WEBVTT 00:00:00.000 --> 00:00:01.520 Okay, I want you to close your eyes for a second. 00:00:01.740 --> 00:00:04.400 Just picture this. It's a stage. It's October 00:00:04.400 --> 00:00:07.240 2017. We're in Pattaya, Thailand. The air is, 00:00:07.299 --> 00:00:09.140 you know, thick. It's humid. I can already feel 00:00:09.140 --> 00:00:11.460 it. Yeah, right. There are strobe lights just 00:00:11.460 --> 00:00:12.919 cutting through the dark. There's this heavy 00:00:12.919 --> 00:00:15.119 bass music that's just thumping in your chest. 00:00:15.560 --> 00:00:17.719 And there's a man in the center of the spotlight 00:00:17.719 --> 00:00:20.839 who is, um... Well, he's practically vibrating 00:00:20.839 --> 00:00:23.019 with energy. Oh, I know exactly who you're talking 00:00:23.019 --> 00:00:26.199 about. The man, the myth, the living meme. He 00:00:26.199 --> 00:00:27.980 grabs the microphone. He's sweating right through 00:00:27.980 --> 00:00:30.300 his suit. And he doesn't just speak to the crowd. 00:00:30.460 --> 00:00:36.399 He unleashes this guttural, cracking, high -pitched 00:00:36.399 --> 00:00:39.579 scream that I think is permanently burned into 00:00:39.579 --> 00:00:42.259 the auditory cortex of anyone who used the internet 00:00:42.259 --> 00:00:45.159 in 2017. Wassup, wassup, wassup, wassup, bitkiness, 00:00:45.159 --> 00:00:48.759 cct. There it is. It is iconic. I mean, it is. 00:00:49.000 --> 00:00:52.140 arguably the most famous or maybe infamous soundbite 00:00:52.140 --> 00:00:54.280 in the entire history of the cryptocurrency industry. 00:00:54.479 --> 00:00:56.399 It's like the I have a dream speech of financial 00:00:56.399 --> 00:00:59.000 disasters. That's the perfect way to put it. 00:00:59.060 --> 00:01:01.399 Because if you spend any time online, you've 00:01:01.399 --> 00:01:03.679 seen the remixes, you've seen the parodies. It's 00:01:03.679 --> 00:01:07.439 this moment of just pure, hilarious cringe. It 00:01:07.439 --> 00:01:09.799 really is. It's a bald guy from New York City 00:01:09.799 --> 00:01:12.620 just losing his absolute mind with excitement. 00:01:13.180 --> 00:01:15.579 But, and this is the pivot, this is the really 00:01:15.579 --> 00:01:18.129 important part for our Deep Dives today. When 00:01:18.129 --> 00:01:21.290 I look at that video now, I don't laugh. No. 00:01:21.409 --> 00:01:23.450 And frankly, you shouldn't. It's not funny anymore. 00:01:23.650 --> 00:01:26.469 Not at all. Because that scream wasn't just some 00:01:26.469 --> 00:01:29.010 funny guy on a stage in Thailand. That scream 00:01:29.010 --> 00:01:31.870 was the sound of a financial catastrophe happening 00:01:31.870 --> 00:01:34.730 in real time. It was the sound of thousands and 00:01:34.730 --> 00:01:36.890 thousands of people about to lose their life 00:01:36.890 --> 00:01:39.129 savings. That is the perfect way to frame it. 00:01:39.189 --> 00:01:42.230 It is so easy to get distracted by the spectacle, 00:01:42.390 --> 00:01:46.420 by the sheer absurdity of the presentation. But 00:01:46.420 --> 00:01:48.239 if you strip away the Internet humor, if you 00:01:48.239 --> 00:01:50.180 get rid of the memes, what you are looking at 00:01:50.180 --> 00:01:52.500 is one of the most devastating financial frauds 00:01:52.500 --> 00:01:54.219 of the last decade. And we are talking about 00:01:54.219 --> 00:01:56.200 staggering numbers here. This wasn't a small 00:01:56.200 --> 00:01:58.659 -time operation. Oh, not at all. We are. The 00:01:58.659 --> 00:02:00.819 Securities and Exchange Commission, the SEC, 00:02:01.099 --> 00:02:03.719 they eventually put a number on it. They estimated 00:02:03.719 --> 00:02:07.159 the size of this fraud at around $2 .4 billion. 00:02:07.780 --> 00:02:10.599 A billion. With a B. With a B. It's a number 00:02:10.599 --> 00:02:13.300 that's almost hard to comprehend. It is honestly 00:02:13.300 --> 00:02:15.919 hard to reconcile those two things. the funny 00:02:15.919 --> 00:02:19.439 screaming man from the meme, and a multi -billion 00:02:19.439 --> 00:02:22.620 dollar federal crime. But that is exactly our 00:02:22.620 --> 00:02:24.919 mission for this deep dive. We are going to go 00:02:24.919 --> 00:02:28.120 behind the meme. We need to really understand 00:02:28.120 --> 00:02:30.879 how an open source cryptocurrency, something 00:02:30.879 --> 00:02:32.960 that looked... you know, legitimate on paper 00:02:32.960 --> 00:02:35.560 morphed into a history making Ponzi scheme. And 00:02:35.560 --> 00:02:37.599 to do that, we have to look under the hood. We 00:02:37.599 --> 00:02:40.219 can't just say it was a scam and move on. We 00:02:40.219 --> 00:02:42.280 need to take apart the specific mechanics. We 00:02:42.280 --> 00:02:44.240 need to look at this so -called lending platform 00:02:44.240 --> 00:02:48.360 they built and the the very mysterious trading 00:02:48.360 --> 00:02:51.020 bot that was supposed to be the engine of infinite 00:02:51.020 --> 00:02:52.560 wealth. And we're going to trace that timeline 00:02:52.560 --> 00:02:54.919 from BitConnect being a top 20 cryptocurrency. 00:02:55.629 --> 00:02:58.250 which is just wild to even think about now, all 00:02:58.250 --> 00:03:01.349 the way to a single day in January 2018 where 00:03:01.349 --> 00:03:04.689 it lost 92 % of its value. It's just gone, evaporated. 00:03:04.870 --> 00:03:07.830 Yeah. Our source material for this whole discussion 00:03:07.830 --> 00:03:10.889 is the comprehensive Wikipedia record. It covers 00:03:10.889 --> 00:03:13.789 the history, the collapse, the legal proceedings, 00:03:14.030 --> 00:03:16.370 and, of course, the cultural impact. It paints 00:03:16.370 --> 00:03:18.789 a very, very grim picture, honestly. It really 00:03:18.789 --> 00:03:21.129 does. It serves as a master class in critical 00:03:21.129 --> 00:03:25.340 thinking. Or maybe... a masterclass in how easily 00:03:25.340 --> 00:03:28.020 critical thinking can be suspended when greed 00:03:28.020 --> 00:03:30.849 takes the wheel. So let's start at the very beginning, 00:03:30.969 --> 00:03:33.689 before the scream, before the crash. If I was 00:03:33.689 --> 00:03:36.449 a crypto investor back in 2016 and I'm looking 00:03:36.449 --> 00:03:38.550 for the next big thing, what was BitConnect? 00:03:38.729 --> 00:03:40.710 Because it wasn't just a website with a donate 00:03:40.710 --> 00:03:42.710 button, was it? It had a ticker symbol. It was 00:03:42.710 --> 00:03:44.710 on the charts. Right. And that's a crucial point. 00:03:45.210 --> 00:03:47.710 BitConnect, ticker symbol BCC. It launched around 00:03:47.710 --> 00:03:50.509 2016. And this is vital to understanding how 00:03:50.509 --> 00:03:52.610 so many people fell for this. BitConnect did 00:03:52.610 --> 00:03:54.629 a very, very good job of establishing what I 00:03:54.629 --> 00:03:56.870 call the veneer of legitimacy. Meaning it looked 00:03:56.870 --> 00:03:59.169 like the real deal from the outside. Exactly. 00:03:59.270 --> 00:04:01.949 It was presented as an open source cryptocurrency. 