The Securities and Exchange Commission filed the civil lawsuit Friday in federal court in Manhattan. It alleges that an outfit called BitConnect used a network of promoters to sell the securities without registering the offering with the SEC, or registering themselves, as brokers as required by law.
The promoters touted the benefits of investing in BitConnect’s program, creating testimonial-style videos and publishing them on YouTube, sometimes multiple times a day, according to the regulators. The promoters allegedly received commissions based on their success in bringing in money from investors.
The suit is the latest in a series of enforcement actions involving digital assets that the SEC has taken starting in 2013. The actions against cryptocurrency issuers, brokers and exchanges have come as digital currencies like Bitcoin have exploded in popularity in recent years amid extreme price volatility. The SEC has collected an estimated $1.77 billion in penalties in settlements of cases, according to financial experts.
Digital currencies aren’t tied to a bank or government and allow users to spend money anonymously. The Biden administration is looking at tightening regulation of Bitcoin and other cryptocurrencies, with an eye to preventing the growing incidence of ransomware attacks that demand payment in the currencies.