Baltazar Avalos v. Bitconnect

Case 3:18-cv-01165 Document 1 Filed 02/22/18 Page 1 of 33
1 Rosemary M. Rivas (State Bar No. 209147)

Email: rrivas@zlk.com
2 LEVI & KORSINSKY, LLP
44 Montgomery Street, Suite 650
3 San Francisco, California 94104
Telephone: (415) 291-2420
4 Facsimile: (415) 484-1294
5 Eduard Korsinsky (to be admitted pro hac vice)

Email: ek@zlk.com
30 Broad Street, 24th Floor
7 New York, New York 10004
Telephone: (212) 363-7500
8 Facsimile: (212) 636-7171
9 Donald J. Enright (to be admitted pro hac vice)

Email: denright@zlk.com
10 John A. Carriel (to be admitted pro hac vice)
Email: jcarriel@zlk.com
1101 30th St., NW, Ste. 115
12 Washington, DC 20007
Telephone: (202) 524-4292
13 Facsimile: (202) 333-2121
14 Counsel for Plaintiff Baltazar Avalos
15
16 UNITED STATES DISTRICT COURT

17 FOR THE NORTHERN DISTRICT OF CALIFORNIA
18
19 BALTAZAR AVALOS, individually and on behalf Case No. 3:18-cv-01165

of all others similarly situated,
20 CLASS ACTION
Plaintiff,
21
v. CLASS ACTION COMPLAINT FOR
22 VIOLATION OF SECTION 12(a)(1) AND
BITCONNECT INTERNATIONAL PLC, 15(a) OF THE SECURITIES ACT OF 1933;
23 BITCONNECT LTD., BITCONNECT TRADING VIOLATION OF CAL. BUS. & PROF.
LTD., JOSHUA JEPPESEN, GLENN ARCARO, CODE §§ 17200 et seq.; BREACH OF
24 TREVON BROWN A/K/A TREVON JAMES, CONTRACT; ACTUAL FRAUD;
RYAN HILDRETH, CRAIG GRANT, JOHN DOE
25 1 A/K/A NICHOLAS TROVATO A/K/A CONSTRUCTIVE FRAUD; AND UNJUST
CRYPTONICK, and RYAN MAASEN, ENRICHMENT
26
Defendants. JURY TRIAL DEMANDED
27
28
Case No. 3:18-cv-01165
30 CLASS ACTION COMPLAINT FOR VIOLATION OF SECTION 12(A)(1) AND 15(A) OF THE
SECURITIES ACT OF 1933; VIOLATION OF CAL. BUS. & PROF. CODE §§ 17200 ET SEQ.;
31 BREACH OF CONTRACT; ACTUAL FRAUD; CONSTRUCTIVE FRAUD; AND UNJUST
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1 Plaintiff Baltazar Avalos (“Plaintiff”), individually and on behalf of all other individuals and
2 entities similarly situated, by his undersigned attorneys, alleges in this Complaint for violations of
3 Sections 12 and 15 of the Securities Act of 1933 (the “Securities Act”) and California’s Unfair
4 Competition law, Cal. Bus. & Prof. Code §§ 17200 et seq., breach of contract, actual fraud, Cal. Civ.
5 Code § 1572, constructive fraud, Cal. Civ. Code § 1573, and unjust enrichment, the following based
6 upon knowledge with respect to his own acts, and upon facts obtained through an investigation
7 conducted by his counsel, which included, inter alia: documents and solicitation materials released by
8 Defendants (defined below), in connection with the BitConnect Investment Programs (defined below),
9 and public statements made by Defendants concerning the BitConnect Investment Programs. Plaintiff
10 believes that further substantial evidentiary support will exist for the allegations set forth herein after
11 a reasonable opportunity for discovery. Many of the facts supporting the allegations contained herein
12 are known only to Defendants or are exclusively within their control.
13 NATURE AND SUMMARY OF THE ACTION

14 1. Plaintiff brings this action on behalf of himself and all other individuals and entities
15 similarly situated against BitConnect International PLC, BitConnect Ltd., BitConnect Trading Ltd.
16 (collectively “BitConnect”), Joshua Jeppesen (“Jeppesen”), Glenn Arcaro (“Arcaro”), Trevon Brown
17 a/k/a Trevon James (“James”), Ryan Hildreth (“Hildreth”), Craig Grant (“Grant”), John Doe No. 1
18 a/k/a Nicholas Trovato a/k/a Cryptonick (“Trovato”), and Ryan Maasen (“Maasen,” and together with
19 Jeppesen, Arcaro, James, Hildreth, Grant, Trovato, and Maasen, the “Individual Defendants,” and
20 collectively with BitConnect, the “Defendants”) for violation of Sections 12(a)(1) and 15(a),
21 15 U.S.C. §§ 77l(a)(1), 77o(a), of the Securities Act, and California’s Unfair Competition law, Cal.
22 Bus. Prof. §§ 17200 et seq., breach/rescission of contract,1 actual fraud, Cal. Civ. Code § 1572,
23 constructive fraud, Cal. Civ. Code § 1573, and unjust enrichment.
24 2. Specifically, Defendant BitConnect created and operated fraudulent Ponzi/pyramid
25 schemes in the form of the BitConnect Lending Program and the BitConnect Staking Program (the
26 “BitConnect Investment Programs”). To participate in the BitConnect Investment Programs, investors

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1
Plaintiff’s breach/rescission of contract claim is only alleged against Defendant BitConnect.
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1 were required to purchase BitConnect-created cryptocurrency called BitConnect Coins (“BCC”) on
2 the BitConnect BCC Exchange with bitcoin (“BTC”)2 or fiat currency.
3 3. The BitConnect Lending Program was marketed and sold on the Internet as an
4 opportunity for investors to “lend” their BCCs back to BitConnect, which BitConnect would then
5 purportedly use to generate profits by purchasing BTC when its price was low and selling BTC when
6 its price was high—a “buy low, sell high” strategy that was purportedly effectuated by a BitConnect-
7 designed “trading bot” implementing a proprietary trading algorithm: the “Volatility Software.” In
8 exchange for “lending” BCCs to BitConnect, investors were “guaranteed” lucrative returns on their
9 investments.
10 4. The BitConnect Staking Program was marketed and sold on the Internet as an
11 opportunity for investors to “stake” their BCCs by holding their BCCs in the BitConnect-QT wallet (a
12 software and/or online wallet created by BitConnect). In exchange for “staking” BCCs in the
13 BitConnect-QT Wallet, investors were “guaranteed” lucrative returns on their investments.
14 5. As part of their solicitation efforts, BitConnect enlisted multi-level affiliate marketers
15 (the “Referral Program” or the “Affiliate Program”) to further propagate the reach of the BitConnect
16 Investment Programs. Under the Referral Program, BitConnect paid commissions to affiliates who
17 successfully solicited additional investments in the BitConnect Investment Programs. Additionally,
18 affiliate promoters would receive a percentage of any investments made by the investors they referred
19 as well as a portion of investments made by subsequent investors recruited by their referrals, and so
20 forth—a standard multi-level-marketing scheme. The Individual Defendants were highly influential
21 affiliate marketers and/or directors of BitConnect. .
22 6. Despite being cloaked in technological sophistication and jargon, Defendants operated
23 a century-old fraud that was simple at its core—Defendants paid existing investors with new money
24
25 2
Bitcoin is a type of “digital currency”—also commonly referred to as a “cryptocurrency.” The
26 Financial Action Task Force, an inter-governmental agency that promotes laws combating anti-money
laundering and in which the United States is a member, describes digital currency as a “digital
27 representation of value that can be digitally traded and functions as: (1) a medium of exchange; and/or
(2) a unit of account; and/or (3) a store of value, but does not have legal tender status . . . in any
28 jurisdiction.”
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1 from new investors, who were in turn expected and incentivized to get more new investors to produce
2 more new money.
3 7. As noted above, to participate in the BitConnect Investment Programs, investors were
4 required to purchase BCCs. BCCs constitute “investment contract” securities as defined under the
5 Securities Act. As discussed herein, BCCs are investment contracts because, inter alia, Defendants
6 explicitly referred to BCCs as an “investment option” under which investors could “buy BitConnect
7 coin [sic] at a lower price and sell[] them at [a] higher price,” and Plaintiff and other BitConnect
8 investors were led to believe, and expected, that the BCCs they purchased would be worth more than
9 the BTC they invested with BitConnect.
10 8. Similarly, the BitConnect Investment Programs constitute “investment contract”
11 securities as defined under the Securities Act. As discussed herein, the BitConnect Investment
12 Programs qualify as investment contracts because, inter alia, Defendants have explicitly referred to
13 the programs as lucrative investment opportunities that would lead to “financial freedom” and
14 repeatedly stressed the profit potential from merely holding and “staking” BCCs. The BitConnect
15 Investment Programs were the clear offer and sale of investment contract securities because, inter alia,
16 Defendants touted, and Plaintiff and other BitConnect Investment Program participants reasonably
17 expected, that investors would receive substantial returns and a steady stream of income on their
18 investments.
19 9. With respect to the BitConnect Lending Program, a stream of income would