00:04:02.629 --> 00:04:05.250 Now, in the tech world, open source is usually 00:04:05.250 --> 00:04:08.229 a badge of honor. It implies transparency. It 00:04:08.229 --> 00:04:10.629 implies here's our code. You can check it yourself. 00:04:10.830 --> 00:04:13.330 We have nothing to hide. So they actually released 00:04:13.330 --> 00:04:15.490 the code for the coin itself. You could go on 00:04:15.490 --> 00:04:18.490 like a GitHub and see it. Yes. The source material 00:04:18.490 --> 00:04:21.470 notes that it used a hybrid timestamping scheme. 00:04:21.990 --> 00:04:24.810 It was a mix of proof of stake and proof of work. 00:04:24.889 --> 00:04:28.509 These are legitimate, established consensus mechanisms. 00:04:28.769 --> 00:04:31.029 OK, let's pause there for a second. I don't want 00:04:31.029 --> 00:04:32.930 to get totally bogged down in the deep technical 00:04:32.930 --> 00:04:36.009 weeds. But for anyone listening who isn't, you 00:04:36.009 --> 00:04:38.670 know, mining Bitcoin in their basement, what 00:04:38.670 --> 00:04:41.149 does that hybrid model actually mean? And why 00:04:41.149 --> 00:04:43.790 does that specific choice make it look so legitimate? 00:04:44.379 --> 00:04:47.139 Sure. So proof of work is the model that Bitcoin 00:04:47.139 --> 00:04:49.120 uses. You have computers, we call them miners, 00:04:49.300 --> 00:04:52.100 burning a ton of electricity to solve these incredibly 00:04:52.100 --> 00:04:55.060 complex math problems. It's what secures the 00:04:55.060 --> 00:04:57.839 network and creates new coins. It's hard work, 00:04:57.939 --> 00:04:59.759 hence the name. Right. That's the one everyone's 00:04:59.759 --> 00:05:02.000 heard of. Then you have proof of stake. That's 00:05:02.000 --> 00:05:04.680 different. Instead of computational power, you 00:05:04.680 --> 00:05:07.389 validate transactions based on how many... Coins 00:05:07.389 --> 00:05:09.310 you already hold and are willing to stake as 00:05:09.310 --> 00:05:11.870 collateral, you have a stake in the network. 00:05:11.930 --> 00:05:14.910 So you earn interest for helping secure it. It's 00:05:14.910 --> 00:05:16.870 much more energy efficient. And BitConnect said 00:05:16.870 --> 00:05:19.089 they were using both of these. They used a hybrid 00:05:19.089 --> 00:05:21.850 of both. And here's the kicker. Technologically, 00:05:22.170 --> 00:05:27.569 the coin itself, the BCC token, it actually functioned. 00:05:27.569 --> 00:05:30.610 It had a working blockchain. You could download 00:05:30.610 --> 00:05:33.709 a wallet. You could send BCC to me. I could receive 00:05:33.709 --> 00:05:36.800 it. It would confirm on the network. So the car 00:05:36.800 --> 00:05:39.079 had an engine. It wasn't just a cardboard cut 00:05:39.079 --> 00:05:41.100 out of a car. It could actually drive down the 00:05:41.100 --> 00:05:43.100 road. The car could drive. And that is precisely 00:05:43.100 --> 00:05:45.920 why it was so dangerous. Right. The problem wasn't 00:05:45.920 --> 00:05:48.660 the car. The problem was the dealership and the 00:05:48.660 --> 00:05:51.540 absolutely insane financing plan they were selling 00:05:51.540 --> 00:05:54.519 along with the car. The coin wasn't the product. 00:05:54.600 --> 00:05:56.779 The coin was just the poker chip for the casino 00:05:56.779 --> 00:05:58.839 they built on top of it. Right. Because nobody 00:05:58.839 --> 00:06:01.480 was just buying Big Connect coin to hold it in 00:06:01.480 --> 00:06:03.459 a wallet and look at it. They were buying it 00:06:03.459 --> 00:06:06.019 for the value proposition. Correct. The core 00:06:06.019 --> 00:06:08.259 pitch of BitConnect, the thing that drove the 00:06:08.259 --> 00:06:11.040 mania, was the lending platform. This was the 00:06:11.040 --> 00:06:13.259 hook. This was the whole game. OK, so walk me 00:06:13.259 --> 00:06:15.420 through the user experience here. It's the late 00:06:15.420 --> 00:06:19.220 2017. I've got some Bitcoin, real actual Bitcoin 00:06:19.220 --> 00:06:21.459 that I bought on a legitimate exchange. Right. 00:06:21.540 --> 00:06:24.000 I hear about BitConnect. What do I do? OK, so 00:06:24.000 --> 00:06:26.480 step one, you send your precious Bitcoin. to 00:06:26.480 --> 00:06:28.879 the BitConnect exchange, a one -way trip. Step 00:06:28.879 --> 00:06:32.399 two, you use that Bitcoin to buy their proprietary 00:06:32.399 --> 00:06:36.480 BitConnect coin, BCC. Now you are holding their 00:06:36.480 --> 00:06:38.459 chips. Okay, so I've swapped my gold for their 00:06:38.459 --> 00:06:41.339 casino tokens. I'm in their ecosystem now. Exactly. 00:06:42.000 --> 00:06:44.180 Now, step three, and this is the crucial part. 00:06:44.300 --> 00:06:47.779 You lend those BCC tokens back to the platform. 00:06:47.899 --> 00:06:50.339 You lock them up. You freeze them for a set period. 00:06:50.399 --> 00:06:53.079 Maybe it's 120 days. Maybe it's 299 days. It 00:06:53.079 --> 00:06:55.120 depended on how much capital you put in. You 00:06:55.120 --> 00:06:57.740 literally cannot touch that principal investment. 00:06:58.000 --> 00:07:00.040 And in exchange for letting them hold my money 00:07:00.040 --> 00:07:03.350 hostage. What do I get? In exchange, they promised 00:07:03.350 --> 00:07:06.050 you interest payments. But this wasn't just put 00:07:06.050 --> 00:07:08.850 it in a savings account for 0 .5 % a year interest. 00:07:09.129 --> 00:07:11.629 This is where the physics of finance just completely 00:07:11.629 --> 00:07:13.910 break down. What kind of numbers are we talking 00:07:13.910 --> 00:07:15.949 about here? Because people were losing their 00:07:15.949 --> 00:07:17.829 minds over this. The interest was calculated 00:07:17.829 --> 00:07:21.610 daily. Daily. Not annually. Daily. Daily. And 00:07:21.610 --> 00:07:25.160 the rates they were citing? The sources mention 00:07:25.160 --> 00:07:28.220 these impossibly high payouts. We are talking 00:07:28.220 --> 00:07:30.740 about an average of around 1 % daily interest. 00:07:30.939 --> 00:07:32.959 Okay. I want to stop here. I really want to dig 00:07:32.959 --> 00:07:36.079 into the math of 1 % daily interest because I 00:07:36.079 --> 00:07:38.600 think our brains, you know, we're wired for linear 00:07:38.600 --> 00:07:40.839 progression. We hear 1 % and we think, oh, that's 00:07:40.839 --> 00:07:42.860 not much. That's a penny on the dollar. We are 00:07:42.860 --> 00:07:44.980 terrible at intuitively understanding exponential 00:07:44.980 --> 00:07:47.319 math. It's a genuine blind spot for the human 00:07:47.319 --> 00:07:49.879 brain. We just can't process it. I ran a quick 00:07:49.879 --> 00:07:51.839 calculation on this before we started just to 00:07:51.839 --> 00:07:53.860 see what that actually looks like in practice. 00:07:54.360 --> 00:07:57.740 Let's say I put $1 ,000 into this system. And 00:07:57.740 --> 00:07:59.740 let's be conservative. Let's say I just take 00:07:59.740 --> 00:08:01.439 the interest out every day and put it in my pocket. 00:08:01.819 --> 00:08:06.180 That's $10 a day. Right. 