According to various estimates, fraudulent ICOs brought their creators from $ 851 million to $ 1 billion. There are quite a few examples when the organizers of such ICOs were tried to bring to justice. The most famous of them were initiated from above, that is, thanks to the activities of the US SEC. We want to tell you how to actin case of deception from ICO organizers.
Last year, Munchen project co- founders refund $ 15 million to investors after the SEC investigation. In early April 2018 SEC arrested the organizers of Centra ICO, which managed to raise $ 32 million. SEC, in particular, indicates that the co-founders of the project promised to invest in creating a debit card, which supports by Visa and MasterCard payment systems, and will allow you to easily convert cryptocurrency into fiat money.
However, the investigation showed that the project had no relationship with either Visa or MasterCard. Another example is from Canada, where the court sentenced the organizer ICO PlexCoin Dominique Lacroix to two months in prison and a fine of $ 10,000, and the company PlexCorps had a fine of $ 100,000. Here too, the SEC participated.
As practice shows, the SEC is very active in the ICO, but outside the US authorities are not yet successfully combating fraudulent cryptoprojects. There is very little legal practice, and in Russia and CIS countries no verdict has been rendered yet.
There is a set of legal instruments and necessary steps that will help you protect your rights if you become a victim of scammers, or consider that the company does not fulfill its obligations for some reason. In fact, for most investors it does not matter why they lost money – because of deception or because of the unsuccessful work of the ICO organizers. It is important for them to return money, or at least part of it.
So, if you consider that you become a player of fraudlent scheme, and you wish to set business in motion, for a start you should collect the maximum quantity of proofs, available to you, of the fact that you were deceived or that you are owed by money. It is necessary to make the screenshots proving the fact of deception or fraud. White Paper with the description of the project, advertizing banners, correspondence in Telegram and other messengers will approach. It is also necessary to keep and download all correspondence by e-mail.
If you had telephone negotiations — it is possible to request the telephone company to unpack history of your calls. If suddenly you personally met representatives of the company, it is necessary to specify the address where there took place the meeting, date of a meeting, to try to attract witnesses. If meetings were in business centers, on check points record about your visit has to remain if in cafe — perhaps you were remembered by employees. Also records from video cameras which is later can remain it will be possible to request. As a result, you should have an impressive folder with information, from which you can already apply to the court or the police. It remains a matter of small – to understand who specifically to write a statement.
Most ICO have identical structure. As a rule, especially for ICO the company issuer which releases tokens and accepts money of investors is created. Very much often such companies are registered on Kaymanov, Seychelles or Bermuda or in jurisdictions of type of Singapore and Estonia, friendly to ICO. In many ICO, especially roguish, there is no information on the company issuer in White Paper, somewhere on the project website. Sometimes it becomes available only after registration on the website. Then it is possible to find information what legal entity is an issuer of tokens in Token Sale Agreement (the agreement on tokensale).
However, the issuing company does not conduct operational activities. And information about the operating company is even more difficult to find than about the issuing company. You can try to find out its traces by indirect signs. So, to the operating company there can be a binding in the user agreement on the site, or you can try to find it through the individuals listed on the site in the “Team” section. It will be difficult anyway, especially if the organizers initially wanted to deceive investors. Most likely, you will first have to demand money from the issuing company.
Appeal to the court with the claim to the company issuer for indemnification is the only security measure in situations when actions of the responsible person don’t contain corpus delicti. A legal process is relevant for cases when it is not about fraud, and just about the unsuccessful project in which the organizer hasn’t fulfilled the obligations and doesn’t hurry to return money. However, and in a case with fraud appeal to the court with the claim to the company issuer can also become an effective way of protection.
Before applying to court, it is necessary to impose requirement to the company issuer about return of means or compensation of damage. If it isn’t satisfied, you can appeal to court with the corresponding statement and proofs collected by you. At a favorable outcome in court will issue you the monetary requirement to the issuer. When also it isn’t satisfied, you will be able to begin the procedure of bankruptcy of the company.
The procedure in itself long, but it will allow to research who really is a co-founder of the company, what assets and other information. It will allow to attract to the answer of true beneficiaries who actually and owe you money. Good news is that now there is a universal trend when remains less and less jurisdictions in which beneficiaries manage to disappear from taxes and creditors. Banks communicate about the movements of means, remains holes less even if the companies are open in “garbage” jurisdictions. Over time opportunities to pursue the company issuer and real organizers of ICO will only extend.
However, you may demand to refund through court only where the company is registered. If it is registered in the Cayman Islands, then you will have to go to the local court. The cost of doing business in the Caymans is $ 30-50 thousand, in Estonia – 6-8 thousand euros, in Singapore $ 85-130 thousand – and this without regard to state duties, translation services and other related costs. That is, either your investment in the scam-project should significantly exceed the possible costs of conducting the case in a foreign court, or you need to file a class action together with other cheated investors.
If there is an obvious deception (for example, the organizers raised funds, did not conduct an ICO and stopped communicating), then you need to contact the police. An excited criminal case provides additional opportunities, which is a significant plus. For example, an investigator may obtain all the necessary information much faster than if you requested it through a court.
But there are also disadvantages: since there is very little legal practice, it will be difficult for the police to understand the matter of this category. Your task is to bring the maximum amount of evidence of violation of the law, and the statement is as simple as possible to describe the crime.
Investigators may have is a problem with determining what bitcoin is, cryptocurrency, tokens and so on. The legislation does not yet have a clear definition. For the police, the qualifications of such crimes may not be clear, although there are signs of fraud (theft of property or the right to fraud). Here, by the way, you can recall the cases in which cases of theft of game artifacts in computer games were considered.
It is better to describe your case in the application as simply as possible, without overloading with technical terms, so that it is unambiguously associated with a particular article in the Criminal Code. And it is better to carry an application not to the district police station, but immediately to the “K” Office, which specializes in “computer” crimes. Of course, you can take it to a local site, which is obliged to accept your application and send it to your destination, but it’s by no means a fact that it will go from there to where you need to or it will come quickly.
If everything went well for you: the application was accepted, you were interviewed and the case started according to your application, – the question arises that such crimes, as a rule, are of a transboundary nature. Investigators will have to send a request to conditional Singapore or the Cayman Islands, so that local authorities can conduct the necessary investigative actions. But this is not your headache. The state has much more leverage to handle such cases than an ordinary citizen who is unlikely to wait for help from a foreign court.
The conduct of both a criminal and civil-law case, especially international – a long (and also expensive) process. Therefore, no matter how trite it may sound, it is best to carefully study all documents and all available information, weigh risks at the investment stage. And just in case everything is fixed – it will come in handy.