20 purportedly come in the form of a daily interest rate and a bonus interest percentage, each of which
21 were tied to BitConnect’s creation and implementation of the Volatility Software, which BitConnect
22 claimed would produce returns sufficient to cover these payments. In addition to the fixed returns that
23 were promised, BitConnect also guaranteed that the principal investment amount would be paid in full
24 on a specified date.
25 10. Similarly, with respect to the BitConnect Staking Program, BitConnect “guaranteed” it
26 would provide returns of “up to 10% per month” which would result from merely holding BCCs in
27 the BitConnect-QT Wallet.
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1 11. In reality, BitConnect Investment Programs were nothing more than pyramid/Ponzi
2 schemes. After operating for less than a year, BitConnect abruptly shut down its platform and stripped
3 the value from all of Plaintiff’s and the Class’ (defined below) investments, leaving them with nearly
4 worthless BCCs.3
5 12. In short, Defendants defrauded tens of thousands of investors by capitalizing on the
6 general public’s excitement for digital currencies and by luring unsuspecting investors into purchasing
7 unregistered securities and participating in pyramid/Ponzi schemes.
8 13. The registration requirements contained within the Securities Act are designed to
9 protect investors by ensuring they are provided adequate information upon which to base their
10 investment decisions. The two basic objectives of registration are: (i) to require that investors receive
11 necessary financial and other significant information concerning securities being offered for public
12 sale; and (ii) to prohibit deceit, misrepresentations, and other fraud in the sale of securities. Absent
13 registration and the protections of the federal securities laws, issuers of securities could seek to market
14 their investment opportunities without disclosing information that might make a potential investor
15 think twice before investing (e.g., conflicts of interest or major setbacks to core product lines) or
16 peddle its securities using unbounded exaggerations regarding the progress of its products, business
17 plan, business strategies, or even fabricate the existence of relationships with vendors or other business
18 partners.
19 14. Accordingly, Plaintiff brings this action for violations of Sections 12 and 15 of the
20 Securities Act and California’s Unfair Competition law, and for breach of contract, actual fraud,
21 constructive fraud, and unjust enrichment against Defendants for their offer and sale of investment
22 contract securities in violation of the federal securities laws’ registration requirements and
23 participation in effectuating the fraudulent Ponzi/pyramid schemes.
24 15. Due to the varied and innumerable ways in which investors can be, and are likely to be,
25 manipulated and harmed absent any of the protections under the federal securities laws, Sections 5
26
27 3
For example, the value of BCC has fallen from over $430.00 in early January 2018 to $3.86 as of
28 February 20, 2018.
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1 and 12(a)(1) of the Securities Act provide for strict liability against any person who offers or sells an
2 unregistered security. As detailed herein, the BitConnect Investment Programs have at all times
3 constituted an offer and sale of unregistered securities; and thus, Defendants are strictly liable under
4 Section 12(a)(1) of the Securities Act. Similarly, Defendants’ unlawful, immoral, and fraudulent
5 conduct has caused, and is continuing to cause, significant financial harm to Plaintiff and the Class
6 (defined below). Absent judicial intervention, Plaintiff and the Class are unlikely to ever recover their
7 investments. Accordingly, judicial intervention is required and requested to rectify the existing and
8 future harm facing Plaintiff and the Class—harm that is likely to be irreparable. For these reasons,
9 Plaintiff on behalf of himself, and all similarly situated individuals and entities that invested in BCC
10 and/or the BitConnect Investment Programs, seeks compensatory, exemplary, punitive, injunctive, and
11 rescissory relief, providing rescission and repayment of all investments into BCCs and/or the
12 BitConnect Investment Programs, and securing and conserving such funds until repayment.
13 JURISDICTION AND VENUE

14 16. This Court has subject matter jurisdiction under 28 U.S.C. § 1367 (supplemental
15 jurisdiction), 28 U.S.C. § 1331 (federal question jurisdiction) and Section 22 of the Securities Act (15
16 U.S.C. § 77v) because Plaintiff alleges violations of Sections 12(a)(1) and 15(a) of the Securities Act.
17 17. This Court has personal jurisdiction over each of the Defendants because each has
18 sufficient minimum contacts with this District as to render the exercise of jurisdiction by this Court
19 permissible under traditional notions of fair play and substantial justice.

20 18. Venue is proper in this District under Section 22 of the Securities Act, 15 U.S.C. § 77v,
21 as well as under 28 U.S.C. § 1391, because: (a) the conduct at issue took place and had an effect in
22 this District; (b) a substantial portion of the transactions and wrongs complained of herein occurred
23 here; and (c) Defendants have received substantial compensation and other transfers of money here by
24 doing business here and engaging in activities having an effect in this District.
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1 PARTIES
2 Plaintiff
3 19. Plaintiff is a resident within this District and a citizen of the United States. On
4 December 11, 2017, January 1, 2018 and January 4, 2018, Plaintiff funded his BitConnect account,
5 through BitConnect’s website, by investing, respectively, $10,000; $40,000; and $60,000. On January
6 17, 2018, when BitConnect closed its lending and trading platform, Plaintiff held 410 BCCs. As of
7 February 22, 2018, 410 BCCs are worth approximately $1,271.
8 The Corporate Defendants
9 20. Defendant BitConnect International PLC is a foreign for-profit company organized in
10 England and Wales and is incorporated under the Companies Act 2006 as a public company limited
11 by shares. BitConnect International PLC’s corporate record lists the entity’s registered address as:
12 Grant Thornton House, 22 Melton Street, Kings Cross, London, United Kingdom NW1 2EP.
13 21. Defendant BitConnect LTD is a foreign for-profit company organized in England and
14 Wales and is incorporated under the Companies Act 2006 as a private company limited by shares.
15 BitConnect’s corporate record lists the entity’s registered address as: The Panorama, Park Street,
16 Ashford, United Kingdom TN24 8EZ.
17 22. Defendant BitConnect Trading LTD is a foreign for-profit company organized in
18 England and Wales and is incorporated under the Companies Act 2006 as a private company limited
19 by shares. BitConnect Trading LTD’s corporate record lists the entity’s registered address as: 23 St.
20 Elizabeth Avenue, Bootle, United Kingdom L20 6FA.
21 23. Upon information and belief, the BitConnect entities are wholly interrelated and are
22 used interchangeably as instrumentalities for the fraud and unlawful schemes described herein.
23 The Director and Affiliate/Recruiter Defendants
24 24. Defendant Jeppesen is an individual believed to be domiciled in the United States.
25 According to published information, Jeppesen held the title of a Director at BitConnect, serving as the
26 Development Director for BitConnect’s operations in the United States and Europe.
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1 25. Defendant Arcaro is an individual domiciled in Moorpark, California. According to
2 paperwork filed with the corporate registry office in the United Kingdom, Arcaro is an active Director
3 of BitConnect International PLC. Defendant Arcaro not only served BitConnect by managing a team
4 of U.S.-based affiliates/recruiters, he also served as one of the most successful affiliate/recruiters for
5 BitConnect himself, soliciting hundreds if not thousands of BitConnect investors in the United States
6 and abroad through social media sites such as YouTube and Facebook.
7 26. Defendant James is an individual believed to be domiciled in the United States.
8 Defendant James served as an affiliate/recruiter for BitConnect, soliciting hundreds if not thousands
9 of BitConnect investors in the United States and abroad through social media sites such as YouTube
10 and Facebook.
11 27. Defendant Hildreth is an individual domiciled in Laguna Nigel, California. Defendant
12 Hildreth served as an affiliate/recruiter for BitConnect, soliciting hundreds if not thousands of
13 BitConnect investors in the United States and abroad through social media sites such as YouTube and
14 Facebook.
15 28. Defendant Grant is an individual believed to be domiciled in Miami, Florida.
16 Defendant Craig served as an affiliate/recruiter for BitConnect, soliciting hundreds if not thousands of
17 BitConnect investors in the United States and abroad through social media sites such as YouTube and
18 Facebook.
19 29. Defendant Trovato is an individual believed to be domiciled in the United States. His
20 true name and the state of his domicile are unknown at this time. Defendant Trovato served as an
21 affiliate/recruiter for BitConnect, soliciting hundreds if not thousands of BitConnect investors in the
22 United States and abroad through social media sites such as YouTube and Facebook.
23 30. Defendant Maasen is an individual believed to be domiciled in Tulsa, Oklahoma.
24 Defendant Maasen served as an affiliate/recruiter for BitConnect, soliciting hundreds if not thousands
25 of BitConnect investors in the United States and abroad through social media sites such as YouTube
26 and Facebook.
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1 CLASS ACTION ALLEGATIONS

