John Bigatton, the Australian promoter of BitConnect, has been convicted by the Sydney District Court of providing unlicenced financial advice contrary to s911B(1) of the Corporations Act 2001. He was released on a recognisance to be of good behaviour for three years.
BitConnect was a financial services business and online crypto platform which required investors to acquire BitConnect Coin (a crypto token) in order to participate in its investment opportunities.
Mr Bigatton provided unlicensed and unauthorised financial advice when he promoted BitConnect in Australia in seminars and on social media between August 2017 and January 2018.
ASIC Deputy Chair Sarah Court said, ‘Providing unlicensed financial advice denies Australian investors access to key protections and undermines trust and confidence in Australia’s financial services industry. ASIC is committed to taking action against the unlawful promotion of high-risk digital assets to protect Australian investors.’
‘This matter sends a clear message to Australians – that ASIC has and will act when unlicensed operators try to take advantage of Australian investors.’
In two of the seminars, Mr Bigatton told attendees that BitConnect Coins would increase in value to at least USD$1,000. At another, he stated words to the effect that, ‘BitConnect is better than any term deposit out there.’
This case is a reminder that many crypto assets are financial products under the current law and that services relating to them (including seminars and promotions) require an Australian financial services licence.
Judge Newlinds SC said ‘[t]he Offending involved a breach of trust in that the recipients of the financial product advice were entitled to have an expectation that they were receiving advice from a sufficiently licenced and regulated individual.’
The Court also said that ‘people who get involved in the promotion of financial products as part of a business for profit…need to be scrupulous in finding out for themselves what the law is and then to abide by that law. They need to understand that breach of these types of laws is a criminal offence and upon conviction they can expect to be met with stern penalties.’
The matter was prosecuted by the Commonwealth Director of Public Prosecutions following a referral from ASIC.
Judgment
R v Bigatton (No 5) [2024] NSWDC 285 (read decision on NSW Caselaw)
Background
BitConnect offered investment opportunities through its website, including a financial product known as the Lending Platform. The Lending Platform was promoted as an investment opportunity and in order to participate, investors were required to acquire BitConnect Coins.
Investors could invest or ‘loan’ BitConnect Coins for fixed terms in exchange for promised high interest rates. Investors did not control their loans once invested, nor could they withdraw their capital investment until the expiry of the lending period.
On 11 December 2018, ASIC successfully applied to the Federal Court to freeze Mr Bigatton’s assets, including his crypto assets. The total value of assets frozen was in the millions. This was the first time ASIC obtained freezing orders over digital assets. ASIC’s proceedings were discontinued in March 2020 and proceedings were commenced by the Australian Federal Police who obtained freezing orders over Mr Bigatton’s property under the Proceeds of Crime Act. These proceedings remain ongoing in the Supreme Court of New South Wales.
As a result of his conviction, Mr Bigatton is disqualified from managing corporations for five years.
On 1 September 2020, ASIC banned Mr Bigatton from providing financial services for seven years (20-206MR).
Mr Bigatton was charged over his conduct in relation to BitConnect in November 2020 (20-288MR). He pleaded guilty to one count of providing unlicensed financial advice contrary to section 911B(1) of the Corporations Act on 16 May 2024 (24-103MR).