365 days a year. That's 00:08:06.180 --> 00:08:10.540 $3 ,650 in a year. That's a 365 % annual return, 00:08:10.779 --> 00:08:14.060 which is already insane. That's already beating 00:08:14.060 --> 00:08:16.220 the greatest investors in human history by a 00:08:16.220 --> 00:08:18.680 factor of 10 or 20. But that's not what people 00:08:18.680 --> 00:08:21.459 did. That wasn't the real allure. They compounded 00:08:21.459 --> 00:08:23.360 it. Right. They hit the little reinvest button 00:08:23.360 --> 00:08:26.399 on the dashboard. Yeah. So if you compound 1%. 00:08:27.919 --> 00:08:31.399 Daily. A thousand dollars becomes what at the 00:08:31.399 --> 00:08:33.500 end of year one. It creates a curve that goes 00:08:33.500 --> 00:08:37.000 vertical. If you reinvest every single day, that 00:08:37.000 --> 00:08:39.159 initial one thousand dollars becomes roughly 00:08:39.159 --> 00:08:42.080 thirty seven thousand seven hundred dollars at 00:08:42.080 --> 00:08:45.000 the end of one year. From one thousand to over 00:08:45.000 --> 00:08:48.240 thirty seven thousand. in 12 months. And people 00:08:48.240 --> 00:08:49.840 were seeing this on their dashboards. They were 00:08:49.840 --> 00:08:52.080 watching it happen. What about two years? If 00:08:52.080 --> 00:08:53.860 you just let it ride for two years? I'm glad 00:08:53.860 --> 00:08:57.159 you asked. It's roughly $1 .4 million from a 00:08:57.159 --> 00:08:59.960 $1 ,000 investment. Okay. That should be the 00:08:59.960 --> 00:09:01.679 red flag right there, shouldn't it? I mean, that's 00:09:01.679 --> 00:09:03.840 the only red flag you need. If you could turn 00:09:03.840 --> 00:09:07.399 $1 ,000 into over a million in two years with 00:09:07.399 --> 00:09:10.960 zero effort and zero risk, why would anyone work? 00:09:11.100 --> 00:09:14.120 Why would banks even exist? That is the ultimate 00:09:14.120 --> 00:09:17.039 question. It defies the laws of thermodynamics 00:09:17.039 --> 00:09:20.340 in economics. Money cannot be created out of 00:09:20.340 --> 00:09:22.539 thin air at that rate. If you have a machine 00:09:22.539 --> 00:09:24.220 that prints money like that, you don't share 00:09:24.220 --> 00:09:26.460 it. You don't ask strangers on the Internet for 00:09:26.460 --> 00:09:28.259 their hundred dollar investments. You just run 00:09:28.259 --> 00:09:30.559 the machine yourself and become the richest person 00:09:30.559 --> 00:09:32.950 on Earth in about three years. But they had an 00:09:32.950 --> 00:09:34.409 answer for that, didn't they? They didn't just 00:09:34.409 --> 00:09:36.669 say, trust us, it's magic. They had a story, 00:09:36.809 --> 00:09:40.389 a secret sauce. They did. And this is where we 00:09:40.389 --> 00:09:43.330 get to the infamous trading bot. The magical 00:09:43.330 --> 00:09:45.809 money printing trading bot. The sources describe 00:09:45.809 --> 00:09:48.250 this as the most controversial and also the most 00:09:48.250 --> 00:09:50.769 essential piece of the whole fiction. The claim 00:09:50.769 --> 00:09:52.470 was that they had developed this proprietary 00:09:52.470 --> 00:09:56.129 volatility software. Volatility software. Yeah. 00:09:56.169 --> 00:09:58.549 Sounds very technical. Very Wall Street. It does. 00:09:58.610 --> 00:10:01.730 It sounds sophisticated. The pitch was this. 00:10:02.279 --> 00:10:04.860 Bitcoin is volatile. It goes up and down violently. 00:10:05.059 --> 00:10:08.480 Our bot trades that volatility. It buys low and 00:10:08.480 --> 00:10:11.559 sells high thousands of times a day, faster than 00:10:11.559 --> 00:10:14.179 a human ever could. And because the crypto market 00:10:14.179 --> 00:10:16.799 is so crazy, there is always profit to be made, 00:10:16.860 --> 00:10:18.639 regardless of whether the market is going up 00:10:18.639 --> 00:10:21.220 or down. So it's the classic black box defense. 00:10:21.740 --> 00:10:23.700 Don't worry your pretty little head about how 00:10:23.700 --> 00:10:26.779 it works. It's a super secret algorithm. It's 00:10:26.779 --> 00:10:29.440 AI. It's too complicated for you to understand. 00:10:29.659 --> 00:10:32.879 Just look at the dashboard. Exactly. It's a very... 00:10:32.909 --> 00:10:34.690 common trope in financial fraud. You look at 00:10:34.690 --> 00:10:36.850 Bernie Madoff. He had a split strike conversion 00:10:36.850 --> 00:10:39.309 strategy that nobody was ever allowed to see. 00:10:39.649 --> 00:10:42.309 In BitConnect's case, the trading bot was the 00:10:42.309 --> 00:10:44.250 black box. You couldn't see the trades. You couldn't 00:10:44.250 --> 00:10:46.309 audit the code. You just saw a number on a screen 00:10:46.309 --> 00:10:49.250 saying, congratulations, you made $400 today. 00:10:49.450 --> 00:10:51.730 And that number on the screen is a powerful drug. 00:10:51.970 --> 00:10:54.710 It is a hallucinogen. When you log in every single 00:10:54.710 --> 00:10:56.490 morning and you see your balance growing like 00:10:56.490 --> 00:10:58.909 that, you stop asking questions. You stop wondering 00:10:58.909 --> 00:11:00.889 how it works and you just get excited that it 00:11:00.889 --> 00:11:03.580 is working. But I have to ask the obvious question, 00:11:03.840 --> 00:11:07.399 was there a bot? No. There was no bot. There 00:11:07.399 --> 00:11:09.139 was no volatility software. There was nothing. 00:11:09.320 --> 00:11:11.840 So where was the money coming from? If I put 00:11:11.840 --> 00:11:15.220 in $1 ,000 and six months later I cash out $5 00:11:15.220 --> 00:11:18.799 ,000, who paid me? The person who joined the 00:11:18.799 --> 00:11:21.179 day after you, it was a textbook Ponzi scheme. 00:11:21.500 --> 00:11:24.559 The profits being paid out to the early investors 00:11:24.559 --> 00:11:27.720 were simply the principal deposits of the new 00:11:27.720 --> 00:11:30.120 investors. I pay Paul with the money I just took 00:11:30.120 --> 00:11:32.980 from Peter. Precisely. And this is why the structure 00:11:32.980 --> 00:11:35.840 had to include that aggressive multi -level marketing 00:11:35.840 --> 00:11:39.299 or MLM component. It wasn't just a feature. It 00:11:39.299 --> 00:11:41.759 was a requirement for survival. Right. The referral 00:11:41.759 --> 00:11:44.000 bonuses. Yeah. That makes so much sense now. 00:11:44.139 --> 00:11:46.799 A Ponzi scheme is like a shark. If it stops swimming, 00:11:46.980 --> 00:11:49.779 it dies. If new money stops flowing in, the whole 00:11:49.779 --> 00:11:51.840 thing collapses instantly because there is no 00:11:51.840 --> 00:11:55.120 underlying value generation. So they had to incentivize 00:11:55.120 --> 00:11:57.860 the users to become the sales force. Which explains 00:11:57.860 --> 00:12:00.059 the whole YouTube phenomenon around Big Connect. 