2 31. Plaintiff brings this action individually and as a class action on behalf of all individuals
3 and entities who transferred to BitConnect any currency or cryptocurrency to invest in BCC and/or
4 the BitConnect Investment Programs and who suffered financial injury as a result thereof (the
5 “Class”). Excluded from the Class are Defendants herein and any person, firm, trust, corporation, or
6 other entity related to, controlled by, or affiliated with, any Defendant, including the immediate family
7 members of the Individual Defendants.
8 32. This action is properly maintainable as a class action under Federal Rule of Civil
9 Procedure 23.
10 33. While the exact number of Class members is presently unknown to Plaintiff and can
11 only be ascertained through discovery, Plaintiff believes that there are thousands of members in this
12 Class. All members of the Class may be identified by records maintained by Defendants and may be
13 notified of the pendency of this action by mail, using forms of notice similar to that customarily used
14 in securities class actions.
15 34. There are questions of law and fact which are common to the Class and which
16 predominate over questions affecting any individual Class member. The common questions include,
17 inter alia, the following: (i) whether Defendants offered and sold unregistered securities in violation
18 of the federal securities laws; (ii) whether Defendants engaged in unfair business practices in violation
19 of California’ Unfair Competition law; (iii) whether Defendant BitConnect breached its contracts with
20 Plaintiff and the Class; (iv) whether Defendants fraudulently solicited investments from Plaintiff and
21 the Class; (v) whether Defendants have been unjustly enriched by the unlawful conduct alleged herein;
22 (vi) whether Plaintiff and the Class will suffer irreparable harm if such unlawful activities are not
23 remedied; and (vii) whether Plaintiff and the Class are entitled to compensatory, exemplary, punitive,
24 injunctive, and/or rescissory relief as a result of Defendants’ wrongful conduct alleged herein, and the
25 measure of such damages.
26 35. Plaintiff’s claims are typical of the claims of the other members of the Class, and
27 Plaintiff does not have any interests adverse to the Class. Additionally, Plaintiff and the other members
28
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1 of the Class have all sustained harm in a substantially identical manner as a result of Defendants’
2 wrongful conduct as alleged herein.
3 36. Plaintiff will fairly and adequately protect the interests of the Class and has retained
4 competent counsel experienced in litigation of this nature.
5 37. The prosecution of separate actions by individual members of the Class would create a
6 risk of inconsistent or varying adjudications with respect to individual members of the Class, which
7 could establish incompatible standards of conduct for Defendants.
8 38. Plaintiff anticipates that there will be no difficulty in the management of this litigation.
9 A class action is superior to other available methods for the fair and efficient adjudication of this
10 controversy.
11 39. Defendants have acted on grounds generally applicable to the Class with respect to the
12 matters complained of herein, thereby making appropriate the relief sought herein with respect to the
13 Class as a whole.
14 40. Accordingly, Plaintiff seeks compensatory, exemplary, punitive, rescissory, injunctive,
15 and other equitable relief on behalf of himself and the Class to prevent the irreparable injury they will
16 continue to suffer absent judicial intervention.
17 SUBSTANTIVE ALLEGATIONS
18 Background on BitConnect
19 41. BitConnect International PLC; BitConnect LTD; and BitConnect Trading LTD
20 (collectively “BitConnect”) are all parts of the same foreign technology organization that conducted
21 business on the Internet, principally by means of a website accessible at www.bitconnect.co.
22 42. BitConnect describes itself as “an opensource all in one [sic] bitcoin and crypto
23 community platform designed to provide multiple investment opportunities with cryptocurrency
24 education where it is entirely possible to find the independence we all desire, in a community of like-
25 minded, freedom loving individuals who, like you, are seeking the possibility of income stability in a
26 very unstable world.”

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1 43. BitConnect launched in late-2016 by conducting an initial coin offering,4 which ran
2 from November 15, 2016 through early January 2017 (the “BitConnect ICO”).
3 44. The BitConnect ICO introduced BCC into the marketplace. BitConnect describes BCC
4 as “an open source, peer-to-peer, community driven decentralized cryptocurrency that allow [sic]
5 people to store and invest their wealth in a non-government controlled currency, and even earn a
6 substantial interest on investment [sic]. This means anyone holding BitConnect Coin in their wallet
7 will receive interest on their balance in return for helping maintain security on the network.” Similarly,
8 BCC was described as not just “an investment tool; [but as] the investment tool you need to jump start
9 your financial security.”
10 45. Shortly following the BitConnect ICO, BitConnect launched the BitConnect
11 Exchange—a cryptocurrency exchange where investors could use BTC or fiat currency to purchase
12 BCC.
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4
An “initial coin offering” is a capital raising event in which an entity offers participants a unique
23 “coin” or “token” in exchange for consideration (often in the form of digital currency—most
commonly BTC and Ethereum—or fiat currency). These tokens are issued on a blockchain and are
24 oftentimes listed on online platforms, called virtual currency exchanges, where they are tradable for
digital or fiat currencies.
25
To participate in an initial coin offering, investors are required to transfer digital currencies to the
26 issuer’s address, online wallet, or other account. After the completion of an initial coin offering, the
issuer will typically distribute its unique “tokens” to the participants’ unique address on the
27 blockchain. Similar to stockholders in an initial public offering (“IPO”), holders of these tokens are
then entitled to certain rights related to a venture underlying the initial coin offering, such as profits,
28 shares of assets, use of certain services provided by the issuer, and/or voting rights.
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1 46. Over the following year, BitConnect implemented various investment programs,
2 including the BitConnect Lending Program, the BitConnect Staking Program, and the
3 Referral/Affiliate Program. BitConnect marketed various uses for BCC:
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15 The BitConnect Websites

16 47. BitConnect maintained a website accessible at and a website accessible at
17 http://bitconnectcoin.co (the “BitConnect Websites”). The BitConnect Websites were accessible
18 worldwide to the general public, including residents of the United States.
19 48. The BitConnect Investment Programs were available for purchase by individuals in the
20 United States and worldwide through the BitConnect Websites and affiliated websites rendered in
21 foreign languages. The investments were promoted on social media pages including, but not limited
22 to, Facebook, YouTube, Reddit, Instagram, and Craigslist.
23 49. BitConnect promoted its Investment Programs on the BitConnect Websites by making
24 the following representations:
25 (a) “There are multiple ways to invest in the BitConnect platform with different level
of earning opportunity associated”;
26
(b) “You can invest BitConnect Coin in BitConnect lending platform exclusively
27 from the BitConnect Dashboard. This investment option involved profiting from
BitConnect trading bot and volatility software. You will receive daily profit
28 based on your investment option. Upon investment term completion, you will
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1 receive your capital back to take out from the BitConnect lending platform or
optionally reinvest back in lending platform to continue receiving daily profit”;
2 and
3 (c) “Invest your wealth in community-driven decentralized cryptocurrency. Using

BitConnect public exchanges, you can buy, sell and trade BitConnect Coin (BCC)
4 directly to and from each other with no central organization involved.”
5 50. Upon information and belief, Defendant Jeppesen played an integral role in developing
6 and promoting the BitConnect Websites. Without his vital contributions, the BitConnect Websites
7 would not have functioned as well as they did and would not have ensnared as many victims who fell
8 prey to Defendants’ promotion of BCCs and the BitConnect Investment Programs.
9 Trading BCC
10 51. Trading BCC was marketed as an “investment option” that could be “used to profit on
11 price fluctuation” in that investors could “buy BitConnect coin at a lower price and sell[] them at [a]
12 higher price.” Additionally, investors could “profit[] from downward movements in [BCC] price by
13 selling them at a higher price and buy[ing] them again at a lower price and pocketing the price
14 difference.”
15 52. In addition to trading BCC, the two primary investment opportunities Defendants
16 touted were the BitConnect Lending Program and the BitConnect Staking Program. To participate in
17 either investment opportunity, investors were required to expend BTC or fiat currency to purchase
18 BCC on the BitConnect Exchange.
19 The BitConnect Lending Program

20 53. The BitConnect Lending Program was described as an “investment option [that]
21 involves profiting from Bitconnect trading bot and volatility software” under which investors would
22 “receive daily profit based on [their] investment option.” Following the “term completion, [investors]
23 [would] receive [their] CAPITAL BACK to take out from Bitconnect lending platform or optionally
24 [sic] reinvest back in lending platform to continue receiving daily profit.”
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1 54. The BitConnect Lending Program offered up to forty percent (40%) interest per month
2 as well as additional interest on a daily basis. The general mechanics of the program is demonstrated
3 in the following graphic BitConnect published:
10
11
12 55. In soliciting investors for the BitConnect Lending Program, BitConnect employed the
13 use of online banner ads such as the following:
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21 56. Under the BitConnect Lending Program investors would “lend” their BCCs to
22 BitConnect—“with no risk”—as part of an investment scheme whereby BitConnect ostensibly used
23 these BCCs to fund the trading activities using its Volatility Software.
24 57. Once the funds were deposited into the BitConnect Lending Program, trading bots
25 using the Volatility Software purportedly managed those funds, generating a guaranteed return using
26 its volatility predictions for the price of BTC. In exchange, investors receive income in the form of a
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1 daily fixed interest rate, and a bonus interest percentage, before eventually receiving the return of the
2 principal amount invested.
3 58. In short, investors were sold the promise of profit merely through “lending” BCCs and
4 enjoying the guaranteed returns provided by trading bots and the Volatility Software. These returns
5 were allegedly backed by the earnings promised by BitConnect’s development and implementation of
6 the trading algorithms, which would purportedly produce returns sufficient to pay the following rates
7 and bonuses:
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15 The BitConnect Staking Program

