Regulation
Sydney court convicts Bigatton of giving unauthorised financial advice on cryptocurrencies
The Sydney District Court has sentenced John Bigatton, an Australian promoter of the now-defunct cryptocurrency exchange BitConnect, for providing unlicensed financial advice.
The conviction follows charges from the Australian Securities and Investments Commission (ASIC), underlining the regulator’s commitment to protecting Australian investors.
John Bigatton extensively promoted BitConnect through seminars and social media between August 2017 and January 2018. ASIC’s investigation found that Bigatton’s activities included making material statements about the potential returns from investments in BitConnect Coin (BCC), which he claimed could increase in value to at least $1,000.
Despite warnings, the court found that his statements constituted unauthorised financial advice, breaching Australian financial regulations.
Bigatton’s conviction carries a three-year prison sentence and a five-year ban from managing companies. These measures are part of ASIC’s efforts to maintain integrity and trust in Australia’s financial services sector.
The BitConnect Schema
BitConnect, founded in 2016, created a digital token, BitConnect Coin, which could be exchanged for BitcoinThe platform promised high returns through its “volatility lending” program, encouraging investors to lend their BCC for fixed periods in exchange for supposedly guaranteed interest rates.
However, ASIC and other regulators subsequently identified the structure as having the characteristics of a Ponzi scheme.
Bigatton’s promotional tactics, particularly at seminars, emphasized high returns and superior performance compared to traditional investments. His statements influenced investors’ decisions, leading to substantial financial losses during the collapse of BitConnect. The Sydney District Court’s decision reinforces the importance of complying with financial licensing laws, particularly in high-risk investment sectors such as cryptocurrencies.
Ongoing legal proceedings
In 2018, ASIC obtained a Federal Court order to freeze Bigatton’s assets, including his cryptocurrency holdings. It was the first time an Australian regulator had obtained freezing orders on digital assets.
The proceedings, which are being 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 at several million dollars.
ASIC Deputy Chair Sarah Court said:
“The provision of unlicensed financial advice denies Australian investors access to essential protections and undermines confidence in the Australian financial services sector. ASIC is committed to taking action against the illegal promotion of high-risk digital assets to protect Australian investors.”
International repercussions
In early 2022, BitConnect founder Satish Kumbhani was indicted by a jury in a US court for orchestrating a multi-billion dollar international crypto scam. The US Securities and Exchange Commission reported that Kumbhani had allegedly moved from India to an unknown foreign country, with his current whereabouts unknown.
In January 2023, a U.S. federal district court in San Diego ruled that more than 800 victims of the BitConnect Ponzi scam should receive a portion of a $17 million restitution recovered from the $2.4 billion scamThis international case highlights the widespread impact of unregulated cryptography systems and the need for strict regulatory measures.