(Bloomberg) -- Federal regulators sued five individuals for helping BitConnect, a cryptocurrency exchange platform, raise more than $2 billion from retail investors in an offering that wasn’t registered with the U.S. Securities and Exchange Commission.
The SEC sued the promoters for advertising the merit’s of BitConnect’s “lending program” in 2017 by creating testimonials on YouTube, sometimes multiple times a day, according to a Friday statement from the SEC. The promoters received commissions based on their success in attracting investor cash with one individual earning more than $2.6 million.
“We allege that these defendants unlawfully sold unregistered digital asset securities by actively promoting the BitConnect lending program to retail investors,” said Lara Shalov Mehraban, an associate regional director for the SEC’s New York office.
BitConnect closed its exchange in January 2018 after receiving two cease-and-desist letters from state authorities for the unauthorized sale of securities and suffering from denial-of-service attacks. BitConnect offered to let people receive interest on their digital coin balance by lending or investing their capital.
The SEC has been sounding the alarm over initial coin offerings for years, arguing that the sales are likely securities that must comply with federal rules. The regulator has warned individual investors of the risks in buying the tokens, cautioning that scammers might be using them to lure investors into frauds.