16 59. The BitConnect Staking Program incentivized investors to purchase and hold BCCs by
17 offering “guaranteed” interest—paid in BCC. The BitConnect Staking Program was sold to the public
18 as an investment program that promised investors could earn interest of up to ten percent (10%) per
19 month over a specified term through a process called “Proof of Stake Minting.” In essence, the
20 BitConnect Staking Program and BCCs in general were sold as “interest bearing asset[s] with 120%
21 return per year. It is that simple.”
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1 60. The general mechanics of the BitConnect Staking Program are demonstrated in the
2 following graphic BitConnect published:
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14
15 61. To participate in the BitConnect Staking Program, investors were required to download
16 and install the BitConnect-QT wallet software to hold their BCCs; eventually BitConnect also released
17 an online version of the BitConnect-QT Wallet. After holding their BCCs in the BitConnect-QT
18 Wallet for fifteen (15) days, an investor’s BCCs would accrue interest. The amount of interest paid to
19 investors was purportedly contingent upon the dates of the investors’ investments:
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1 62. BitConnect further represented that the BitConnect Staking Program was an
2 opportunity for investors to: (i) “[s]ecure [their] future by gaining quick profit growth for tomorrow
3 that is practical and attainable”; (ii) achieve “financial freedom”; (iii) “begin staking or holding
4 BitConnect Coin and watch [their] interest grow”; and (iv) that “the more [ BCC investors] hold, the
5 more [they] earn.”
6 The BitConnect Referral Program
7 63. In connection with the BitConnect Investment Programs, BitConnect operated the
8 Referral Program pursuant to which “affiliates” would earn additional income for referring additional
9 investors to invest in BitConnect. The Referral Program was a run-of-the-mill pyramid scheme.
10 Initially, the program extended “to Infinity” in that after the tenth (10) level was reached in the
11 pyramid, 0.01% of all investments made by subsequent investors in the pyramid would siphon
12 upwards to the top affiliate. The concept is more plainly visible in the following graphic:
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16
17
18
19
20
21
22
23
24 64. Eventually, BitConnect modified the Referral Program to “7 levels of earning potential
25 to” investors based on the number of referrals that signed up for the BitConnect. However, the core
26 concept and fraudulent Pyramid scheme remained in essence. Indeed, BitConnect encouraged
27 investors to “[i]nvite [their] friends and family to join BitConnect via [their] unique referral link to
28
16 Case No. 3:18-cv-01165
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1 start earning a serious income from [BitConnect’s] affiliate program” and to “[s]pread the word on
2 social media and other online platforms to help” make BitConnect a success.
3 65. Defendants Arcaro, James, Hildreth, Grant, Trovato, and Maasen were some of
4 BitConnect’s most successful “affiliate” marketers.
5 66. For example, upon information and belief, Defendant Arcaro was responsible for
6 managing a large team of affiliate markets for BitConnect; and he personally assisted affiliates with
7 preparing sales presentations and honing their sales pitches to potential investors in the BitConnect
8 Investment Programs.
9 67. Evidently, Defendant Arcaro was so successful as an affiliate marketer and organizer
10 that he received a Porsche Carrera 911 S as a reward during a live broadcast of the BitConnect
11 Conference in October 2017.
12 68. Defendant Arcaro is also believed to have created and orchestrated the “BCC
13 School”—an online training program to “teach” the unsuspecting public how to participate in
14 cryptocurrency investment opportunities, including the BitConnect Investment Programs. For
15 example, on Defendant Arcaro’s website, Futuremoney.io, “lessons” eight, nine, and ten in the course
16 named “Cryptocurrency 101,” were entitled, respectively, “Buying Your First Bitcoin,” “Creating
17 Your Bitconnect Account,” and “Bitcoin to Bitconnect: Transfer and Start Earning!” Unsurprisingly,
18 the “graduates” of “BCC School” were directed to open BitConnect accounts using Defendant
19 Arcaro’s and his team’s referral links.

20 69. In essence, the BCC School was little more than a conduit to get BCC School
21 “graduates” to open up accounts at BitConnect, for which Defendant Arcaro and his team of affiliates
22 reaped from BitConnect the riches of each client referral.
23 70. Among the BitConnect “affiliate” marketers, Defendant James has been a particularly
24 active affiliate promoter, primarily by using videos he posted on YouTube wherein he solicited
25 investments for the BitConnect Investment Programs.
26 71. Shockingly, after Texas issued an Emergency Cease and Desist Order against
27 BitConnect in early-January 2018, Defendant James encouraged the public to use a Virtual Private
28
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1 Network (“VPN”) to simulate an IP address outside of Texas and continue using BitConnect: “Load
2 you [sic] a VPN, they all are good, and keep using BitConnect. Don’t let Texas, don’t let them
3 government shut you down . . . they haters [sic], they mad cus [sic] we making money.”
4 72. Rather than exhibit even a semblance of remorse for his involvement propagating the
5 BitConnect pyramid schemes, Defendant James has opted to deem investors who were cheated by
6 Defendants’ fraudulent schemes—some of whom lost their life savings—“crybabies.”
7 73. Similarly, upon information and belief, Defendant Hildreth marketed the BitConnect
8 Investment Programs through his website named ryanhildreth.com which was touted as teaching “how
9 to make an extra $1,000-$5,000+ per month” and targeted “ENTREPRENEURS WHO WANT THE
10 FREEDOM TO MAKE MONEY FROM ANYWHERE IN THE WORLD, TRAVEL, AND
11 CHOOSE THE LIFESTYLE [THEY] WANT TO LIVE!” (emphasis in original).
12 74. With respect to Defendant Grant, upon information and believe, he has been hailed as
13 a “godfather” of BitConnect and began promoting the BitConnect Investment Programs in April 2017.
14 Additionally, Defendant Grant has been alleged to have been involved in numerous other scams.5
15 75. Similarly, Defendant Trovato was an extremely influential affiliate marketer who
16 claimed to have become a millionaire as a result of his cryptocurrency investments. Defendant
17 Trovato’s participation and culpability in furthering the BitConnect pyramid/Ponzi schemes is further
18 evident from the fact that he has recently taken to deleting all of his YouTube videos promoting any
19 cryptocurrency investment opportunity.

20 76. Defendant Maasen also published dozens of YouTube videos promoting the
21 BitConnect Investment Programs. Further, Defendant Maasen appears to have primarily targeted
22 raising investments from high school and college-age investors.
23 77. Each of the affiliate Defendants personally benefited from their marketing efforts on
24 behalf of BitConnect from investors using their individual referral links to open BitConnect accounts.
25
26
27 5
See, e.g., http://www.davinsden.com/avalos/, (research compiled by a podcast team on Defendant
28 Grant’s various schemes).
18 Case No. 3:18-cv-01165
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1 The BitConnect Investments Were Ponzi Schemes
2 78. Contrary to the claims of fantastic investment returns through the power of its
3 proprietary, secret trading volatility software, and the communal power of the BitConnect Staking
4 Program, BitConnect was actually operating Ponzi schemes.
5 79. Any investment returns provided to BitConnect investors were not legitimately
6 generated; rather, BitConnect simply used new BitConnect investors’ money to pay the promised
7 returns on outstanding BitConnect investors’ investments.
8 80. In addition, BitConnect used new BitConnect investors’ funds to pay the BitConnect
9 Directors and affiliates—including, but not limited to, Defendants Jeppesen, Arcaro, James, Hildreth,
10 Grant, Trovato, and Maasen—salary and/or commissions for their role in bringing additional victims
11 into the schemes.
12 BCCs and the BitConnect Investment Programs Are Investment Contract Securities
13 81. Moreover, BitConnect and its affiliates engaged in the offer and sale of unregistered
14 securities.
15 82. Under the Securities Act, a “security” is defined as including any “note,” “investment
16 contract,” or “instrument commonly known as a ‘security.’” See 15 U.S.C. § 77b(a)(1). Here, the
17 BCCs, the BitConnect Lending Program, and the BitConnect Staking Program each constitute an
18 investment contract. In SEC v. W.J. Howey Co., the United States Supreme Court established a three-
19 part test to determine whether an offering, contract, transaction, or scheme constitutes an investment
20 contract.6 Under the test articulated in Howey, a contract, transaction, or scheme is an “investment
21 contract” if it involves: (i) the investment of money; (ii) in a common enterprise; (iii) with the
22 expectation of profits to come solely from the efforts of others.
23 83. When determining whether a security has been offered and sold, the focus must be on
24 the economic realities underlying the transaction. Here, the economic realities are that Plaintiff and
25
26 6
See SEC v. W.J. Howey, Co., 328 U.S. 293 (1946); see also Intern. Bhd. of Teamsters v. Daniel,
27 421 U.S. 837, 852 (1979) (noting that the Howey test is not the only test for determining a security,
but has been held to embody “all the attributes that run through all of the Court’s decisions defining a
28 security”).
19 Case No. 3:18-cv-01165
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1 the Class invested funds to trade BCCs, “lend” BCCs, and/or “stake” BCCs—each of which they
2 expected would lead to “financial freedom” and/or “guaranteed” lucrative returns. Investors in the
3 BitConnect Investment Programs used BTC or fiat currency to purchase the BCC required to make
4 their investments. Accordingly, Plaintiff’s and the Class’ investment of BTC or fiat currency
5 constitutes an investment of money for the purposes of determining whether an investment involved
6 a security.
7 84. Plaintiff and the Class were investing in a common enterprise with Defendants, as the
8 BTC and fiat currency were pooled under the control of Defendant BitConnect, and the success of the
9 BitConnect platform—and thus potential profits stemming from the future valuation of the BCC—
10 was entirely reliant on Defendants’ actions, primarily BitConnect’s implementation of its proprietary,
11 secret trading system, which BitConnect claimed would produce returns sufficient to cover interest
12 payments to the BCC holders. With respect to the BitConnect Lending Program, investors were
13 promised substantial fixed returns and a complete return of principal at a fixed time in the future.7
14 BitConnect provided a Daily Interest Chart on its website that showed the daily interest that it
15 purported to have paid to its investors in the three months prior to that date. Although the daily interest
16 rate for BitConnect investments varied on a daily basis, on average BitConnect guaranteed a return of
17 1% per day.8
18
19
20
21
22
23
24
7
As relates to the BitConnect Staking Program, BitConnect failed to ever explain where the funds
25 would come from to provide up to “120%” returns per year; thus, it can only be presumed that such
funds were meant to also result from Defendants’ actions, through trading bots or otherwise.
26 8
Theoretically, if investors chose to reinvest the interest earned, this daily interest would potentially
27 add up to significant returns as a result of daily compounding. For example, a one-hundred-dollar
investment compounded at 1% daily interest would be worth $134.77 after one month, $599.58 after
28 six months, and $3,778.02 by the end of the year—representing an outlandish 3,678.02% net profit.
20 Case No. 3:18-cv-01165
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10
11
12
13 85. In short, it is indisputable that Defendants were selling investment contracts and that
14 any success from BitConnect’s implementation of its Volatility Software—enabling payment of the
15 interests and bonuses that were to be distributed—as well as any future potential increases to the value
16 of the BCCs were entirely dependent on Defendants’ actions.
17 BitConnect Failed to Register the Securities
18 86. The reality is, BitConnect was not offering a revolutionary technology, but was instead
19 selling a new take on a century-old scam. Specifically, BitConnect used cryptocurrency to coat its
20 Ponzi/pyramid schemes with the thinnest veneer of legitimacy. Despite such efforts, it is abundantly
21 clear that Defendants were conducting and/or supporting the Ponzi/pyramid schemes. Indeed, the
22 BitConnect Investment Programs exhibit numerous characteristics of such schemes, including:
23 (a) providing daily interest on an investment that had no income other than new investor
24 money;
25 (b) artificially increasing the value of its cryptocurrency by having new investors in the Ponzi
26 scheme purchase BCC to invest;
27
28
21 Case No. 3:18-cv-01165
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1 (c) obfuscating the identities of BitConnect’s owners by using an offshore company
2 created through a company called Companies Made Simple; and
3 (d) expanding the amount of people in this Ponzi scheme by implementing a Pyramid scheme
4 that paid a commission 7-levels deep for recruits.
5 87. While the SEC has yet to involve itself—at least publicly—in the present matter, state
6 regulators have displayed no such hesitancy. By late-2017, it was apparent to BitConnect that the
7 Ponzi schemes it had constructed was on the verge of toppling. Not content with riding off into the
8 sunset with its ill-gotten gains, BitConnect decided to take another bite at the apple and orchestrated a
9 second BitConnect ICO to take place in January 2018 (the “BitConnectx ICO”). The Bitconnectx.co
10 domain was registered in late-December 2017, and a crowdsale commenced less than two weeks later.
11 The company was seeking to sell 11.76 million of a new digital currency (“BCCX”), which would
12 earn BitConnect $588 million. Additionally, BitConnect planned to retain another $145 million in
13 BCCXs for itself, bringing its total expected income from the BitConnectx ICO to $733 million.
14 88. On January 4, 2018, the Texas State Securities Board issued an Emergency Cease and
15 Desist Order against BitConnect in which the Securities Commissioner of the State of Texas presented
16 his office’s conclusion that, inter alia:
17 (a) the BitConnect Investments are securities;
18 (b) BitConnect had violated numerous securities regulations by offering the

