BitConnect Promoter Glenn Arcaro Argues Crypto Scam was Gambling and is Not a Security
Glenn Arcaro Argues Bitconnect Is Gambling And Is Not A Security
Glenn Arcaro, a top U.S. Bitconnect investor, moved to dismiss a class-action lawsuit filed by the platform’s victims. Arcaro argued that other investors were “disappointed gamblers,” that the laws cited in the class-action lawsuit “do not apply to him,” and that he has “no colorable legal responsibility for his conduct.”
Arcaro also raised several defenses, such as lack of personal jurisdiction, he did not personally sell Bitconnect, the investors did not rely on his statements, and that several claims were defective. In terms of the personal jurisdiction claim, he argued
“Even if this Court were to find that Florida’s long-arm statute conferred jurisdiction over Mr. Arcaro – which Mr. Arcaro does not concede – the limits of the U.S. Constitution prohibit hailing him into court in this District.”
Arcaro further argued that investors unfairly targeted him and that “there is no evidence that Plaintiffs’ counsel ever attempted service on any Bitconnect entity, despite knowing where they are and presumably knowing about the well-recognized and widely used tools for serving process in the United Kingdom.” The trouble with Arcaro’s claims is that he fails to realize that a non-existing entity cannot be served. Bitconnect no longer exists. As a result, investors are within their right to sue Arcaro.
Concerning Arcaro’s argument that “Bitconnect’s BCC is not a security[y], BCC is a security if it meets the Howey Test as outlined in SEC v. W.J. Howey Co. Under the test, an investment contract is a security if all three of the following conditions are met: (i) there is an investment of money; (2) in a common enterprise; (3) with the expectation of profits to be derived solely from the efforts of others. Arcaro countered the elements by stating that BCC is not an investment of money, BCC is unregulated and decentralized cryptocurrency, and it can only be purchased with BTC, another unregulated and decentralized cryptocurrency.
Looking at the nature of Bitconnect, it may actually fall into the definition of a security, contrary to Arcaro’s argument. Individuals made an investment, Bitconnect is a common enterprise, and the investors expected profits to arise from the efforts of others.
Next, Arcaro argues that he did not personally sell BCC to class members. As he stated in his motion for summary judgment,
“Plaintiffs also fail to allege that Mr. Arcaro either sold BCC, or successfully solicited the sale of BCC, to either Plaintiffs or any other members of the putative class. Section 12 limits availability to only those persons who ‘offer or sell a security” and limits relief to only those persons “purchasing such security from him.”
Arcaro’s arguments are weak, especially because he was named Director of Bitconnect.
Aside from the lawsuit, the SEC is also conducting an investigation of Bitconnect. At this point, Arcaro is facing the investigation and the motion to dismiss is under consideration.