00:12:00.299 --> 00:12:02.179 It wasn't just people sharing a cool investment 00:12:02.179 --> 00:12:04.440 tip. It was people actively trying to get their 00:12:04.440 --> 00:12:07.529 commission. You had grandmothers, college students, 00:12:07.830 --> 00:12:10.190 random people recording videos in their cars, 00:12:10.269 --> 00:12:13.830 all shouting, join my team, use my link. They 00:12:13.830 --> 00:12:17.470 were weaponized promoters. The source mentions 00:12:17.470 --> 00:12:19.669 a tiered structure. If you bring in someone, 00:12:19.870 --> 00:12:21.970 you get a percentage of their deposit. If they 00:12:21.970 --> 00:12:23.789 bring in someone, you get a smaller percentage 00:12:23.789 --> 00:12:26.929 of that and so on. It turns the victims into 00:12:26.929 --> 00:12:29.649 the perpetrators in a way. It does. It's a very 00:12:29.649 --> 00:12:32.379 sinister mechanism. You aren't just losing your 00:12:32.379 --> 00:12:35.259 own money. You are actively encouraged to drag 00:12:35.259 --> 00:12:37.419 your friends and your family down with you. It 00:12:37.419 --> 00:12:39.659 spreads like a virus. Now, I want to touch on 00:12:39.659 --> 00:12:41.639 one other mechanism that I found really interesting 00:12:41.639 --> 00:12:45.340 in the research, the liquidity trap. Because 00:12:45.340 --> 00:12:47.179 they didn't pay you in Bitcoin and they didn't 00:12:47.179 --> 00:12:49.399 pay you in dollars. This is subtle, but it's 00:12:49.399 --> 00:12:51.399 the absolute key to how they kept the illusion 00:12:51.399 --> 00:12:54.360 going for as long as they did. When your dashboard 00:12:54.360 --> 00:12:57.019 said you earned interest, it showed that value 00:12:57.019 --> 00:13:00.690 in U .S. dollars. You earned $50. but you couldn't 00:13:00.690 --> 00:13:02.909 withdraw dollars. So I have a number on a screen 00:13:02.909 --> 00:13:05.250 that says $50. How do I turn that into something 00:13:05.250 --> 00:13:07.809 I can buy groceries with? Well, first, you have 00:13:07.809 --> 00:13:12.379 to convert that $50 balance into... BCC the BitConnect 00:13:12.379 --> 00:13:14.299 coin at whatever the current market rate was. 00:13:14.500 --> 00:13:17.220 Then you have to take that BCC and sell it on 00:13:17.220 --> 00:13:19.600 their own internal exchange for Bitcoin. And 00:13:19.600 --> 00:13:21.440 then you could finally move the Bitcoin to an 00:13:21.440 --> 00:13:23.779 external exchange and cash out to your bank. 00:13:23.960 --> 00:13:25.700 So to get your profits out, you have to first 00:13:25.700 --> 00:13:28.919 buy their coin. Yes. The liquidity of the BCC 00:13:28.919 --> 00:13:31.360 cryptocurrency was effectively funding users' 00:13:31.500 --> 00:13:34.200 ability to exchange their earnings. As long as 00:13:34.200 --> 00:13:36.519 new people were buying BCC to get into the lending 00:13:36.519 --> 00:13:38.940 program to start their loans, the price of BCC 00:13:38.940 --> 00:13:41.960 kept going up. Wow. It's a self -fulfilling prophecy. 00:13:42.500 --> 00:13:45.240 The scam itself creates the demand for the token, 00:13:45.419 --> 00:13:47.600 which artificially inflates the price of the 00:13:47.600 --> 00:13:50.379 token, which in turn makes the scam look even 00:13:50.379 --> 00:13:52.259 more successful and legitimate. It's a perfect 00:13:52.259 --> 00:13:55.100 circle of fraud. Until the music stops. And the 00:13:55.100 --> 00:13:56.820 music started to get a little dissonant towards 00:13:56.820 --> 00:13:59.740 the end of 2017. Which brings us to the next 00:13:59.740 --> 00:14:02.519 section of our outline. The walls close in. Because 00:14:02.519 --> 00:14:05.080 you can't run a multi -billion dollar fraud this 00:14:05.080 --> 00:14:08.759 loudly forever without someone somewhere noticing. 00:14:09.259 --> 00:14:11.539 No, you cannot, especially not when you're holding 00:14:11.539 --> 00:14:13.759 massive conferences in Thailand and screaming 00:14:13.759 --> 00:14:16.720 about it on YouTube. The first major blow came 00:14:16.720 --> 00:14:19.879 from the United Kingdom. On November 7th, 2017, 00:14:20.440 --> 00:14:23.480 the UK Registrar of Companies issued a strike 00:14:23.480 --> 00:14:25.899 off notice. A strike off notice. That sounds 00:14:25.899 --> 00:14:28.200 pretty serious. What does that mean in practice? 00:14:28.480 --> 00:14:31.450 It's basically the government saying. We don't 00:14:31.450 --> 00:14:33.529 think you're a real company. You have two months 00:14:33.529 --> 00:14:35.990 to prove your legitimacy, to show us your books, 00:14:36.070 --> 00:14:38.730 or we are forcibly dissolving you and seizing 00:14:38.730 --> 00:14:41.169 any assets we can find in our jurisdiction. Two 00:14:41.169 --> 00:14:44.070 months? That is a ticking clock. That must have 00:14:44.070 --> 00:14:46.169 set off alarm bells everywhere. It should have. 00:14:46.509 --> 00:14:49.610 But here is the fascinating and terrifying thing 00:14:49.610 --> 00:14:52.690 about crowd psychology. The UK warning comes 00:14:52.690 --> 00:14:55.120 out in November. But the price of BitConnect 00:14:55.120 --> 00:14:58.139 didn't crash. In fact, it kept going up. Wait, 00:14:58.200 --> 00:15:00.519 really? The government of a major Western country 00:15:00.519 --> 00:15:02.740 says this looks fake and people just kept buying. 00:15:03.080 --> 00:15:05.159 Not only did they keep buying, the price of the 00:15:05.159 --> 00:15:08.179 BCC coin hit its all -time high in December of 00:15:08.179 --> 00:15:12.100 2017, a full month after the UK warning. It reached 00:15:12.100 --> 00:15:16.860 nearly $463 per coin. That is just wild. It's 00:15:16.860 --> 00:15:18.700 like standing on the deck of the Titanic, seeing 00:15:18.700 --> 00:15:20.899 the iceberg dead ahead, and deciding to buy an 00:15:20.899 --> 00:15:24.220 upgrade to a better cabin. Greed is a powerful 00:15:24.220 --> 00:15:27.080 blinder. And you have to remember the context. 00:15:27.820 --> 00:15:30.759 The crypto market as a whole was in an absolute 00:15:30.759 --> 00:15:35.179 frenzy in late 2017. Bitcoin was rocketing towards 00:15:35.179 --> 00:15:39.080 $20 ,000 for the first time. People felt invincible. 00:15:39.519 --> 00:15:44.259 They dismissed the UK warning as FUD fear, uncertainty 00:15:44.259 --> 00:15:47.080 and doubt. Right. The classic crypto excuse. 00:15:47.320 --> 00:15:48.980 They said the government just doesn't understand 00:15:48.980 --> 00:15:51.000 the tech. They're old. They're slow. They don't 00:15:51.000 --> 00:15:53.299 understand the magic of the bot. Exactly. But 00:15:53.299 --> 00:15:55.139 then the United States got involved. And when 00:15:55.139 --> 00:15:57.240 U .S. regulators decide to step in, things... 00:15:57.259 --> 00:15:59.240 tend to move a lot faster. And specifically, 00:15:59.480 --> 00:16:01.700 the great state of Texas got involved. January 00:16:01.700 --> 00:16:04.440 3rd, 2018. This is the critical date. This is 00:16:04.440 --> 00:16:06.960 the beginning of the end. The Texas State Securities 00:16:06.960 --> 00:16:10.039 Board issued an emergency cease and desist order. 