BitConnect Investments for sale in Texas;
19
(c) BitConnect had engaged in fraud and made materially misleading statements
20 about the BitConnect Investments that were likely to deceive the public; and
21 (d) BitConnect’s conduct, acts, and practices threaten an immediate and irreparable
public harm.
22
23 89. Soon thereafter, on January 9, 2018, the Secretary of State of North Carolina –
24 Securities Division issued a Temporary Cease and Desist Order against BitConnect to prevent
25 BitConnect from further violating state securities laws and restrain it from conducting the second ICO
26 because the State had concluded that BitConnect’s investment offerings were unregistered securities
27
28
22 Case No. 3:18-cv-01165
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1 being offered to the residents of the State and that those investments posed an immediate and
2 irreparable harm to the residents of North Carolina.
3 BitConnect Abruptly Closed Its Operations
4 90. On January 13, 2018, Bitconnect’s website went down. Although the website was back
5 up just a few days later, on January 16, 2018, BitConnect posted an anonymous announcement
6 declaring that BitConnect had closed the trading platform:
7 This is to inform all community members that we are closing the Bitconnect lending
and exchange platform. We are closing the lending operation immediately with the
8 release of all outstanding loans. With release of your entire active loan in the lending
wallet we are transferring all your lending wallet balance to your BitConnect wallet
9 balance at 363.62 USD. This rate has been calculated based on last 15 days averages
of the closing price registered on coinmarketcap.com. You are free to withdraw your
10 BitConnect coin currently in QT wallets that was used for staking as well. We are
also closing BCC exchange platform in 5 days. In short, we are closing lending
11 service and exchange service while BitConnect.co website will operate for wallet
service, news and educational purposes.
12
The reason for halt of lending and exchange platform has many reasons as follow:
13
The continuous bad press has made community members uneasy and created a lack
14 of confidence in the platform.
15 We have received two Cease and Desist letters, one from the Texas State Securities
Board, and one from the North Carolina Secretary of State Securities Division. These
16 actions have become a hindrance for the legal continuation of the platform.
17 Outside forces have performed DDos attacks on platform several times and have
made it clear that these will continue. These interruptions in service have made the
18 platform unstable and have created more panic inside the community.
19 Closing the lending and exchange platform doesn’t mean that we will stop supporting
BitConnect coin. Closing the lending platform will allow Bitconnect to be listed on
20 outside exchanges giving more options for trading.
21 We will keep working to make BitConnect coin available to merchant websites

providing them API access to accept BitConnect Coins on their platforms.
22
BitConnect X ICO is still functional and we are building an exchange platform on
23 the BitConnect X website. With BitConnect X operating as an exchange platform,
BitConnect Coin (BCC) will be listed there.
24
This is not the end of this community, but we are closing some of the services on the
25 website platform and we will continue offering other cyptocurrency services in the
future.
26
27
28
23 Case No. 3:18-cv-01165
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1 91. Evidently, the lending program was shut down entirely; and BitConnect no longer
2 honored its promise to pay interest thereon nor return the principal investments made into the lending
3 program. Moreover, BitConnect determined to move forward with the BitConnectx ICO—which is
4 still ongoing as of February 21, 2018.
5 92. Within moments of BitConnect shutting down its trading and lending platforms, the
6 price of BCC plummeted nearly ninety percent (90%) in value; and the token is believed to be
7 effectively useless now.
8 93. As a result of Defendants’ fraudulent and misleading activities—as well as their
9 violation of the federal securities laws—Plaintiff and the Class have suffered damages believed to be
10 greater than $2 billion.
11 Necessity for Judicial Intervention
12 94. In 2013, the SEC issued an investor alert on “Ponzi Schemes Using Virtual
13 Currencies,” warning investors to be wary of investment opportunities offering “high investment
14 returns with little or no risk” and explaining that “Ponzi schemes typically involve investments that
15 have not been registered with the SEC or with state securities regulators.” Here, Defendants have
16 conducted and propagated precisely such schemes.
17 95. On July 25, 2017, the SEC issued a report on “the DAO,” which offered tokens for sale
18 online, in which the SEC advised those using “distributed ledger or blockchain-enabled means for
19 capital raising to take appropriate steps to ensure compliance” with the federal securities laws, and
20 stated that “[a]ll securities offered and sold in the United States must be registered with the
21 Commission . . .” or qualify for an exemption from registration. On the same day, the SEC issued an
22 investor bulletin urging caution when investing in ICOs and urging investors to be mindful that
23 promoters and initial sellers that lead buyers of tokens to expect a return on their investment or
24 participate in shared returns provided by the project may be offering a security for sale.
25 96. Digital currencies are a relatively new phenomenon, and numerous individuals and
26 entities—by engaging in unlawful conduct with near impunity—are taking advantage of the time it
27 takes for regulatory agencies to address new investment developments, as Defendants have here by
28
24 Case No. 3:18-cv-01165
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1 raising hundreds of millions of dollars if not billions of dollars with promises of profits to be made
2 from trading BCCs and/or the BitConnect Investment Programs.
3 97. It is clear from recent events that the rampant disregard of state and federal securities
4 laws and consequently, abuse of investors, taking place in connection with BitConnect’s unlawful and
5 fraudulent conduct has been noted by state regulatory agencies.
6 98. While BCCs and the BitConnect Investment Programs plainly constitute investment
7 contract securities, at no time was a registration statement ever filed or in effect with the SEC for the
8 securities being offered. As such, the unlawful, unregistered offering of securities by Defendants to
9 Plaintiff and the Class violated Sections 5, 12(a)(1), and 15(a) of the Securities Act; and the private
10 right of action provided by Section 12(a)(1) of the Securities Act, created for just this type of situation,
11 provides strict liability for Defendants’ sale of such unregistered securities.
12 99. Additionally, due to the fraudulent and deceitful conduct involved and necessary to
13 propagate the BitConnect Investment Programs—particularly as relates to the Referral/Affiliate
14 Program—Defendants are liable for violating California’s Unfair Competition law, breach of contract
15 (with respect to Defendant BitConnect), actual fraud, constructive fraud, as well as for being unjustly
16 enriched at the expense of unsuspecting public investors.
17 100. Plaintiff has duly performed all of his duties and obligations, and any conditions
18 precedent to Plaintiff bringing this action have occurred, have been performed, or else have been
19 excused or waived.
20 CLAIMS FOR RELIEF
21 COUNT I
22 Claim for Violation of Section 12(a)(1) of the Securities Act
Against All Defendants
23
24 101. Plaintiff repeats and re-alleges the preceding allegations as if fully set forth herein.
25 102. Section 12(a)(1) grants Plaintiff a private right of action against any person who offers
26 or sells a security in violation of Section 5 and states that such person,

