The Texas state regulator on Friday warned Texans about persons that approach victims of the now-defunct pyramid scheme BitConnect claiming that, for a $250 fee, they can help them recover their investments. The Texas State Securities Board said investors should not be lulled into a false website trying to usurp its identity to defraud them in an “advance fee” scam, in which “individuals are asked to pay a fee up front before they receive any proceeds.” The fake notice, which is labeled “Bitconnect update,” claims that the agency has promised to refund 35 percent of a “participant’s investment” in BitConnect. This type of activity is typical of the fraud mechanism known as a ‘recovery room.’ Although the agency could help people who have lost money, they don’t charge a fee, guarantee money back, or give special preference to anyone who files a formal complaint.
Red Flags for Not Being Scammed Again
While there are many variations of these tactics, the investor should be cautious of any person or organization that claims to know about his expertise and offers to help return their money. Texas’ watchdog is one of the most active state regulators in the crypto arena, joining federal authorities in going after businesses trying to avoid proper registrations. BitConnect itself received two cease-and-desist letters from state authorities after the self-described "self-regulating financial system" used celebrities to promote its scam. Divyesh Darji, the Indian head of BitConnect and believed to be a core promoter of the scheme, was arrested in August. These recovery scams are simply defrauding the victims one more time, and according to the regulator, consumers should look for some red flags. In most cases, victims are contacted by someone pretending to be affiliated with a government entity to perform investigations or other services. They use a variety of lies to add credibility to their pitch, and once the victim shows interest, a series of official-looking documents are sent to assure the investor that money is waiting in an account and can be recovered for a fee.
