three years on recognizance for good behavior and a five-year disqualification from managing corporations. These measures are part of ASIC’s effort to maintain integrity and trust within Australia’s financial services industry.

The BitConnect Scheme

BitConnect, founded in 2016, created a digital token, BitConnect Coin, which could be exchanged for Bitcoin. The platform promised high returns through its “volatility lending” program, encouraging investors to lend their BCC for fixed periods in exchange for purportedly guaranteed interest rates. 

However, ASIC and other regulators later identified this structure as bearing the characteristics of a Ponzi scheme.

Bigatton’s promotional tactics, particularly during seminars, emphasized high returns and superior performance compared to traditional investments. His claims influenced investor decisions, leading to substantial financial losses when BitConnect collapsed. The Sydney District Court’s ruling reinforces the importance of compliance with financial licensing laws, especially in high-risk investment sectors like cryptocurrency.

Ongoing Legal Proceedings

ASIC obtained a Federal Court order in 2018 to freeze Bigatton’s assets, including his crypto holdings. This was the first instance of an Australian regulator securing freezing orders over digital assets. 

The proceedings, overseen by the Australian Federal Police under the Proceeds of Crime Act, are still ongoing in the Supreme Court of New South Wales. The total value of the frozen assets is estimated to be in the millions.

ASIC Deputy Chair Sarah Court stated, 

“Providing unlicensed financial advice denies Australian investors access to key protections and undermines trust and confidence in Australia’s financial services industry. ASIC is committed to taking action against the unlawful promotion of high-risk digital assets to protect Australian investors.”

International Repercussions

In early 2022, Satish Kumbhani, the founder of BitConnect, was indicted by a U.S. court jury for orchestrating the international multi-billion dollar crypto Ponzi scheme. The U.S. Securities and Exchange Commission reported that Kumbhani allegedly relocated from India to an unknown foreign country, with his current whereabouts remaining unknown.

In January 2023, a U.S. federal district court in San Diego ruled that over 800 victims of the BitConnect Ponzi scheme should receive a portion of a $17 million restitution recovered from the $2.4 billion scam. This international case underlines the widespread impact of unregulated crypto schemes and the necessity for stringent regulatory measures.

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