Regulation
Sydney Court Convicts Bigatton of Providing Unauthorized Crypto Financial Advice
The Sydney District Court has condemned John Bigatton, Australian promoter of the now-defunct cryptocurrency exchange BitConnect, for providing unlicensed financial advice.
Meanwhile, the conviction follows allegations made by the Australian Securities and Investments Commission (ASIC), underlining the regulator’s commitment to protecting Australian investors.
John Bigatton promoted BitConnect extensively via seminars and social media between August 2017 and January 2018. ASIC’s investigation revealed that Bigatton’s activities included material claims about the potential returns on investments in BitConnect Coin (BCC), which he claimed could increase in value to at least $1,000.
Despite the disclaimers, the court found that his statements constituted unauthorised financial advice, in breach of Australian financial regulations.
Bigatton’s conviction carries a three-year prison sentence for good behavior and a five-year disqualification from managing a company. These measures are part of ASIC’s effort to maintain integrity and trust in Australia’s financial services industry.
The BitConnect scheme
BitConnect, founded in 2016, has created a digital token, BitConnect Coin, which can be exchanged for BitcoinThe platform promised high returns through its “volatility lending” program, encouraging investors to lend their BCCs for fixed periods in exchange for supposedly guaranteed interest rates.
However, ASIC and other regulators subsequently identified this structure as having the characteristics of a Ponzi scheme.
Bigatton’s promotional tactics, particularly during seminars, emphasized high returns and superior performance compared to traditional investments. His claims influenced investors’ decisions, leading to substantial financial losses when BitConnect collapsed. The Sydney District Court ruling reinforces the importance of complying with financial licensing laws, particularly in high-risk investment sectors like cryptocurrency.
Legal proceedings in progress
In 2018, ASIC obtained a Federal Court order to freeze Bigatton’s assets, including his cryptocurrency holdings. This was the first time an Australian regulator had obtained freezing orders on digital assets.
The case, overseen by the Australian Federal Police under the Proceeds of Crime Act, is ongoing in the New South Wales Supreme Court. The total value of the frozen assets is estimated in the millions.
ASIC Vice President Sarah Court said:
“Providing unlicensed financial advice denies Australian investors access to key protections and undermines confidence in the Australian financial services industry. ASIC is committed to cracking down on the illicit promotion of high-risk digital assets to protect Australian investors.”
International repercussions
In early 2022, Satish Kumbhani, the founder of BitConnect, was indicted by a US court jury for orchestrating the multi-billion dollar international crypto Ponzi scheme. The US Securities and Exchange Commission reported that Kumbhani had relocated from India to an undisclosed 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 scheme should receive a portion of a $17 million settlement recovered from the $2.4 billion fraudThis international case highlights the widespread impact of unregulated cryptographic schemes and the need for strong regulatory measures.