27
Shall be liable . . . to the person purchasing such security from him, who may sue
28 either at law or in equity in any court of competent jurisdiction, to recover the
25 Case No. 3:18-cv-01165
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1 consideration for such security with interest thereon, less the amount of any income
received thereon, upon the tender of such security, or for damages if he no longer
2 owns the security.
103. From January 2017 through January 2018, in connection with the BitConnect
3
Investment Programs and offer and sale of BCCs, Defendants unlawfully made use of means or
4
instruments of transportation or communication in interstate commerce or of the mails for the purposes
5
of offering, selling, or delivering unregistered securities in direct violation of the Securities Act.
6
104. The offer and sale of BCCs and solicitation of investments in the BitConnect
7
Investment Programs constituted the offer and sale of unregistered securities under controlling federal
8
law. BCCs and the BitConnect Investment Programs exhibit the following particular hallmarks of a
9
security under the Howey test: (a) to receive any BCCs (and invest in the BitConnect Investment
10
Programs), an investment of money, in the form of BTC and/or other currencies was required; (b) the
11
investment of money was made into the common enterprise that is Defendant BitConnect and its
12
ability to provide “guaranteed” returns using its trading algorithm or otherwise; and (c) the success of
13
the investment opportunities and any potential returns thereon were entirely reliant on Defendants’
14
ability to continuously provide such “guaranteed” returns to investors.
15
105. Each of the Individual Defendants constitutes “seller[s]” under the Securities Act and
16
is thus equally liable for selling unregistered securities in connection with BitConnect. Moreover, the
17
individual “affiliate”/recruiter Defendants personally profited by soliciting investors to use their
18
“referral” links to participate in the BitConnect Investment Programs.
19
106. As such, Defendants have participated in the offer and sale of unregistered securities
20
in violation of the Securities Act, and are liable to Plaintiff and the Class for rescission and/or
21
compensatory damages.
22
COUNT II
23
Claim for Violation of Section 15(a) of the Securities Act
24 Against Defendant Arcaro
25
107. Plaintiff repeats and re-alleges the preceding allegations as if fully set forth herein.
26
108. Due to his ownership in and/or control over Defendant BitConnect International PLC,
27
Defendant Arcaro acted as controlling person of BitConnect International PLC within the meaning of
28
26 Case No. 3:18-cv-01165
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1 Section 15(a) of the Securities Act as alleged herein. By virtue of his position(s) as an affiliate
2 manager and/or director and participation in and/or awareness of Defendant BitConnect International
3 PLC’s operations, Defendant Arcaro had the power to influence and control and did influence and
4 control, directly or indirectly, the decision making relating to the BitConnect Investment Programs,
5 including the decision to engage in the sale of unregistered securities in furtherance thereof.
6 109. By virtue of the foregoing, Defendant Arcaro is liable to Plaintiff and the Class as a
7 control person of Defendant BitConnect International PLC under Section 15(a) of the Securities Act.
8 COUNT III
9 Claim for Violation of Section 15(a) of the Securities Act
Against Defendant Jeppesen
10
12 111. Defendant Jeppesen is subject to liability by virtue of his top-level executive position
13 with BitConnect and his influence over the enterprise, which provided him the power to control or
14 influence BitConnect’s actions. For example, Defendant Jeppesen is reportedly a Director of
15 BitConnect—serving as the Director of Development for BitConnect’s operations in the United States
16 and Europe—and is responsible for overseeing and contributing to development of the websites used
17 by BitConnect to fraudulently offer and sell its BitConnect Investment Programs and BCCs to
18 investors, including its operations vis-à-vis Plaintiffs and the Class.
19 112. As a top-level executive and controlling person of BitConnect, Defendant Jeppesen

20 knew of, or recklessly disregarded, the fact that BitConnect was offering unlawful Ponzi/pyramid
21 schemes on the BitConnect Websites in connection with the sale of the BitConnect Investment
22 Programs and the BCCs.
23 113. Defendant Jeppesen had the power to influence and control and did influence and
24 control, directly or indirectly, the decision making relating to the BitConnect Investment Programs,
25 including the decision to engage in the sale of unregistered securities in furtherance thereof.
26 114. Defendant Jeppesen is a culpable participant in the fraudulent schemes described herein
27 and caused BitConnect to engage in the acts and omissions described herein.
28
27 Case No. 3:18-cv-01165
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1 115. Accordingly, Defendant Jeppesen is liable to Plaintiff and the Class as a “controlling
2 person” of BitConnect within the meaning of Section 15(a) of the Securities Act.
3 COUNT IV
4 Claim for Violation of Cal. Bus. & Prof. Code §§ 17200 et seq.
5
7 117. Defendants violated the Unfair Business Competition law, Cal. Bus. & Prof. Code
8 §§ 17200 et seq., both by offering and selling unregistered securities to Plaintiff and the Class in
9 violation of the federal securities laws and by conducting and/or substantially assisting in the
10 furtherance of a fraudulent, unlawful, and widespread Ponzi/pyramid schemes through direct and/or
11 personal solicitations of investments in BCC and/or the BitConnect Investment Programs.
12 118. Defendants engaged in immoral and unethical practices to the detriment of public
13 investors, as well as law-abiding industry participants in related cryptocurrency markets.
14 119. Plaintiff and the Class have suffered monetary injuries in fact due to Defendants’
15 actions alleged herein and are entitled to the rescission of their investments in BCC and/or the
16 BitConnect Investment Programs and injunctive relief.
17 COUNT V
18 Breach of Contract
Against Defendant BitConnect
19
21 121. Defendant BitConnect breached its contracts with Plaintiff and the Class by failing to
22 provide the “guaranteed” returns, daily interest, bonus interests, and return the initial investments
23 pursuant to the terms of the BitConnect Lending Program. Rather than adhere to the express,
24 unequivocal terms of the contracts, Defendant BitConnect converted Plaintiff’s and the Class’
25 investments into near worthless BCCs and shut down its operations.
26 122. By virtue of the foregoing, Defendant BitConnect is liable to Plaintiff and the Class for
27 damages resulting from Defendant BitConnect’s breaches of contract.
28
28 Case No. 3:18-cv-01165
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1 123. To the extent that Plaintiff has received from BitConnect any benefits through the
2 contract—though none are known to him at this time—Plaintiff hereby offers to restore to BitConnect
3 those benefits, once they are identified and can be quantified.
4 COUNT VI
5 Actual Fraud (Cal. Civ. Code § 1572)
6
8 125. Actual fraud consists of, inter alia, any of the following acts “committed by a party to
9 the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to
10 enter into the contract”: (1) the “suggestion, as a fact, of that which is not true, by one who does not
11 believe it to be true”; (2) the “positive assertion, in a manner not warranted by the information of the
12 person making it, of that which is not true, though he believes it to be true”; (3) the “suppression of
13 that which is true, by one having knowledge or belief of the fact”; or (4) “[a]ny other act fitted to
14 deceive.”
15 126. Due to Defendant BitConnect’s actual knowledge that the BitConnect Investment
16 Programs were fraudulent pyramid/Ponzi schemes, Defendant BitConnect is liable to Plaintiff and the
17 Class for damages. Similarly, due to the fact that the Individual Defendants knew or were grossly
18 negligent in not knowing that the BitConnect Investment Programs for which they solicited
19 investments—so as to receive significant personal monetary benefits as parties to the contracts

20 involving investors using their “referral” links—the Individual Defendants are likewise liable for
21 committing actual fraud as defined by Cal. Civ. Code § 1572 and thus, are liable to Plaintiff and the
22 Class for damages.
23 COUNT VII
24 Constructive Fraud (Cal. Civ. Code § 1573)
Against the Individual Defendants
25
27
28
29 Case No. 3:18-cv-01165
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1 128. Constructive fraud includes: “any breach of duty which, without an actually fraudulent
2 intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another
3 to his prejudice, or to the prejudice of any one claiming under him” or “any such act or omission as
4 the law specially declares to be fraudulent, without respect to actual fraud.”
5 129. The Individual Defendants each undertook substantial efforts to promote the
6 BitConnect Ponzi/Pyramid schemes, which by definition are fraudulent in nature. In the event the
7 Individual Defendants are not found liable for “actual fraud,” at minimum, each Individual Defendant
8 gained substantial personal benefits as a result of their significant and persistent efforts to induce the
9 unwitting public to invest in the unlawful and fraudulent BitConnect Investment Programs,
10 constituting constructive fraud under Cal. Civ. Code § 1573 and thus, are liable to Plaintiff and the
11 Class for damages.
12 COUNT VIII
13 Unjust Enrichment
Against the All Defendants
14
16 131. Defendants have reaped the benefits of operating and/or personally benefiting from
17 inducing Plaintiff and the Class to invest in fraudulent Ponzi/pyramid schemes (BCC and/or the
18 BitConnect Investment Programs), thereby causing actual harm to thousands of investors.
19 132. It would be unconscionable and against the fundamental principles of justice, equity,
20 and good conscience for Defendants to retain the substantial monetary benefits they have received as
21 a result of their misconduct.
22 133. To remedy Defendants’ unjust enrichment, the Court should order Defendants to
23 immediately return Plaintiff’s and the Class’ investments and disgorge any amounts received by
24 Defendants as a result of their misconduct alleged herein.
25
26
27
28
30 Case No. 3:18-cv-01165
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1 PRAYER FOR RELIEF