00:16:10.259 --> 00:16:12.259 And Texas doesn't really mince words, do they? 00:16:12.590 --> 00:16:14.769 They do not. They didn't just say this looks 00:16:14.769 --> 00:16:17.389 suspicious. They explicitly called it a Ponzi 00:16:17.389 --> 00:16:21.210 scheme. They cited failings in transparency regarding 00:16:21.210 --> 00:16:23.889 how user earnings were generated. They said the 00:16:23.889 --> 00:16:26.350 statements being made by promoters were materially 00:16:26.350 --> 00:16:28.970 misleading. And most importantly, they pointed 00:16:28.970 --> 00:16:31.629 out that BitConnect was not registered to sell 00:16:31.629 --> 00:16:35.009 securities. Which is a huge deal. If you're selling 00:16:35.009 --> 00:16:37.409 an investment that pays people interest, that's 00:16:37.409 --> 00:16:39.570 a security. You have to register with the SEC 00:16:39.570 --> 00:16:42.429 or state boards. You can't just operate in the 00:16:42.429 --> 00:16:45.190 shadows like that. Exactly. And almost simultaneously, 00:16:45.490 --> 00:16:47.529 the North Carolina Secretary of State Securities 00:16:47.529 --> 00:16:49.570 Division issued their own warning for the same 00:16:49.570 --> 00:16:52.169 reason. So now you have pressure mounting from 00:16:52.169 --> 00:16:55.610 two major U .S. jurisdictions on top of the ticking 00:16:55.610 --> 00:16:58.909 clock from the U .K. It's early January 2018. 00:16:59.370 --> 00:17:02.409 U .K. deadline is looming. Texas is saying stop 00:17:02.409 --> 00:17:05.089 immediately. North Carolina is saying stop immediately. 00:17:05.349 --> 00:17:07.670 The pressure inside that organization must have. 00:17:07.720 --> 00:17:09.859 been immense. They knew there was no trading 00:17:09.859 --> 00:17:12.279 bot to show the regulators. The game was up. 00:17:12.359 --> 00:17:14.220 And that leads us directly to the collapse. And 00:17:14.220 --> 00:17:16.539 it happened very, very quickly. So walk us through 00:17:16.539 --> 00:17:19.140 those few days in mid -January, because this 00:17:19.140 --> 00:17:21.799 wasn't a slow decline. This was a cliff dive. 00:17:22.059 --> 00:17:26.319 January 16th and 17th, 2018, the BitConnect administrators 00:17:26.319 --> 00:17:29.380 posted an announcement on their website. They 00:17:29.380 --> 00:17:31.839 were closing the earning platform and the cryptocurrency 00:17:31.839 --> 00:17:35.680 exchange operation. Effective immediately. Just 00:17:35.680 --> 00:17:37.259 like that, flipping a switch and pulling the 00:17:37.259 --> 00:17:40.380 plug. Pulling the plug. They cited the bad press 00:17:40.380 --> 00:17:43.440 and the regulatory pressure from Texas and North 00:17:43.440 --> 00:17:46.180 Carolina as the reasons. They effectively tried 00:17:46.180 --> 00:17:48.880 to frame it as the mean old government is making 00:17:48.880 --> 00:17:51.200 us close our wonderful lending platform. Sorry, 00:17:51.319 --> 00:17:53.460 guys. But wait a minute. If they close the platform, 00:17:53.700 --> 00:17:55.720 what happens to all the money people had loaned 00:17:55.720 --> 00:17:57.839 them? All that Bitcoin that people had locked 00:17:57.839 --> 00:18:00.940 up for 299 days, that's billions of dollars. 00:18:01.200 --> 00:18:03.539 Ah, yes. This brings us to the refund. And I 00:18:03.539 --> 00:18:05.420 want you to hear the huge air quotes around that 00:18:05.420 --> 00:18:07.740 word. BitConnect announced they would refund 00:18:07.740 --> 00:18:10.420 all outstanding loans. OK, that sounds fair. 00:18:10.740 --> 00:18:13.180 I mean, if I gave them $10 ,000 worth of Bitcoin 00:18:13.180 --> 00:18:15.579 and they give me $10 ,000 back, then no harm, 00:18:15.640 --> 00:18:18.059 no foul, right? It sounds fair until you look 00:18:18.059 --> 00:18:20.960 at how they did it. This is the final brutal 00:18:20.960 --> 00:18:25.079 exit scam mechanism. And it is diabolically clever. 00:18:25.690 --> 00:18:27.829 They didn't give people back the Bitcoin they 00:18:27.829 --> 00:18:30.390 had originally invested. They calculated the 00:18:30.390 --> 00:18:33.190 dollar value of your loan at that moment. So 00:18:33.190 --> 00:18:35.910 let's say you had a $10 ,000 active loan on the 00:18:35.910 --> 00:18:38.529 platform. Okay. My dashboard says I have a balance 00:18:38.529 --> 00:18:41.109 of $10 ,000. They paid you back that $10 ,000 00:18:41.109 --> 00:18:44.269 in their own coin, BCC. Okay. I'm still following, 00:18:44.329 --> 00:18:46.390 but I'm getting a bad feeling about this. You 00:18:46.390 --> 00:18:48.869 should. Here is the catch. They determine the 00:18:48.869 --> 00:18:51.740 exchange rate. They valued the BCC they were 00:18:51.740 --> 00:18:56.539 giving you at roughly $363 .62 per coin, which 00:18:56.539 --> 00:18:58.440 was the market average over the last few days 00:18:58.440 --> 00:19:00.980 before they announced the closure. So they give 00:19:00.980 --> 00:19:04.799 me roughly 27 BCC coins and they say, here you 00:19:04.799 --> 00:19:07.220 go. These are worth $10 ,000. Good luck to you. 00:19:07.529 --> 00:19:10.430 Exactly. But now imagine the situation. Every 00:19:10.430 --> 00:19:13.049 single user on the platform has just received 00:19:13.049 --> 00:19:16.329 their entire refund in DCC at the exact same 00:19:16.329 --> 00:19:19.269 moment. The platform is closing. The news is 00:19:19.269 --> 00:19:21.789 out everywhere that it's a scam. What does every 00:19:21.789 --> 00:19:24.130 single person on earth try to do with those coins? 00:19:24.309 --> 00:19:26.970 They sell. Instantly. Everyone hit sell at the 00:19:26.970 --> 00:19:29.569 same time. It's a bank run on a global scale. 00:19:29.789 --> 00:19:33.849 It's a panic sale of epic proportions. Millions 00:19:33.849 --> 00:19:36.490 of coins hit the open market instantly. And who 00:19:36.490 --> 00:19:39.009 is on the other side of that trade? Who is buying? 00:19:39.329 --> 00:19:42.069 Nobody. Absolutely nobody. Nobody. The demand 00:19:42.069 --> 00:19:44.650 drops to zero. The supply shoots to infinity. 00:19:44.890 --> 00:19:47.869 The price crashed 92 percent almost immediately. 00:19:48.109 --> 00:19:49.430 Oh, my God. So I'm saying they're holding these 00:19:49.430 --> 00:19:51.890 27 coins that they told me were worth $10 ,000. 00:19:52.430 --> 00:19:55.170 But five minutes later. they are trading on other 00:19:55.170 --> 00:19:58.990 exchanges for... What? $30, then $20, then eventually 00:19:58.990 --> 00:20:02.690 less than $1. So my $10 ,000 refund is actually 00:20:02.690 --> 00:20:05.049 worth maybe $100 by the time I can even sell 00:20:05.049 --> 00:20:08.170 it. If you're lucky. Correct. And the BitConnect 00:20:08.170 --> 00:20:10.250 founders walk away clean technically. They can 00:20:10.250 --> 00:20:12.730 throw their hands up and say, hey, we refunded 00:20:12.730 --> 00:20:15.049 everyone. We gave you the coins. It's not our 00:20:15.049 --> 00:20:17.029 fault the market crashed afterwards. It's the 00:20:17.029 --> 00:20:19.369 most malicious form of compliance I've ever heard 00:20:19.369 --> 00:20:22.349 of. They wiped out the massive liability of the 00:20:22.349 --> 00:20:24.950 system while leaving the investors holding an 00:20:24.950 --> 00:20:28.289 empty bag. It effectively transfer all the remaining 00:20:28.289 --> 00:20:31.109 wealth from the users to the creators in one 00:20:31.109 --> 00:20:34.420 final. devastating stroke. The internal exchange 00:20:34.420 --> 00:20:37.359 liquidity collapsed completely. It was over. 00:20:37.559 --> 00:20:39.859 And that is the moment the scream from the meme 00:20:39.859 --> 00:20:43.079 turned into a genuine cry for help from thousands 00:20:43.079 --> 00:20:45.559 of people. Indeed. It was absolute devastation. 