How to return ICO investments?
Being an ICO investor is a tricky thing – no matter how good at digital economics or how smart you are, lack can eventually run out. Nowadays, according to various estimates, fraudulent ICOs activity had brought their creators from up to $ 1 billion incomes of dirty money.
For now, there are different examples when the fraudster ICO organizers got eventually busted and brought to justice. The US SEC is among the best performing in this area up to date.
It is known that in 2017 the founders of the Munchen project were forced to return $ 15 million to investors after the SEC investigation. Moreover, In early April 2018, the organizers of ICO “Centra” were arrested – that one which managed to raise $ 32 million. The SEC especially, in particular, indicates that the founders of the project promised to invest in creating a debit card, which will be supported by Visa and MasterCard payment systems and will allow you to convert cryptocurrency into fiat money easily.
However, the investigation showed that the project had no relationship with cooperation either with Visa or MasterCard firms. Another fine example is from Canadian origin, where the court sentenced the organizer of Plex Coin ICO Dominique Lacroix to two months in prison and a fine of $ 10,000, and the company PlexCorps he founded – to a fine of $ 100,000. The SEC had done a good job here, no wonder.
The latest statistics show, that SEC is very active in the ICO field, but outside the US authorities are not yet successfully combating fraudulent crypto projects. Fact is, the needed ultimate legislation rules are still not established worldwide which makes the prevention of fraud a tough task to accomplish.
Nevertheless, there is still a set of legal instruments, and the necessary steps exist aimed to protect your rights and investments and not to become a victim 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 in the first place – deception or because of the useless work of the organizers of the ICO. It is essential for them to return the money or at least part of it.
What to do before going to court or police?
In case you think that you have been deceived and want to start an actual case:
First, you need to collect the maximum amount of evidence available to you that you have been cheated or that you owe money. Making screenshots proving the fact of deception or fraud is necessary.
That could be the following stuff:
White Paper with the description of the project, advertising banners, correspondence in Telegram and other messengers will do. Also, it is essential to save and download all communication by e-mail.
If you had any telephone conversations with the fraudsters – you could ask the telephone company to print out the history of your calls, that wo;; serve as perfect proof. If you have personally met with company representatives, you need to specify the address where the meeting was held, the date of the meeting, and try to attract witnesses.
In case your meeting took place in overcrowded business centers, you should have a record of your visit at the security checkpoints. Documents from camcorders can also be saved there, which can later be requested by official representatives and the police. 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.
Understanding the demanding side
Most ICOs have the same structure at modern market. An issuing company, as a rule, is explicitly created for the ICO, which issues tokens and accepts investors’ money. Very often, such companies are registered in the Cayman Islands, Seychelles or Bermuda, or in ICO-friendly jurisdictions such as Singapore and Estonia. Many ICOs, especially fraudulent, do not specify the information about the company-issuer not in White Paper, or anywhere else. Usually, one can find it in Token Sale Agreement.
However, the issuing company does not conduct operational activities. Moreover, information about the operating company is even more challenging to find – its traces could be seen only by indirect signs. That could be tricky as if the organizers initially wanted to deceive the investors. Most likely, one will first have to demand money from the issuing company.
Visiting the court
The court appeal against the company-issuer for inflicted financial damages could be regarged as the protection in situations where the actions of the responsible person do not contain the corpus delicti. The judicial procedure is relevant for cases when it is not a matter of fraud, but merely an unsuccessful project in which the organizer has not fulfilled his obligations and is in no hurry to return the money. However, in the case of fraud, recourse to a court with a claim against the issuing company can also become an effective way of protection.
One need to present a claim to the issuing company about the return of funds or compensation for damage before going to court with an appropriate application and the evidence collected. With a favorable outcome in court, one will be given a monetary claim to the issuer.
There is a decent worldwide trend – the fewer and fewer jurisdictions are available overtime in which beneficiaries manage to hide from taxes and creditors. Banks exchange information about the funds more actively and there are fewer loopholes. No wonder that over time, opportunities to pursue the issuing company and the real organizers of the ICO will only expand.
However, one can demand to return the money through court only where the company is registered. In case it is registered in the most popular off-shores like Cayman Islands, then one will have to visit the local court. The cost of doing business in the Caymans is up to $50,000 , in Singapore $ 75-125,000 – without regard to state duties, translation services, and other related costs. That is, either one’s investment in the scam-project should significantly exceed the possible costs of conducting the case in a foreign court, or one will need to file a class action together with other cheated investors.
When and how to contact the police
If there is an obvious deception (for example, the organizers received money, did not conduct an ICO and stopped communication), it would be appropriate to contact the police. The criminal case provides additional opportunities, which is a significant plus. For example, an investigator can obtain all the necessary information much faster than if one requested it through a court.
However, there are also several disadvantages: since there is very small legal practice, it will be difficult for the police to understand the matter of this category. The task is to bring the maximum amount of evidence of the violation of the law, and the statement is as simple as possible to describe the crime.
On the other hand, there is a parallel practice when, for example, clients money are stolen from a current bank account. In such cases, the crime scene is considered to be the bank’s registration address, although it is clear that the theft itself occurred somewhere on the Internet. So in the fraudulent ICO crime scene, there may be an address where the computer was located when you invested money in ICO.
Anoter vital question that investigators may have is a problem with determining what Bitcoin is, cryptocurrency, tokens and so on. The legislation does not yet have a precise definition. For the police, the qualifications of such crimes may not be apparent, although there are signs of fraud (theft of property or the right to fraud). Here, by the way, one can recall the cases in which cases of robbery of game artifacts in computer games were considered.
The conduct of both a criminal and civil-law case, especially international – along (and also expensive) process. Therefore, no matter how trite it may sound, it is best to study all documents carefully and all available information, weigh risks at the investment stage. Also, just in case everything is fixed – it will come in handy.
However, it is better to describe the case in the application as simple as possible, without overloading with technical terms. 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. 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.