2 WHEREFORE, Plaintiff prays for judgment and relief as follows:
3 A. Declaring that this action is properly maintainable as a class action and certifying
4 Plaintiff as the Class representative and his counsel as Class counsel;
5 B. Declaring that Defendants offered and sold unregistered securities in violation of the
6 federal securities laws;
7 C. Declaring Defendants are liable to Plaintiff and the Class under Sections 12(a)(1)
8 and/or 15(a) of the Securities Act;
9 D. Declaring Defendants violated California’s Unfair Business Competition law and are
10 therefore required to provide rescissory and/or other equitable relief to Plaintiff and the Class;
11 E. Declaring Defendants are liable to Plaintiff and the Class due to their breach of contract,
12 actual fraud, constructive fraud, and/or unjust enrichment;
13 F. Preliminarily enjoining Defendants from making further transfers or dissipations of the
14 investments raised from the offer and sale of BCCs and in connection with the BitConnect Investment
15 Programs, or using such funds in any further purchases or transactions;
16 G. Requiring an accounting of the remaining funds and assets raised from Plaintiff and the
17 Class in connection with the offer and sale of BCCs and the BitConnect Investment Programs;
18 H. Imposing a constructive trust over the funds and assets rightfully belonging to Plaintiff
19 and the Class;

20 I. Ordering rescission of the investments made by Plaintiff and the Class relating to the
21 offer and sale of BCCs and the BitConnect Investment Programs and/or compensatory damages;
22 J. Awarding Plaintiff the costs of this action, including reasonable allowance for
23 Plaintiff’s attorneys’ and experts’ fees; and
24 K. Granting such other and further relief as this Court may deem just and proper.
25
26
27
28
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1 JURY DEMAND
2 Plaintiff respectfully requests a trial by jury on all issues so triable.
3 Dated: February 22, 2018 LEVI & KORSINSKY, LLP

4 By: /s/ Rosemary M. Rivas
Rosemary M. Rivas
5 44 Montgomery Street, Suite 650
San Francisco, CA 94104
6 Telephone: (415) 291-2420
Facsimile: (415) 484-1294
7
Eduard Korsinsky (to be admitted pro hac vice)
30 Broad Street, 24th Floor
9 New York, New York 10004
Telephone: (212) 363-7500
10 Facsimile: (212) 636-7171
11 Donald J. Enright (to be admitted pro hac vice)

Email: denright@zlk.com
12 John A. Carriel (to be admitted pro hac vice)
Email: jcarriel@zlk.com
1101 30th St., NW, Ste. 115
14 Washington, DC 20007
Telephone: (202) 524-4292
15 Facsimile: (202) 333-2121
16 Attorneys for Baltazar Avalos
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32 Case No. 3:18-cv-01165
ENRICHMENT
JS-CAND 44 (Rev. 06/17) Case 3:18-cv-01165 Document 1-1 Filed 02/22/18 Page 1 of 2
CIVIL COVER SHEET
The JS-CAND 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law,
except as provided by local rules of court. This form, approved in its original form by the Judicial Conference of the United States in September 1974, is required for the Clerk of
Court to initiate the civil docket sheet. (SEE INSTRUCTIONS ON NEXT PAGE OF THIS FORM.)
I. (a) PLAINTIFFS DEFENDANTS
BALTAZAR AVALOS, individually and on behalf of all others similarly situated BITCONNECT INTERNATIONAL PLC, BITCONNECT LTD., BITCONNECT TRADING LTD., JOSHUA JEPPESEN, GLENN ARCARO,
TREVON BROWN A/K/A TREVON JAMES, RYAN HILDRETH, CRAIG GRANT, JOHN DOE 1 A/K/A NICHOLAS TROVATO A/K/A
CRYPTONICK, and RYAN MAASEN
(b) County of Residence of First Listed Plaintiff Santa Clara County, CA County of Residence of First Listed Defendant
(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)
NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF
THE TRACT OF LAND INVOLVED.
(c) Attorneys (Firm Name, Address, and Telephone Number) Attorneys (If Known)
Rosemary Rivas, Levi & Korsinsky, LLP, 44 Montgomery Street,
Suite 650, San Francisco, CA 94104; 415-291-2420
II. BASIS OF JURISDICTION (Place an “X” in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff
(For Diversity Cases Only) and One Box for Defendant)
PTF DEF PTF DEF
1 U.S. Government Plaintiff 3 Federal Question Citizen of This State 1 1 Incorporated or Principal Place 4 4
(U.S. Government Not a Party)
of Business In This State
Citizen of Another State 2 2 Incorporated and Principal Place 5 5
2 U.S. Government Defendant 4 Diversity of Business In Another State
(Indicate Citizenship of Parties in Item III)
Citizen or Subject of a 3 3 Foreign Nation 6 6
Foreign Country
IV. NATURE OF SUIT (Place an “X” in One Box Only)

CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES
110 Insurance PERSONAL INJURY PERSONAL INJURY 625 Drug Related Seizure of 422 Appeal 28 USC § 158 375 False Claims Act
120 Marine Property 21 USC § 881 423 Withdrawal 28 USC 376 Qui Tam (31 USC
310 Airplane 365 Personal Injury – Product
130 Miller Act Liability 690 Other § 157 § 3729(a))
315 Airplane Product Liability
140 Negotiable Instrument 367 Health Care/ LABOR PROPERTY RIGHTS 400 State Reapportionment
320 Assault, Libel & Slander
150 Recovery of Pharmaceutical Personal 410 Antitrust
330 Federal Employers’ 710 Fair Labor Standards Act 820 Copyrights
Overpayment Of Injury Product Liability 430 Banks and Banking
Liability 720 Labor/Management 830 Patent
Veteran’s Benefits 368 Asbestos Personal Injury 450 Commerce
340 Marine Relations 835 PatentņAbbreviated New
151 Medicare Act Product Liability
345 Marine Product Liability 740 Railway Labor Act Drug Application 460 Deportation
152 Recovery of Defaulted PERSONAL PROPERTY 470 Racketeer Influenced &
350 Motor Vehicle 751 Family and Medical 840 Trademark
Student Loans (Excludes 370 Other Fraud Corrupt Organizations
355 Motor Vehicle Product Leave Act
Veterans) 371 Truth in Lending SOCIAL SECURITY
Liability 790 Other Labor Litigation 480 Consumer Credit
153 Recovery of 380 Other Personal Property 861 HIA (1395ff)
360 Other Personal Injury 791 Employee Retirement 490 Cable/Sat TV
Overpayment Damage Income Security Act 862 Black Lung (923) 850 Securities/Commodities/
of Veteran’s Benefits 362 Personal Injury -Medical
Malpractice 385 Property Damage Product 863 DIWC/DIWW (405(g)) Exchange
160 Stockholders’ Suits Liability IMMIGRATION
864 SSID Title XVI 890 Other Statutory Actions
190 Other Contract 462 Naturalization
CIVIL RIGHTS PRISONER PETITIONS 865 RSI (405(g)) 891 Agricultural Acts
195 Contract Product Liability Application
440 Other Civil Rights HABEAS CORPUS FEDERAL TAX SUITS 893 Environmental Matters
196 Franchise 465 Other Immigration
441 Voting 463 Alien Detainee Actions 895 Freedom of Information
870 Taxes (U.S. Plaintiff or
REAL PROPERTY 442 Employment Act
510 Motions to Vacate Defendant)
210 Land Condemnation 443 Housing/ Sentence 896 Arbitration
871 IRS–Third Party 26 USC
220 Foreclosure Accommodations 530 General § 7609 899 Administrative Procedure
445 Amer. w/Disabilities– Act/Review or Appeal of
230 Rent Lease & Ejectment 535 Death Penalty
Employment Agency Decision
240 Torts to Land OTHER
446 Amer. w/Disabilities–Other 950 Constitutionality of State
245 Tort Product Liability 540 Mandamus & Other Statutes
290 All Other Real Property 448 Education
550 Civil Rights
555 Prison Condition
560 Civil Detainee–
Conditions of
Confinement
V. ORIGIN (Place an “X” in One Box Only)

1 Original 2 Removed from 3 Remanded from 4 Reinstated or 5 Transferred from 6 Multidistrict 8 Multidistrict
Proceeding State Court Appellate Court Reopened Another District (specify) Litigation–Transfer Litigation–Direct File
VI. CAUSE OF Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):
Private Securities Litigation Reform Act; 15 U.S.C. § 77v
ACTION
Brief description of cause:
Violation of the Securities Act of 1933 §§ 12 & 15; Cal. Bus. & Prof. Code §§ 17200 et seq.; breach of contract, etc.
VII. REQUESTED IN ✔ CHECK IF THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint:
COMPLAINT: UNDER RULE 23, Fed. R. Civ. P. JURY DEMAND: Yes No
VIII. RELATED CASE(S), JUDGE DOCKET NUMBER

