As part of the order dismissing claims against BitConnect class-action defendants Glenn Arcaro, Ryan Maasen and YouTube, a US court has definitively ruled that BitConnect was a securities offering.

In his August 23rd order, Judge Middlebrooks addressed Glenn Arcaro’s assertion that BitConnect wasn’t a securities offering.

Arcaro (right) put forward
three defenses
as to why
BitConnect’s Ponzi scheme
wasn’t a securities offering.

These related to the Howey Test, which serves as the legal standard for defining an investment contract to establish the presence of a securities offering on.

Namely;

Whether BitConnect required an investment of money;

Whether BitConnect was a “common enterprise”; and

Whether BitConnect affiliates expected profits solely from the efforts of BitConnect or a third-party.

With respect to requiring an investment of money;

Arcaro argues that the first element of the Howey test cannot be met because BCC can only be purchased with bitcoin.

Bitcoin is an unregulated cryptocurrency rather than a fiat currency, Arcaro argues, and so purchase of BCC is not an investment of money, per se.

This is the old “securities law doesn’t apply to cryptocurrency investment” arguments…

…and Judge Middlebrooks was having none of it.

l find such pedantry unavailing in the face of the broad and adaptable conceptions of investment contracts, as defined by the Supreme Court, and of securities, as contemplated by Congress.

l thus determine that Plaintiffs’ investment of Bitcoin satisfies the first element of the Howey test.

No matter how many times we tell people the vehicle a passive investment opportunity is made through is irrelevant, there seems to be an endless parade of MLM crypto Ponzi shills ready to argue otherwise.

Next Arcaro argued that BitConnect wasn’t a common enterprise because

BCC purchasers were never led to believe that their BCC purchases “would be used to invest in or develop any future product or common enterprise.”

To which Judge Middlebrooks replied;

This argument misses the forest for the trees: the Bitconnect platform itself was the common enterprise.

Those who purchased BCC did so in order to make a return on their investment; indeed, BCC appear to have no other purpose.

The success of an investment in BCC was inextricably linked to the value of the BCC, which in turn was “interwoven with and dependent on the efforts and success” of the Bitconnect Defendants, who were to operate the Bitconnect Lending Program and the Bitconnect Staking Program.

The investors had neither the desire nor the capacity to operate these investment program.

Additionally, to the extent that the Promoter Defendants received their com missions in BCC, as Plaintiffs allege, the efforts of the promoters are also a fundamental part of the enterprise.

An enterprise ”need not be so all-encompassing as to constitute an “ecosystem” in order to satisfy the Howey test, of course, but the Consolidated Complaint does in fact allege a c

🤖 Quick Answer

What did the US court rule regarding BitConnect's legal classification?
A US court definitively ruled that BitConnect constituted a securities offering. Judge Middlebrooks dismissed claims against defendants Glenn Arcaro, Ryan Maasen, and YouTube, rejecting arguments that BitConnect's Ponzi scheme fell outside securities regulations under the Howey Test framework.

What is the Howey Test and its relevance to BitConnect?
The Howey Test is the legal standard determining whether an investment qualifies as a securities offering. It evaluates three criteria: whether investment of money is required, whether a common enterprise exists, and whether profits derive solely from the efforts of the operator or affiliates.

Which defendants were involved in the BitConnect class-action lawsuit?
The class-action lawsuit involved defendants Glenn Arcaro, Ryan Maasen, and YouTube. Judge Middlebrooks' August 23rd

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