Bitcoin Lenders Take Money and Run During Crypto Crash
Lend us your money and you have a chance to win $ 1,000,000, cryptocurrency firm Davor Coin promised users on Jan.31. the state of Texas.
As cryptocurrency values have exploded in the last months of 2017, with some enthusiasts taking out loans to buy digital money. Others have invested in lenders like Davor Coin, which accept real money for “interest” paid in. fringe cryptocurrencies. The lending system works as long as the cryptocurrency values continue to rise. But cryptocurrency values are crashing and loan companies are cut and run with the money, or get slapped with cease-and-desist letters from government regulators alleging securities fraud.
A week before it closed on Wednesday, Davor Coin was flying high.
“WELCOME TO THE” BE A MILLIONAIRE “LOAN LOTTERY !!!” the company shouted in a medium message. “We are going to give an incredible $ 1,000,000 to someone from the Davor community and many more prizes!”
All the users had to do was lend their money to Davor Coin. Even though customers didn’t win the million dollar jackpot, Davor Coin promised them huge returns on their loans, in the form of the company’s type of cryptocurrency.
The investment might have been a gamble for buyers, but for Davor Coin it was almost a foolproof money maker. At least one study suggests that buyers of cryptocurrencies like bitcoin are comfortable entering lending programs for digital currency, the value of which they believe will skyrocket.
In a December survey of bitcoin buyers, more than 18% of respondents said they borrowed money to buy bitcoin. Of those who bought bitcoin with borrowed money, 22% told research group LendEDU that they had not paid off the debt. Among Bitcoin fans who have not paid off their Bitcoin debts, over 70% said they agreed with the statement “I think owning Bitcoin is worth the interest expense.”
Cryptocurrency forums are full of discussions like this, where a user brags about taking out a title loan on his Honda to buy cryptocurrency, which he expects to gain in value until he can buy a Lamborghini. Meanwhile, companies like Shift Cash advertise cryptocurrency-based securities lending for cars.
“Over 70% said they agreed with the statement “ I think owning Bitcoin is worth the interest charges. ”“
It’s a buyer’s market for people who want to spend money they don’t have on digital currencies that might be worthless next week.
Davor Coin also had another reason for optimism. Two weeks before the company announced its $ 1 million jackpot, one of its biggest competitors pulled back.
Bitconnect, one of the largest crypto-lending companies, had long been accused of being a Ponzi scheme for its aggressive marketing that encouraged customers to recruit other users. The management of the company was completely anonymous. They promised a daily return on investment of 1%, which experts said was impossible.
Other than the red flags, investors continued to lend Bitconnect money until the Texas State Securities Board and the North Carolina Secretary of State sent the company cease and desist letters at the start. January, accusing the company of securities fraud. On January 16, Bitconnect announced it was shutting down, blaming “bad press continues made community members uncomfortable.
The value of Bitconnect’s cryptocurrency has plummeted through the ground, leading people to like this Reddit user who claims to have taken a business loan of $ 500,000 and loaned most of it to the now defunct crypto company.
But instead of acting nervous about the Bitconnect shutdown, the nearly identical Davor Coin celebrated. “It doesn’t change anything for us,” Davor Coin wrote of the Bitconnect shutdown. Davor Coin had just become “the biggest lending platform in the world !!”
The swagger caught the attention of the same Texas authorities that issued a cease-and-desist to Bitconnect. On February 2, Texas sent Davor Coin its own forbearance ban, asking it to stop selling in the state until it registers as a securities firm.
Five days later, Davor Coin announced the closure of its lending platform. Customers were left with nothing but the company’s mostly defunct cryptocurrency which fell from its peak value of $ 177 per coin to less than 1 cent per coin.
Buyers have turned to Facebook to report their losses. One of them, who had loaned the company $ 4,000, ended up with $ 9, he said. Another complained that he loaned Davor Coin $ 20,000 and received the equivalent of $ 23.50 when he tried to withdraw his money.
But as swindled investors lamented their losses on Twitter, other crypto companies rushed to replace the two previous loan scams.
“Good announcement for you guys,” tweeted a Twitter user without a profile picture to dozens of people who complained about losing money to Davor Coin. The “good announcement” was an advertisement for a new cryptocurrency lending company launched on Saturday.