IF ANY (See instructions):
IX. DIVISIONAL ASSIGNMENT (Civil Local Rule 3-2)
(Place an “X” in One Box Only) SAN FRANCISCO/OAKLAND SAN JOSE EUREKA-MCKINLEYVILLE
DATE 02/22/2018 SIGNATURE OF ATTORNEY OF RECORD /s/ Rosemary M. Rivas

JS-CAND 44 (rev. 07/16) Case 3:18-cv-01165 Document 1-1 Filed 02/22/18 Page 2 of 2
INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS-CAND 44
Authority For Civil Cover Sheet. The JS-CAND 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and
service of pleading or other papers as required by law, except as provided by local rules of court. This form, approved in its original form by the Judicial
Conference of the United States in September 1974, is required for the Clerk of Court to initiate the civil docket sheet. Consequently, a civil cover sheet is
submitted to the Clerk of Court for each civil complaint filed. The attorney filing a case should complete the form as follows:
I. a) Plaintiffs-Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiff or defendant is a government agency, use
only the full name or standard abbreviations. If the plaintiff or defendant is an official within a government agency, identify first the agency and
then the official, giving both name and title.
b) County of Residence. For each civil case filed, except U.S. plaintiff cases, enter the name of the county where the first listed plaintiff resides at the
time of filing. In U.S. plaintiff cases, enter the name of the county in which the first listed defendant resides at the time of filing. (NOTE: In land
condemnation cases, the county of residence of the “defendant” is the location of the tract of land involved.)
c) Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there are several attorneys, list them on an attachment, noting
in this section “(see attachment).”
II. Jurisdiction. The basis of jurisdiction is set forth under Federal Rule of Civil Procedure 8(a), which requires that jurisdictions be shown in
pleadings. Place an “X” in one of the boxes. If there is more than one basis of jurisdiction, precedence is given in the order shown below.
(1) United States plaintiff. Jurisdiction based on 28 USC §§ 1345 and 1348. Suits by agencies and officers of the United States are included here.
(2) United States defendant. When the plaintiff is suing the United States, its officers or agencies, place an “X” in this box.
(3) Federal question. This refers to suits under 28 USC § 1331, where jurisdiction arises under the Constitution of the United States, an amendment
to the Constitution, an act of Congress or a treaty of the United States. In cases where the U.S. is a party, the U.S. plaintiff or defendant code
takes precedence, and box 1 or 2 should be marked.
(4) Diversity of citizenship. This refers to suits under 28 USC § 1332, where parties are citizens of different states. When Box 4 is checked, the
citizenship of the different parties must be checked. (See Section III below; NOTE: federal question actions take precedence over diversity
cases.)
III. Residence (citizenship) of Principal Parties. This section of the JS-CAND 44 is to be completed if diversity of citizenship was indicated above.
Mark this section for each principal party.
IV. Nature of Suit. Place an “X” in the appropriate box. If the nature of suit cannot be determined, be sure the cause of action, in Section VI below, is
sufficient to enable the deputy clerk or the statistical clerk(s) in the Administrative Office to determine the nature of suit. If the cause fits more than
one nature of suit, select the most definitive.
V. Origin. Place an “X” in one of the six boxes.
(1) Original Proceedings. Cases originating in the United States district courts.
(2) Removed from State Court. Proceedings initiated in state courts may be removed to the district courts under Title 28 USC § 1441. When the
petition for removal is granted, check this box.
(3) Remanded from Appellate Court. Check this box for cases remanded to the district court for further action. Use the date of remand as the filing
date.
(4) Reinstated or Reopened. Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date.
(5) Transferred from Another District. For cases transferred under Title 28 USC § 1404(a). Do not use this for within district transfers or
multidistrict litigation transfers.
(6) Multidistrict Litigation Transfer. Check this box when a multidistrict case is transferred into the district under authority of Title 28 USC
§ 1407. When this box is checked, do not check (5) above.
(8) Multidistrict Litigation Direct File. Check this box when a multidistrict litigation case is filed in the same district as the Master MDL docket.
Please note that there is no Origin Code 7. Origin Code 7 was used for historical records and is no longer relevant due to changes in statute.
VI. Cause of Action. Report the civil statute directly related to the cause of action and give a brief description of the cause. Do not cite jurisdictional
statutes unless diversity. Example: U.S. Civil Statute: 47 USC § 553. Brief Description: Unauthorized reception of cable service.
VII. Requested in Complaint. Class Action. Place an “X” in this box if you are filing a class action under Federal Rule of Civil Procedure 23.
Demand. In this space enter the actual dollar amount being demanded or indicate other demand, such as a preliminary injunction.
Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded.
VIII. Related Cases. This section of the JS-CAND 44 is used to identify related pending cases, if any. If there are related pending cases, insert the docket
numbers and the corresponding judge names for such cases.
IX. Divisional Assignment. If the Nature of Suit is under Property Rights or Prisoner Petitions or the matter is a Securities Class Action, leave this
section blank. For all other cases, identify the divisional venue according to Civil Local Rule 3-2: “the county in which a substantial part of the
events or omissions which give rise to the claim occurred or in which a substantial part of the property that is the subject of the action is situated.”
Date and Attorney Signature. Date and sign the civil cover sheet.

Baltazar Avalos v. Bitconnect

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Baltazar Avalos v. Bitconnect

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Case 3:18-cv-01165 Document 1 Filed 02/22/18 Page 1 of 33

1 Rosemary M. Rivas (State Bar No. 209147)

5 Eduard Korsinsky (to be admitted pro hac vice)

9 Donald J. Enright (to be admitted pro hac vice)

14 Counsel for Plaintiff Baltazar Avalos

16 UNITED STATES DISTRICT COURT

19 BALTAZAR AVALOS, individually and on behalf Case No. 3:18-cv-01165

12 are known only to Defendants or are exclusively within their control.

13 NATURE AND SUMMARY OF THE ACTION

23 constructive fraud, Cal. Civ. Code § 1573, and unjust enrichment.

24 2. Specifically, Defendant BitConnect created and operated fraudulent Ponzi/pyramid

26 “BitConnect Investment Programs”). To participate in the BitConnect Investment Programs, investors

1 were required to purchase BitConnect-created cryptocurrency called BitConnect Coins (“BCC”) on

2 the BitConnect BCC Exchange with bitcoin (“BTC”)2 or fiat currency.

13 BitConnect-QT Wallet, investors were “guaranteed” lucrative returns on their investments.

14 5. As part of their solicitation efforts, BitConnect enlisted multi-level affiliate marketers

17 successfully solicited additional investments in the BitConnect Investment Programs. Additionally,

21 affiliate marketers and/or directors of BitConnect. .

22 6. Despite being cloaked in technological sophistication and jargon, Defendants operated

2 more new money.

3 7. As noted above, to participate in the BitConnect Investment Programs, investors were

9 the BTC they invested with BitConnect.

10 8. Similarly, the BitConnect Investment Programs constitute “investment contract”

19 9. With respect to the BitConnect Lending Program, a stream of income would

5 12. In short, Defendants defrauded tens of thousands of investors by capitalizing on the

7 unregistered securities and participating in pyramid/Ponzi schemes.

23 participation in effectuating the fraudulent Ponzi/pyramid schemes.

13 JURISDICTION AND VENUE

19 permissible under traditional notions of fair play and substantial justice.

7 February 22, 2018, 410 BCCs are worth approximately $1,271.

8 The Corporate Defendants

9 20. Defendant BitConnect International PLC is a foreign for-profit company organized in

16 Ashford, United Kingdom TN24 8EZ.

17 22. Defendant BitConnect Trading LTD is a foreign for-profit company organized in

23 The Director and Affiliate/Recruiter Defendants

24 24. Defendant Jeppesen is an individual believed to be domiciled in the United States.

1 25. Defendant Arcaro is an individual domiciled in Moorpark, California. According to

7 26. Defendant James is an individual believed to be domiciled in the United States.

11 27. Defendant Hildreth is an individual domiciled in Laguna Nigel, California. Defendant

12 Hildreth served as an affiliate/recruiter for BitConnect, soliciting hundreds if not thousands of

15 28. Defendant Grant is an individual believed to be domiciled in Miami, Florida.

23 30. Defendant Maasen is an individual believed to be domiciled in Tulsa, Oklahoma.

1 CLASS ACTION ALLEGATIONS

7 members of the Individual Defendants.

14 in securities class actions.

25 measure of such damages.

2 wrongful conduct as alleged herein.

4 competent counsel experienced in litigation of this nature.

7 could establish incompatible standards of conduct for Defendants.

14 40. Accordingly, Plaintiff seeks compensatory, exemplary, punitive, rescissory, injunctive,

16 continue to suffer absent judicial intervention.

21 business on the Internet, principally by means of a website accessible at www.bitconnect.co.

23 community platform designed to provide multiple investment opportunities with cryptocurrency

26 very unstable world.”

9 your financial security.”

3 Referral/Affiliate Program. BitConnect marketed various uses for BCC:

15 The BitConnect Websites

3 (c) “Invest your wealth in community-driven decentralized cryptocurrency. Using

8 prey to Defendants’ promotion of BCCs and the BitConnect Investment Programs.

18 BCC on the BitConnect Exchange.

19 The BitConnect Lending Program

3 in the following graphic BitConnect published:

2 principal amount invested.