Cryptocurrencies offer unique advantages over the use of fiat like anonymity and peer-to-peer transactions, and these features make cryptos the better option for payments and even initial coin offerings (ICO). However, as cryptocurrency is unregulated, it has become a tool to push for illegal activities that often result in theft, fraud, and Ponzi schemes. These cases have caused the rise of cryptocurrency litigation on a global level.
Expertise in Cryptocurrency-Related Cases Needed
As scams involving cryptocurrency have gained ground, more law firms begin to offer cryptocurrency litigation services. According to Hogan Injury, there are three points a crypto user should do to avoid being scammed: research, be vigilant, and only use trusted sources. These points are valid, but there are moments in which a user could still be deceived, especially when digital currency schemes become as elaborate as the Benebit case.
There is now an emerging need for lawyers who are experts in cryptocurrency-related cases to give investors an option to turn to instead of having to accept that their digital currency investment venture did not pan out. In fact, below are some of the most recent cases of scam involving the use of cryptocurrencies:
Giza ICO Fraud
Startup company Giza said started an ICO in January 2018 after announcing that it would create an all-in-one hardware wallet device. By February, investors had pledged 2,100 ETH, which at the time was worth US$2.4 million. Trouble began when Ivan Larionov, CEO of Third Pin, a Russian firm assigned to develop the device, allegedly had not received any payment. It turned out that the ICO was a fake as was the identity of the Giza chief operating officer, Marco Fike.
Prodeum Exit Scam
Prodeum, a startup company supposedly from Lithuania, sought to improve the fruit and vegetable industry by using the Ethereum blockchain technology. Fundraising began on January 20, 2018 with a projected hard cap of 5,400 ETH. The project, however, was never completed as the Prodeum website disappeared along with the money given by a few investors.
Seele Impersonation Scam
Seele is a blockchain project with potential applications in game assets, e-government, financial technology, and more. The sale reportedly began on April 3, 2018. Before the public sale went live, however, two scammers posing as Seele admins directly messaged some members of the Seele Telegram group and asked to send over ethers as part of a private sale. Before the official admins of Seele intervened, the scammers had already disappeared with nearly US$2 million worth of ETH at that time.
Benebit Exit Scam
Benebit was supposed to create a currency for customer loyalty. The platform had positive ratings on ICO review sites and had a Telegram following of over 9,000. When someone noticed that the photos of the Benebit team came from a school website, the site went offline. The scammers are believed to have disappeared with around US$2.7 million to as much as US$4 million in investor funds. Before the fraud was exposed, Benebit was one of the most hyped ICOs of 2018.
These incidents are alarming, but these cases do not mean that every ICO is a scam. There are numerous legitimate startups that use cryptocurrency crowdfund. However, investors should be cautious about the projects they choose to invest. Being careful when investing in ICOs will then be the smartest action every investor should do.