A second lawsuit was filed against BitConnect on January 30, 2018, and on the same day Chief District Judge Joseph McKinley, Jr. of the U.S. District Court for the Western District of Kentucky signed a temporary restraining order (TRO) freezing the assets of BitConnect, a now-defunct cryptocurrency exchange and lending service. The TRO will expire on February 13, 2018.
The order requires the parties to disclose cryptocurrency wallet and trading account addresses, as well as the identities of anyone to whom BitConnect has sent digital currencies within the last 90 days.
The defendants have 10 days to comply with the order. In addition to the disclosures, BitConnect International PLC, BitConnect LTD, BitConnect Trading LTD and Ryan Maasen are prohibited from transferring any assets they may possess until they are granted permission by the court, according to the TRO.
The order comes in response to a second class action lawsuit filed against BitConnect after it shut down its trading and lending platform, alleging that the exchange is a Ponzi scheme.
The plaintiff, Kentucky resident Brian Paige, filed the lawsuit on behalf of every investor in BitConnect, noting that bitcoin and other cryptocurrency assets had been converted into BitConnect Coin (BCC) when the company announced it was shutting down its exchange. BCC, which was trading at more than $300 at the time, had crashed to about $6 at press time.
It points to defendant Ryan Maasen of Tulsa, Okla. as the ringleader of the alleged scam, using YouTube videos to promote the company and “convince people to deposit money onto Bitconnect’s website,” which Paige and a host of others did. Massen deposited bitcoin in exchange for fixed returns and a guarantee of the principal amount being paid in full at a later date. Bitconnect was promising fixed returns of as high as 40% monthly and 1% daily irrespective of the cryptocurrency market.
The court found that the plaintiffs stood to lose any chance of recovering their funds if BitConnect’s assets were not frozen, and that enforcing a TRO:
“is in the public interest because the public is interested in preventing massive consumer fraud and other securities violations.”
In addition to granting the plaintiff’s motion for the TRO, the Court ordered the following:
“Defendants, Bitconnect International, PLC, Bitconnect LTD and Bitconnect Trading, LTD, and Ryan Maasen shall within ten (10) days of the entry of this Order disclose (a) all Bitcoin and other cryptocurrency wallet addresses, (b) all cryptocurrency trading account addresses, and (c) the identity of the holder/owner of any wallet or cryptocurrency address to which Defendants have transferred any Bitcoin or other cryptocurrency in the past 90 days, so that these assets can be monitored and traced.”
The lawsuit continued:
“This temporary restraining order is being entered without notice to Defendants to preserve the status quo and prevent irreparable harm until such time as the Court may hold a hearing.”
Due to the nature of the lawsuit and alleged securities violations, the court also noted that the plaintiff “has shown a strong likelihood of success,” and that the TRO “would present the status quo and give the Court the ability to make a meaningful ruling on the merits of this case.”
The TRO will expire on Feb. 13, according to the filing.