00:20:45.599 --> 00:20:47.700 The source material is grim. There were suicide 00:20:47.700 --> 00:20:50.059 hotline numbers pinned to the top of the BitConnect 00:20:50.059 --> 00:20:52.319 subreddits. People lost homes. They lost their 00:20:52.319 --> 00:20:54.420 college funds. They lost their entire retirement 00:20:54.420 --> 00:20:57.319 savings. So who is pulling the strings? You don't 00:20:57.319 --> 00:21:00.500 build a $2 .4 billion fraud by accident. Who 00:21:00.500 --> 00:21:02.940 are the architects here? The structure was intentionally 00:21:02.940 --> 00:21:05.740 opaque and anonymous. That's the nature of these 00:21:05.740 --> 00:21:08.380 crypto primes. But legal investigations over 00:21:08.380 --> 00:21:10.259 the last few years have managed to bring some 00:21:10.259 --> 00:21:13.039 names to light. The man identified as the founder, 00:21:13.160 --> 00:21:15.460 the original author of the code, is an Indian 00:21:15.460 --> 00:21:18.759 national named Satish Kumbani. Satish Kumbani. 00:21:18.880 --> 00:21:21.240 For a long time, he was a ghost. a name in a 00:21:21.240 --> 00:21:24.640 white paper. But in February 2022, the U .S. 00:21:24.660 --> 00:21:27.319 Department of Justice finally unsealed an indictment 00:21:27.319 --> 00:21:30.200 against him for money laundering, wire fraud 00:21:30.200 --> 00:21:33.180 and operating an unlicensed money transmitting 00:21:33.180 --> 00:21:36.640 business. So has he been arrested? Is he in custody? 00:21:36.859 --> 00:21:39.740 His whereabouts have been complicated, let's 00:21:39.740 --> 00:21:41.900 say. The pursuit of international crypto criminals 00:21:41.900 --> 00:21:44.380 is always difficult. But legally speaking, he 00:21:44.380 --> 00:21:46.109 is the head of the snake. But he couldn't have 00:21:46.109 --> 00:21:48.569 done it alone. We talked about that huge MLM 00:21:48.569 --> 00:21:51.009 structure. You need promoters. You need faces 00:21:51.009 --> 00:21:54.430 for the operation. Yes. And the biggest promoter 00:21:54.430 --> 00:21:56.670 in the United States, the guy at the very top 00:21:56.670 --> 00:21:59.509 of the pyramid here, was a man named Glen Orcaro. 00:21:59.630 --> 00:22:02.650 Glen Orcaro. He served as the lead national promoter 00:22:02.650 --> 00:22:05.970 from August 2017 to January 2018, right during 00:22:05.970 --> 00:22:08.990 the peak of the mania. He created a company with 00:22:08.990 --> 00:22:13.589 a very subtle name, Future Money LTD. Future 00:22:13.589 --> 00:22:16.089 Money. Little on the nose, isn't it? Just a bit. 00:22:16.089 --> 00:22:18.750 It worked, though. He used this entity to lure 00:22:18.750 --> 00:22:20.589 investors into the BitConnect lending program. 00:22:20.970 --> 00:22:23.130 He was the one organizing the big conferences, 00:22:23.309 --> 00:22:26.369 making the slick promotional videos. But unlike 00:22:26.369 --> 00:22:29.170 Kumbani, Arcaro faced the music relatively quickly. 00:22:29.819 --> 00:22:32.940 On September 1st, 2021, he pleaded guilty to 00:22:32.940 --> 00:22:35.500 a conspiracy to commit wire fraud. And what were 00:22:35.500 --> 00:22:37.519 the penalties for him? They were significant. 00:22:37.740 --> 00:22:40.980 He was ordered to pay $17 million in restitution 00:22:40.980 --> 00:22:43.960 to about 800 identified victims. Yeah. And he 00:22:43.960 --> 00:22:47.200 agreed to forfeit $24 million in assets. $24 00:22:47.200 --> 00:22:49.339 million. That's a lot of money to forfeit. It 00:22:49.339 --> 00:22:51.259 just shows you how much he personally was skimming 00:22:51.259 --> 00:22:53.960 off the top. If one promoter has $24 million 00:22:53.960 --> 00:22:55.859 just lying around. It gives you a sense of the 00:22:55.859 --> 00:22:57.839 scale of the cash flow, yes. And then there's 00:22:57.839 --> 00:23:00.390 the international connection. Dvij Darji, who 00:23:00.390 --> 00:23:03.089 was the India region leader. He was arrested 00:23:03.089 --> 00:23:06.549 in Delhi in August of 2018. And the sources mentioned 00:23:06.549 --> 00:23:08.750 something really interesting about him, a potential 00:23:08.750 --> 00:23:11.630 connection to something called black money in 00:23:11.630 --> 00:23:15.740 India. Yes. This connects to a broader economic 00:23:15.740 --> 00:23:19.359 event in India at the time demonetization. The 00:23:19.359 --> 00:23:21.660 Indian government had suddenly banned certain 00:23:21.660 --> 00:23:24.380 high value currency notes to crack down on the 00:23:24.380 --> 00:23:27.440 shadow economy and elicit cash hordes. Right. 00:23:27.579 --> 00:23:29.759 I remember that. It caused chaos. People were 00:23:29.759 --> 00:23:31.440 scrambling to figure out what to do with their 00:23:31.440 --> 00:23:34.670 stacks of untaxed cash. Exactly. And there is 00:23:34.670 --> 00:23:37.069 a strong suspicion among Indian authorities that 00:23:37.069 --> 00:23:39.789 Darjeet and BitConnect were involved in laundering 00:23:39.789 --> 00:23:42.589 this black money through the crypto platform. 00:23:42.930 --> 00:23:45.289 The pitch would have been give us your soon to 00:23:45.289 --> 00:23:47.990 be worthless cash. We'll give you digital BitConnect 00:23:47.990 --> 00:23:51.390 coins. It's a perfect laundromat. So it wasn't 00:23:51.390 --> 00:23:53.829 just a simple Ponzi scheme. It was potentially 00:23:53.829 --> 00:23:57.049 a massive money laundering operation for criminal 00:23:57.049 --> 00:23:59.920 cash as well. That is the allegation. And remarkably, 00:24:00.240 --> 00:24:02.619 after being arrested for BitConnect, Darjeet 00:24:02.619 --> 00:24:04.799 was later arrested in connection with another 00:24:04.799 --> 00:24:08.380 very similar scam called RegalCoin. You're kidding 00:24:08.380 --> 00:24:10.680 me. He got out and just did it again. It appears 00:24:10.680 --> 00:24:14.019 so. It speaks to the serial nature of these frauds. 00:24:14.019 --> 00:24:15.859 Once you have the playbook, you just change the 00:24:15.859 --> 00:24:17.759 logo, change the name of the coin, and run the 00:24:17.759 --> 00:24:20.339 same scam all over again on a new group of victims. 00:24:20.619 --> 00:24:23.819 That's depressing. Now, before we get to the 00:24:23.819 --> 00:24:26.400 final legal cleanup, we have to talk about the 00:24:26.400 --> 00:24:29.329 event. The meme. We touched on it in the intro, 00:24:29.430 --> 00:24:31.470 but we need to go deeper because I think that 00:24:31.470 --> 00:24:33.769 one event explains the psychology of the scam 00:24:33.769 --> 00:24:37.710 better than any financial chart ever could. The 00:24:37.710 --> 00:24:41.230 first and as it turns out, the only BitConnect 00:24:41.230 --> 00:24:45.970 annual ceremony. Pattaya, Thailand, October 28th, 00:24:45.970 --> 00:24:49.140 2017. Right at the peak of the hype. Just a few 00:24:49.140 --> 00:24:51.319 short months before the entire thing imploded. 