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Hundreds of technology companies that raise money in the fever market of cryptocurrencies use deceptive or even fraudulent tactics to attract investors.
In a review of documents produced for 1,450 offers of digital coins, the Wall Street Journal found 271 with red flags that include documents of plagiarized investors, promises of guaranteed returns and missing or false executive teams.
"Jeremy Boker" is listed as Co-Founder of Money, an online payment project. In investor documents for a public offering in March, which claimed to have raised $ 8.3 million, Mr. Boker bragged about his cryptocurrency "powerhouse" team. In his biography, he noted a "respectable story of happy customers" in consulting before launching Money.
In fact, Mr. Boker's bio image was an archive photograph, there is no evidence that exists and the rest of his team seems to be fictitious, except for two freelancers who claim to be paid by people unknown to them to commercialize the project, Diary found.
The principles behind Money could not be identified and attempts to reach the company had not been answered. The real person whose image was revived while Mr. Boker turns out to be Jenish Mirani, a banker in Poland. Mr. Mirani, who had posted the photo on his personal website, said "it was really shocking" to discover his life in the afterlife.
Investors paid over $ 1 billion in the 271 coin deals in which the Journal identified the red flags, according to a review of the company's statements and online transaction records – almost one in five of those examined. Some companies are still raising funds, while others have closed. Investors have so far incurred losses of up to $ 273 million in these projects, based on lawsuits and regulatory actions.
Companies use coin offers to raise money by selling their digital currency. Driven by bitcoin fever, the 1,450 projects analyzed by the Journal – a number believed to include most of those intended for an English speaking audience since 2014 – say they have raised at least $ 5 billion. As of 2017, cryptographic offers have generated more than $ 9 billion in revenues globally, according to Satis Group, a research and data company.
Recently, the Securities and Exchange Commission issued warnings to investors that many operations in the booming private cryptocurrency market could violate securities laws, and on Wednesday launched a website to advertise an offer of counterfeit money as an example of what to avoid.
Since December, the agency has filed civil charges against companies and individuals in four separate cases concerning initial coin offerings, known as ICOs. At least a dozen companies have suspended their offers after the agency has raised questions, an SEC official said in February.
The heart of most coin bidding is the "white paper" of a company, a document that typically describes mission statements, team biographies and project specifications.
Of the 1,450 white papers downloaded from three popular websites that track coin offerings, the Journal found 111 that repeated entire sections word by word from other white papers. The copied language included descriptions of marketing plans, security issues, and even distinct technical features, such as how other programmers can interact with their database.
At least 121 projects did not reveal the name of a single employee, and many of them listed team members who did not seem to exist, as with Money, or were real people who claimed that their identities were being used without realizing it.
The Journal also identified over two dozen companies that promised financial premiums to investors without risk, something the SEC prohibits. These white papers have gone up to commit weekly payments or doubled returns. The SEC has recently taken action against ICOs that guaranteed these guarantees, including PlexCorps, which raised up to $ 15 million promising a profit of 1,354% in less than a month. In December, the agency obtained a court injunction freezing the company's assets.
PlexCorps did not respond to emails looking for comments. On April 23, someone published a statement about the company
page saying that "the PlexCoin project is not dead, it is simply suspended because some court orders prevent us from continuing the development of the project for the time being."
Interest in bitcoins and other cryptocurrencies exploded as a frantic rally pushed coin prices to historic highs at the end of last year. Now, reality has been established for many in the industry as regulators intensify control and issue warnings to investors about fraud in the slightly controlled market.
Unlike public offers, international product organizations generally take place outside the strict regulatory framework and do not require the filing of many official paperwork, if any. This leaves investors the opportunity to do a lot of investigative work on what is real and what is not.
The copied language, the absence of nominated employees and the high promised returns are "warning signs for investors", said Bradley Bennett, former chief application at the regulatory authority of the financial industry.
"There will be some legitimate players emerging from this, but it will be a handful: many look like penny stock fraud with fewer barriers to entry," Mr. Bennett, now a partner of the law firm Baker Botts LLP, said larger coins.
To fuel the growing market, freelance ranks have grown to write white papers for a minimum of $ 100.
At least five projects have compiled their white papers or websites with executive images taken directly from online photography or other sites, the Journal noted.
Help hiring
The Premium Trade website describes the managing director Idan Cohen as an "experienced entrepreneur".
In many cases, the images used by Premium Trade are from people who have appeared on other sites on the Internet.
The people whose photographs were used to represent the executive team of five members of Premium Trade also appear on nearly 500 unrelated websites, according to a Journal analysis of Google Image Search results.
Number of websites with photos of Premium Trade staff
Source: analysis of the Wall Street Journal of Google Image Search results
Photo: designed by Freepik (stock images)
Premium Trade website (screenshot)
Among the most extreme was the Premium Trade investment startup. The images for his five-member executive team were used simultaneously on nearly 500 unrelated websites: Premium co-founder, Andrew Ravitsky, was also "Dr. John Watsan," in an online cardiology class.
Premium Trade did not respond to several requests for comments and Mrs. Ravitsky and Watsan were not reachable, if indeed they exist.
