In April 2020 what was left of the BitConnect class-action was dismissed by a District Court Judge.

The dismissal was appealed, resulting in the Eleventh Circuit overturning the decision on February 18th.

As summarized by the Eleventh Circuit;

After (BitConnect) collapsed, BitConnect buyers sought to hold the promoters liable under section 12 of the Securities Act of 1933 for soliciting the purchase of unregistered securities.

The marketers insist that they cannot be held liable because the Securities Act covers sales pitches to particular people, not communications directed to the public at large.

The District Court sided with the defendants, dismissing the case.

The Eleventh Circuit however
called the defendants out on their bluff
.

Neither the Securities Act nor our precedent imposes that kind of limitation.

This is similar to the “but cryptocurrency!” arguments scammers routinely trot out. My answer to that has always been “there are no exemptions for cryptocurrency in the Securities and Exchange Act”.

So too is there no exemption of committing securities fraud if you don’t direct promotion of unregistered securities at anyone in particular.

Solicitation has long occurred through mass communications, and online videos are merely a new way of doing an old thing.

Because the Securities Act provides no free pass for online solicitations, we reverse the district court’s dismissal of the section 12 claim.

There are two important considerations here;

Firstly the BitConnect class-action is back on.

We therefore REVERSE the district court’s dismissal of the section 12 claim against Arcaro and Maasen; VACATE its dismissal of the state-law claims against them; AFFIRM its dismissal of any other claims and defendants in the orders appealed.

As I understand it defendants Glenn Arcaro and Ryan Maasen are back on the chopping block.

Arcaro, as the top BitConnect net-winner and promoter in the US, is a juicy target.

That said he’s also getting
railed by the DOJ
and
the SEC
, so I’m not sure what, if anything, will be left for class-action Plaintiffs.

Maasen is also being
hounded by the SEC
, so that’s probably a dead-end too.

The second important consideration is what this appeal means for promoters of scams on YouTube – specifically of the Ponzi variety (pyramid schemes by themselves aren’t securities).

Here we have a US Court of Appeals telling victims of a Ponzi scheme they are free to sue anyone who promoted it.

Arcaro insists that liability follows only when a seller directs a solicitation to a particular prospective buyer.

Mass communications, in his view, are never enough.

That rule would certainly go a long way toward eliminating liability for the promoters here, and for others who champion dicey investments through modern communication channels.

The problem for these promoters is that nothing in the Securities Act makes a distinction between individually targeted sales efforts and broadly disseminated pitches.

The Secur

🤖 Quick Answer

What was the outcome of the BitConnect class-action appeal in February 2024?
The Eleventh Circuit overturned the District Court's dismissal decision on February 18th, rejecting defendants' argument that the Securities Act does not apply to public communications. The court ruled that promoters could face liability under Securities Act section 12 for soliciting purchases of unregistered securities.

Why did defendants claim they were not liable under the Securities Act?
Defendants argued the Securities Act only covers direct sales pitches to specific individuals, not communications directed to the general public. This distinction formed their primary defense against liability claims from BitConnect investors.

What did the Eleventh Circuit determine regarding Securities Act applicability?
The appellate court rejected defendants' narrow interpretation, establishing that the Securities Act's protections extend beyond individual solicitations to encompass broader public communications promoting unregistered securities purchases.

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