00:24:51.420 --> 00:24:54.779 They rent out this massive flashy venue. It's 00:24:54.779 --> 00:24:57.579 pure spectacle. There are lasers, dancers, awards 00:24:57.579 --> 00:24:59.759 ceremonies where they give out these giant oversized 00:24:59.759 --> 00:25:02.039 checks to the top promoters. It's designed to 00:25:02.039 --> 00:25:04.140 look like a celebration of success. And then 00:25:04.140 --> 00:25:06.779 Carlos Matos takes the stage. Carlos Matos from 00:25:06.779 --> 00:25:08.950 New York City. He's an investor. It's important 00:25:08.950 --> 00:25:10.789 to note he's not a founder. He's not one of the 00:25:10.789 --> 00:25:13.069 architects of the scam. He's a user and he is. 00:25:13.190 --> 00:25:15.730 Well, exuberant is the word you used. That is 00:25:15.730 --> 00:25:18.150 a very polite word for what we witnessed. He 00:25:18.150 --> 00:25:21.150 gives this testimonial that is just pure, unadulterated, 00:25:21.170 --> 00:25:24.529 raw energy. I am so excited. He's talking about 00:25:24.529 --> 00:25:26.910 how his wife didn't believe in him, how she kept 00:25:26.910 --> 00:25:29.849 telling him it was a scam. No, no, no, he says. 00:25:30.440 --> 00:25:33.059 And now he's making so much money. And then comes 00:25:33.059 --> 00:25:37.619 the scream, BitConnect's CCT. He screams it in 00:25:37.619 --> 00:25:40.400 different registers. He growls it. He shrieks 00:25:40.400 --> 00:25:43.539 it. It's this primal release of financial validation. 00:25:43.819 --> 00:25:46.400 He feels like he's proven everyone wrong. I've 00:25:46.400 --> 00:25:48.940 watched that video so many times. And looking 00:25:48.940 --> 00:25:52.680 back now, knowing everything we know, it's genuinely 00:25:52.680 --> 00:25:55.150 eerie. It doesn't look like a financial conference. 00:25:55.230 --> 00:25:57.349 It feels like a religious revival meeting. It 00:25:57.349 --> 00:25:59.630 feels like a cult. It absolutely does. And that 00:25:59.630 --> 00:26:01.549 is a key insight. The community aspect of these 00:26:01.549 --> 00:26:03.769 schemes is incredibly powerful. When you are 00:26:03.769 --> 00:26:06.430 in that room in Thailand, surrounded by thousands 00:26:06.430 --> 00:26:08.329 of other people who are all getting rich, all 00:26:08.329 --> 00:26:10.940 screaming the name of the company. Doubt just 00:26:10.940 --> 00:26:13.099 evaporates. It suppresses your critical thinking. 00:26:13.460 --> 00:26:15.920 Your brain says, if all these people are happy 00:26:15.920 --> 00:26:18.240 and successful, surely I'm the one who's wrong 00:26:18.240 --> 00:26:20.980 to be suspicious. Exactly. It's social proof, 00:26:21.099 --> 00:26:23.880 weaponized. The meme itself, you mentioned, it 00:26:23.880 --> 00:26:26.180 was profiled by John Oliver, by Keegan -Michael 00:26:26.180 --> 00:26:30.509 Key. It became a global joke. As an expert looking 00:26:30.509 --> 00:26:33.509 at market psychology, that video serves as a 00:26:33.509 --> 00:26:36.549 historical document of irrational exuberance. 00:26:36.690 --> 00:26:39.230 It is what a financial bubble looks like in human 00:26:39.230 --> 00:26:42.230 form. It's the visual representation of the absolute 00:26:42.230 --> 00:26:45.049 peak right before the fall. Yes. When you see 00:26:45.049 --> 00:26:48.849 that level of blind, screaming fanaticism for 00:26:48.849 --> 00:26:51.130 a financial product, when people are chanting 00:26:51.130 --> 00:26:53.029 the name of an asset class like it's a deity, 00:26:53.190 --> 00:26:55.890 run. Run fast. Run very, very fast in the other 00:26:55.890 --> 00:26:58.529 direction. So the party ended. The music stopped. 00:26:58.990 --> 00:27:01.369 The scream faded. And then came the lawyers. 00:27:01.809 --> 00:27:04.589 This brings us to Section 7, the legal fallout. 00:27:04.650 --> 00:27:07.829 The bill comes due. We mentioned that $2 .4 billion 00:27:07.829 --> 00:27:10.829 figure from the SEC. Yes. In September 2021, 00:27:11.190 --> 00:27:13.950 the SEC officially sued BitConnect, Kumani, and 00:27:13.950 --> 00:27:16.029 Arcaro. They alleged that they defrauded U .S. 00:27:16.049 --> 00:27:18.769 investors of a total of $2 .4 billion. It's one 00:27:18.769 --> 00:27:20.369 of the largest crypto -related frauds they've 00:27:20.369 --> 00:27:22.529 ever prosecuted. It's just a staggering number. 00:27:22.750 --> 00:27:25.029 And the civil actions, the class action lawsuits 00:27:25.029 --> 00:27:27.839 from investors, they started... Pretty much immediately 00:27:27.839 --> 00:27:30.660 after the collapse, right? Right. January 31st, 00:27:30.660 --> 00:27:33.400 2018. A temporary restraining order was issued 00:27:33.400 --> 00:27:36.019 to freeze their assets. But here's the problem. 00:27:36.599 --> 00:27:39.279 Freezing assets implies that you can actually 00:27:39.279 --> 00:27:42.769 find the assets. And let me guess. The money 00:27:42.769 --> 00:27:45.730 was long gone. Well, not just that. It was a 00:27:45.730 --> 00:27:48.630 structural problem. BitConnect as a corporate 00:27:48.630 --> 00:27:51.970 entity never actually existed. Wait, what do 00:27:51.970 --> 00:27:54.329 you mean? It was a decentralized structure by 00:27:54.329 --> 00:27:56.609 design. There wasn't a BitConnect Inc. headquarters 00:27:56.609 --> 00:27:59.029 in a skyscraper in New York that the FBI could 00:27:59.029 --> 00:28:01.769 raid. There were no filing cabinets full of documents. 00:28:01.970 --> 00:28:04.029 There was no central server farm. It was just 00:28:04.029 --> 00:28:06.690 a distributed network of code and anonymous crypto 00:28:06.690 --> 00:28:09.500 wallets scattered all over the world. This made 00:28:09.500 --> 00:28:12.079 locating and seizing assets incredibly difficult. 00:28:12.420 --> 00:28:15.039 The court ordered the disclosure of wallet addresses 00:28:15.039 --> 00:28:16.940 and the identities of the people who controlled 00:28:16.940 --> 00:28:19.599 them. But you are literally chasing ghosts on 00:28:19.599 --> 00:28:22.119 the blockchain. Funds can be tumbled, mixed and 00:28:22.119 --> 00:28:24.559 moved across international borders in seconds 00:28:24.559 --> 00:28:28.220 with no paper trail. This is the dark side of 00:28:28.220 --> 00:28:30.359 decentralization that people don't often talk 00:28:30.359 --> 00:28:32.779 about. It can be used as a shield for crime. 00:28:33.299 --> 00:28:36.000 Precisely. It turns the legal process into a 00:28:36.000 --> 00:28:38.299 very slow and expensive game of whack -a -mole. 00:28:38.759 --> 00:28:42.740 However, the legal system is persistent. We saw 00:28:42.740 --> 00:28:45.140 the criminal actions against Arcaro result in 00:28:45.140 --> 00:28:48.119 a conviction. And more recently, on January 12th, 00:28:48.119 --> 00:28:51.400 2023, a federal court in San Diego ordered a 00:28:51.400 --> 00:28:53.980 restitution distribution. So victims are actually 00:28:53.980 --> 00:28:56.440 getting some money back. Some victims, yes. About 00:28:56.440 --> 00:28:59.579 800 of them qualified for this specific distribution 00:28:59.579 --> 00:29:02.839 of funds seized from Glenn Arcaro. The total 00:29:02.839 --> 00:29:06.430 amount being distributed. $17 million. $17 million. 