LoopX, which began soliciting money last year, promised to build "the most advanced" trading platform in the cryptocurrency market. The company has not appointed any team members or detailed how the platform would be built. His white paper presented several key items identical to those of another coin.
"During this trip, we found great partners and mentors who were strongly committed and excited to work with LoopX's ever-changing vision," wrote the company in one of several steps identical to those of a previous payment company online called UTrust.
After claiming to raise $ 4.5 million, LoopX disappeared from the Internet at the beginning of February. His website is now inactive and relative
chirping
The account presents a single message that refers to an article stating that the founder or the founders ran away with the money. LoopX could not be reached for comment.
When he was contacted by the Journal, Nuno Correia, CEO of UTrust, based in Switzerland, said he knew that his white paper had been plagiarized, but he did not think there was anything to be done about it.
"We receive many copies of our white paper," said Correia. "My image, my description, my team, even our website have been copied."
Another seven coins also offer steps that appeared earlier in the UTrust white paper.
Along with Mr. Correia's biography, the Journal found lawyers in California, a security agent based in Ukraine and co-owner of a media company whose identities had been hijacked to lend credibility to a series of cryptocurrency projects involving education, e-commerce and mining crypt.
"I'm a little scared of the whole thing," said Amanda Gavin, co-owner of a multimedia production company in San Francisco, whose image and name were taken from her LinkedIn page and used for a & # 39; offering coins that he had never heard of called Pixiu.
Pixiu did not respond to several requests for comments via email and social media.
At least four coin promoters have been sued by investors seeking to launch cases of classic actions. During its 2017 offer, Paragon Coin raised more than $ 70 million, according to a lawsuit filed in a California federal court alleging that the business was "overly ambitious, vague and impractical" to gather funds for the purchase of real estate.
Paragon, founded by a Russian internet entrepreneur named Egor Lavrov and his wife, Jessica VerSteeg, promises to "connect the cannabis industry through the blockchain", according to the company's white paper. In July, the company plans to open a co-working space in Los Angeles paid for "exclusively in cryptocurrency", according to the company's website.
"Paragon has pledged to comply with all applicable laws and has tried to do so throughout the ICO process," said VerSteeg, who was Miss Iowa of the United States in 2014 and is currently the CEO of Paragon, in a statement provided by the company. "Paragon stands at a high level of compliance with our token owners and will continue to do so as it moves forward." Mr. Lavrov could not be reached.
After the money supply for cash was closed in March, the entity's website has been overshadowed and investors now claim on social media that the founders have escaped with millions of dollars.
Daniel Armstrong, who claimed to have worked for Money as a freelancer in February, rereading company literature, now believes the startup was handled by Lithuanians, based on evidence he saw from payment details, from the documents he published and a message sent to Slack by one of the founders written in another language.
"I did a marketing text for them," Mr. Armstrong said. "When they sent it to me it was terrible and written by a non-native writer."
Money did not die entirely. Recently, an offer for a new payment system called Pluto Coin has emerged with a similar site and an identical white paper. Half of the members of the Money team were also recycled for Pluto Coin, including the image of Mr. Boker, which appears in the coding of the website but is not visible to occasional viewers. It was renamed "Ivan Denver".
So far, Pluto Coin has claimed on its website that it has raised at least $ 10 million from investors. It was not possible to reach it for a comment.
-Jean Eaglesham contributed to this article
– Shane Shifflett's additional development
– Illustration of Jessica Kuronen
How the magazine identified questionable cryptographic offers
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The Wall Street Journal has compiled a list of 1958 cryptocurrency projects that have announced an initial offer of three websites: Coinmarketcap.com, Tokendata.io and ICORating.com.
The Journal downloaded white papers in PDF format from a project website or from the source of the ad. Duplicate and non-English white papers were removed before conducting an analysis.
To prepare for his research, the Journal converted 1,450 PDF into plain text and removed punctuation and case after identifying individual sentences.
To identify the duplicate language, the Journal compared sentences with at least 10 unique words with each other written sentence. The Journal then examined 2,483 sentences appearing 6,392 times among the 1,450 papers analyzed.
To find documents that did not list any members of the team, the Journal looked for names that appear on a list of over a million managed by the US Census Bureau.
To identify the fake team members, the inverse image in the diary looked for photos of people associated with 343 projects lacking key details about team members.
To identify "unmissable" opportunities, the Journal searched over 484,000 sentences for the following terms: nothing to lose, guaranteed return, return on investment, higher return, high return, profits, no risk and little risk . The sentences that correspond to those parameters were further manually reviewed.
To identify projects with websites that do not respond, the Journal has pinged each project's website and attempted to download a copy of the public pages on March 31, 2018. The Journal visited each site not responding to its request to confirm that was not available.
-Shane Shifflett and Coulter Jones
Corrections and amplifications
An image that claims to describe Andrew Ravitsky, co-founder of Premium Trade, has appeared on 16 unrelated websites. An earlier version of an online chart put the number at eight. (18 May 2018)
Write to Coulter Jones at [email protected]
