According to various estimates, fraudulent ICOs have brought their founders from $ 851 million to $ 1 billion. There are quite a few examples when organizers of such ICOs were brought to justice.
Last year, the founders of the Munchen project, after an investigation carried out by the SEC, were forced to return $ 15 million to investors. In early April 2018, the organizers of ICO Centra, who managed to raise $ 32 million, were arrested. SEC, in particular, indicates that the project’s founders promised to create a debit card with investments which will be supported by Visa and MasterCard payment systems and will allow users to easily convert cryptocurrency into fiat money.
Tokens listing on crypto exchanges
However, the investigation showed that the project had no relationship with Visa or MasterCard. The other example is from Canada, where the court sentenced the organizer of ICO PlexCoin Dominique Lacroix to two months in prison and a fine of $ 10,000, and the company PlexCorps founded by him – to a fine of $ 100,000.
As practice shows, the SEC is very active in the field of ICO, but outside the United States, the authorities are not so successfully fighting with fraudulent crypto-projects. Extremely few legal practices, and in Russia and the CIS countries not a single sentence has yet been passed.
Nevertheless, there is a set of legal tools and necessary steps that, at least, will help you protect your rights if you are a victim of fraudsters, or you think that the company is not fulfilling its obligations for some reason. In fact, for most investors, it doesn’t matter why they lost money, because of fraud or because of the failure of ICO organizers. It is important for them to return the money or at least part of it.
What to do before you go to court or the police
So, if you think that you have been deceived, and want to give the case a turn, first you need to collect the maximum amount of evidence available to you that you have been deceived or that you owe money. You need to make screenshots that prove the fact of fraud. White Paper with the description of the project, advertising banners, correspondence in Telegram and other messengers will be suitable. You also need to save and download all correspondence by e-mail.
If you had phone calls – you can request the phone company to print the history of your calls. If suddenly you personally met with representatives of the company, you need to specify the address where the meeting took place, the date of the meeting, try to attract witnesses. If the meetings were in business centers, a record of your visit should be kept at checkpoints, if in a cafe, the staff may have remembered you. You may also save recordings from video cameras, which you can later request. As a result, you should have a folder with information that you can already go to court or the police. It remains the case for small – to understand who exactly to write a statement.
Most ICOs have a similar structure. As a rule, an issuing company is created specifically for the ICO, which issues tokens and accepts investors’ money. Very often such companies are registered in the Cayman, Seychelles or Bermuda or in ICO-friendly jurisdictions such as Singapore and Estonia. In many ICOs, especially fraudulent, there is no information about the issuing company either in White Paper or anywhere else on the project website. Sometimes it becomes available only after registering on the site. Then in the Token Sale Agreement, you can find information about which legal entity is the issuer of tokens.
Before you go to court, you must submit a claim to the issuing company for the return of funds or damages. If it is not satisfied (the fraudsters will not return any money for nothing), you can go to court with the appropriate statement and the evidence you collected. With a favorable outcome in court, you will be given a monetary claim to the issuer. When it is not satisfied, you can start a bankruptcy process for the company.
The procedure itself is lengthy, but it will let you know who the founder of the company really is, what assets it has and other information. This will bring to the answer the true beneficiaries who actually owe you money. The good news is that now there is a global trend when there are fewer and fewer jurisdictions in which the beneficiaries manage to hide from taxes and lenders. Banks exchange information about the movements of funds, fewer and fewer loopholes remain, even if companies are open in “junk” jurisdictions. Over time, the chances of pursuing the issuing company and the real organizers of the ICO will only expand.