00:29:06.630 --> 00:29:09.490 Correct. Out of an estimated $2 .4 billion in 00:29:09.490 --> 00:29:12.210 losses. It is less than 1%. It is a drop in the 00:29:12.210 --> 00:29:14.710 ocean. That is just heartbreaking. It is. And 00:29:14.710 --> 00:29:16.470 that is the ultimate tragedy of these schemes. 00:29:16.990 --> 00:29:19.730 Once the money enters the crypto ecosystem and 00:29:19.730 --> 00:29:22.670 gets properly washed and distributed, it is incredibly, 00:29:22.769 --> 00:29:25.890 almost impossibly hard to get back. Most of that 00:29:25.890 --> 00:29:28.910 $2 .4 billion is likely gone, forever spent on 00:29:28.910 --> 00:29:31.990 luxury cars and mansions, hitting in untraceable 00:29:31.990 --> 00:29:35.109 cold storage wallets, or simply lost to the volatility 00:29:35.109 --> 00:29:37.390 of the crypto market itself. So let's zoom out. 00:29:37.450 --> 00:29:39.710 We've gone through this whole sordid tale. We've 00:29:39.710 --> 00:29:41.190 looked at the tech, the scam, the people, the 00:29:41.190 --> 00:29:43.670 meme. If we step back and look at the whole picture, 00:29:43.829 --> 00:29:46.759 what is the big takeaway here? The summary is 00:29:46.759 --> 00:29:49.920 painfully clear. BitConnect was a classic, old 00:29:49.920 --> 00:29:52.279 fashioned Ponzi scheme dressed up in modern, 00:29:52.460 --> 00:29:55.299 complicated blockchain terminology. It used the 00:29:55.299 --> 00:29:57.500 complexity and the hype around crypto words like 00:29:57.500 --> 00:30:00.259 blockchain, trading bots, volatility software, 00:30:00.519 --> 00:30:03.119 proof of stake to hide a simple mechanism that 00:30:03.119 --> 00:30:05.259 Charles Ponzi would have recognized in 1920. 00:30:05.680 --> 00:30:08.859 It promised 1 % daily returns, which we've established 00:30:08.859 --> 00:30:11.759 is mathematically impossible and unsustainable. 00:30:12.009 --> 00:30:14.730 And it collapsed the very moment any kind of 00:30:14.730 --> 00:30:17.950 real regulatory scrutiny appeared. The magical 00:30:17.950 --> 00:30:20.150 bot couldn't survive a cease and desist letter 00:30:20.150 --> 00:30:22.309 because the bot never existed in the first place. 00:30:22.549 --> 00:30:25.029 You know, it's easy to look back now with the 00:30:25.029 --> 00:30:27.130 benefit of hindsight and say, how could people 00:30:27.130 --> 00:30:29.769 be so stupid? But I think that's unfair. Yeah. 00:30:29.869 --> 00:30:31.450 That misses the point of how seductive these 00:30:31.450 --> 00:30:33.809 things are. It is extremely unfair. These schemes 00:30:33.809 --> 00:30:36.630 are designed to bypass our logic centers. They 00:30:36.630 --> 00:30:39.289 don't target our intellect. They target our hope. 00:30:39.430 --> 00:30:42.809 They target our greed. And they create a powerful 00:30:42.809 --> 00:30:46.369 community like that event in Thailand that reinforces. 00:30:46.480 --> 00:30:48.640 the lie. They make you feel like you are part 00:30:48.640 --> 00:30:51.500 of a special club, a revolution. I keep thinking 00:30:51.500 --> 00:30:54.099 about Carlos Matos on that stage. He wasn't one 00:30:54.099 --> 00:30:56.500 of the core scammers. He was a victim who became 00:30:56.500 --> 00:30:58.940 a promoter because he truly believed it. He was 00:30:58.940 --> 00:31:00.660 a true believer and there were thousands like 00:31:00.660 --> 00:31:02.640 him. He represents thousands of others who weren't 00:31:02.640 --> 00:31:05.440 on a stage but felt the exact same way. They 00:31:05.440 --> 00:31:07.660 desperately wanted to believe there was a shortcut 00:31:07.660 --> 00:31:10.079 to financial freedom and BitConnect sold them 00:31:10.079 --> 00:31:12.700 that dream. So for you, for our listeners, the 00:31:12.700 --> 00:31:16.119 ultimate lesson is what? The lesson is absolute 00:31:16.119 --> 00:31:20.599 radical skepticism. If someone, anyone, promises 00:31:20.599 --> 00:31:23.539 you guaranteed returns, especially anything approaching 00:31:23.539 --> 00:31:27.539 1 % a day, it is a scam. Full stop. There is 00:31:27.539 --> 00:31:30.940 no software, no AI, no quantum computer that 00:31:30.940 --> 00:31:33.960 can guarantee profit in a volatile market. The 00:31:33.960 --> 00:31:37.039 fundamental principle is this. If it sounds too 00:31:37.039 --> 00:31:40.460 good to be true, it is. Every single time. The 00:31:40.460 --> 00:31:42.980 technology changes, but the scam remains the 00:31:42.980 --> 00:31:45.200 same. Exactly. Today, it's a crypto trading bot. 00:31:45.400 --> 00:31:47.839 Tomorrow, it might be an AI -driven real estate 00:31:47.839 --> 00:31:50.279 fund. The day after that, it might be asteroid 00:31:50.279 --> 00:31:53.119 mining rights. The pitch changes, but the underlying 00:31:53.119 --> 00:31:55.900 Ponzi math does not. That's a sobering thought. 00:31:56.119 --> 00:31:58.799 I want to leave us with one final, slightly provocative 00:31:58.799 --> 00:32:01.410 thought to chew on. We mentioned Divya Starji, 00:32:01.529 --> 00:32:03.430 the guy from India, getting arrested for another 00:32:03.430 --> 00:32:05.769 scam called RegalCoin right after BitConnect 00:32:05.769 --> 00:32:07.890 blew up. Yes. It's like a hydra, isn't it? You 00:32:07.890 --> 00:32:10.009 cut off one head and two more grow back in its 00:32:10.009 --> 00:32:12.130 place. That is the unfortunate reality of the 00:32:12.130 --> 00:32:14.890 space. BitConnect is gone. The scream is now 00:32:14.890 --> 00:32:18.930 a joke on TikTok. But somewhere, right now, on 00:32:18.930 --> 00:32:21.690 a Telegram channel or a Discord server, there 00:32:21.690 --> 00:32:24.809 is a new version of this brewing. A new magic 00:32:24.809 --> 00:32:28.079 bot. A new revolutionary platform. And people 00:32:28.079 --> 00:32:29.759 are putting their life savings into it right 00:32:29.759 --> 00:32:33.200 now as we speak. Exactly. So the question that 00:32:33.200 --> 00:32:35.660 kind of keeps me up at night is this. What is 00:32:35.660 --> 00:32:37.700 the next BitConnect that is operating right now 00:32:37.700 --> 00:32:39.519 that we just haven't identified yet? And it should 00:32:39.519 --> 00:32:42.160 keep all of us up. Vigilance is the only real 00:32:42.160 --> 00:32:44.769 defense. Well, on that cheerful note, I think 00:32:44.769 --> 00:32:47.170 we're going to wrap up this deep dive. Thank 00:32:47.170 --> 00:32:49.230 you for listening and thanks for unpacking this 00:32:49.230 --> 00:32:51.210 absolute madness with me. Always a pleasure, 00:32:51.349 --> 00:32:53.950 even when the topic is this dark. Keep your wallet 00:32:53.950 --> 00:32:55.390 safe, everyone. We'll see you next time.