Bitconnect

Bitcoin and cryptocurrency prices deepened their weeks-long rout Wednesday as a spate of hacks and scam warnings compounded fears that regulators would crack down on the nascent digital assets. The price of Bitcoin crashed to well below $10,000, plunging to as little as about $9,200, down more than 50% from its highs a month ago.
Spooking investors was an announcement late Tuesday by Bitconnect, a popular but controversial site for trading and lending cryptocurrency, that it was closing down operations. Bitconnect had recently been accused of running a Ponzi scheme—the financial fraud most famously perpetrated by Bernie Madoff—by several influential investors, including Ethereum co-founder Vitalik Buterin and billionaire cryptocurrency investor Mike Novogratz . (The company didn’t respond to the accusations.)
Some Bitconnect clients interpreted the abrupt shutdown as confirmation of those suspicions, and worried they would not be able to withdraw their money if the exchange, whose management team remains anonymous, became insolvent. While Bitconnect, whose own digital token had risen to more than $2 billion in market value as recently as last week, promised that investors would be able to withdraw their funds at an average of the cryptocurrency’s recent exchange rate, doubts persisted. Bitconnect’s own cryptocurrency quickly lost as much as 90% For several days this week, Bitconnect said it had come under a “continuous” cyberattack known as a denial-of-service, depriving customers of their ability to withdraw money. Following the shutdown announcement, some users continued to report problems when they tried to sell their positions. Now some Bitconnect investors, fearing they won’t be able to collect, are lamenting on social media that they’ve lost anywhere from a few thousand dollars to their entire
“family’s savings.”
Indeed, the sudden halt of Bitconnect drew parallels to Mt. Gox, a major cryptocurrency exchange that shuttered in 2014 after losing virtually all its Bitcoins—largely through a massive hack, but also through the
alleged embezzlement and mismanagement of its CEO. The Mt. Gox collapse precipitated a Bitcoin price crash of more than 70%, shaking investors’ confidence in the cryptocurrency for so long that it took Bitcoin more than two years to recover.
While many cryptocurrencies have been in bear market territory since a correction that began in late December, this week has been especially bloody for investors, with the Bitcoin and Ethereum prices down nearly 40% in the past two days, and Ripple shedding nearly half its value over the same period. By late Wednesday afternoon, the Bitcoin price had bounced back above $10,000 but still remained far below its peak of $20,000 a month ago.
Adding to the Bitconnect concerns was a crop of attempts by apparent scammers to take advantage of the confusion to trick users into handing over the contents of their cryptocurrency wallets. On Twitter, accounts that presented themselves as Bitconnect customer support but appeared to have been set up only after the service shut down, such as
@BitconnectStaff and
@BitConnectExch , seemed to prey on users desperate to get their money off the platform by suggesting they send all their cryptocurrency to a separate digital wallet address. Because such a transaction would be irreversible and difficult, if not impossible, to trace, observers quickly recognized the hallmark of a scam in which the senders would likely be diverting their funds to the criminals, never to see them again.
In explaining its reasons for closing shop, Bitconnect cited the relentless cyberattacks it was experiencing along with “bad press” and “cease and desist” letters it received from two U.S. securities regulators. The threat of governments cracking down on cryptocurrency trading has been a major driver behind the ongoing market selloff, with prices taking a dive after reports this week that regulators in China and South Korea were looking to ban cryptocurrency exchanges.
Although hacks and scams have plagued cryptocurrency exchanges worldwide, even afflicting leading platform Coinbase, the San Francisco-based exchange that has been likened to the industry’s “Goldman Sachs,” a new report this week also shone a light on the acute threat facing South Korea. Recorded Future, a cybersecurity firm, published an
analysis Tuesday laying out evidence that North Korean hackers—the same group, known as Lazarus, blamed for the infamous hack of Sony Pictures Entertainment in 2014—were systematically targeting and plundering South Korean cryptocurrency exchanges.
Meanwhile, hackers used a different method of attack last weekend to steal $400,000 worth of the cryptocurrency Lumens, used on the Stellar digital payment system, from an online wallet service called BlackWallet. The wallet service has been offline ever since.
SPONSORED FINANCIAL CONTENT
Exponential technological change is coming, are you prepared?
Tomorrow Augmented
What are the characteristics of short duration bonds?
AXA Investment Managers
Where is the clever money going?
MarketViews
Latin America’s Renewable Energy Revolution
LatAm Investors
Actively Riding the Wave of ‘Creative Disruption’
Allianz Global Investors
The Risk of Doing Nothing
Waverton
You May Like
TECH
Despite Crashes, 6 of the Top 10 Cryptocurrencies Are Still Showing Gains in the Past Month
THE LEDGER
As Bitcoin Prices Plunge, Overstock, Square Shareholders Also Hurt
SPORTS
You'll Soon Be Able to Buy Dallas Mavericks Tickets With Bitcoin
TECH
As Bitcoin, Ethereum, and Ripple Plunge, These Cryptocurrencies Are on the Rise
FINANCE
France's Newly-Appointed 'Monsieur Bitcoin' Is a Notable Cryptocurrency Skeptic
Stories From
Read More
Subscribe & Save
Subscribe today and save 79% off the cover price.
SUBSCRIBE NOW
40 Under 40
100 Best Companies to Work For
Fortune 500
Global 500
Most Powerful Women in Business
World's 50 Greatest Leaders
World's Most Admired Companies
All Rankings Home
Automotive
Careers
Design
Energy & Environment
Executive Travel
Finance
Commentary
Health
International
Leadership
Luxury
Markets
Most Powerful Women
Retail
Sports Technology
The Ledger
Venture
Photography
Podcasts
Videos
Newsletters
Magazine
Fortune Knowledge Group
Fortune Data Store
Fortune Conferences
TIME Health
Customer Service
Site Map
Privacy Policy
Advertising Subscribe
Give a Gift
Ad Choices
Terms of Use
Your California Privacy Rights
Time Inc. Careers
© 2017 Time Inc. All Rights Reserved. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy ( Your California Privacy Rights ).
Fortune may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
Quotes delayed at least 15 minutes. Market data provided by Interactive Data . ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html .
S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.
Terms & Conditions . Powered and implemented by Interactive Data Managed Solutions . BITCOIN
This Is Why Cryptocurrencies Are...
And how the market can right itself. 
BitConnect really seems like a scam. an old school ponzi … bad actors hurt the community. period. #bitcoin #ether
— Michael Novogratz