The number of failed projects in the cryptocurrency market will increase. Experts predict that it will happen in the summer as a result of massive collapse of the already completed ICO. How to protect yourself from unscrupulous developers, whether defrauded investors can recover their investments and why fraud is not prosecuted, the correspondent Bits.media said the head of the working group of the State Duma of the Russian Federation estimated the risk of cryptocurrency circulation Elina Sidorenko.
Elina, does the number of Scam or fraudulent activity is now in decline?
The leaders of most of the ICO projects open in 2016-2017, must fulfil its obligations to investors in the current year. At the Centre of digital economy at MGIMO, we analyzed the existing ICO projects and came to the conclusion that the legal nuances of Contracting user agreement and the fact of their existence does not allow us to say that the organizers originally had the desire to implement these projects, thus fulfilling its obligations to the investors. Therefore, we do not observe a large number of Scam, a mass collapse of the ICO yet. I guess it will happen in early summer.
Can we say the same about the projects that are open this year?
Infrastructure cryptoeconomy developing and changing and the approach to the creation of ICO. We see the attempts of the developers to take into account a number of legislative norms. However, these attempts are pseudo-legal in nature, because such standards on the international level does not exist, and in most States we are limited to only certain recommendations of the financial regulator. In fact under every obligation is only noble word of honor of the developer.
What, in your opinion, caused the increase in the number of Scam?
Crafty developers are taking money from investors in the cryptocurrency, so the question of whether it is possible to classify their actions to be fraudulent, hangs the air. So we can discredit law enforcement and state control over the market for digital money, one that will not be able to prosecute the majority of developers who deceived their investors in the early summer.
What is the main reason for the success of fraudulent ICO?
The main cause Scam is psychological. People have greed. HYIP has reduced many people’s ability to think rationally in the pursuit of high interest rates, the scammers took advantage. There is an interesting statistics: the most greedy criminals are the swindlers, the greedy victims is also a Scam. The victim believes that he will have time to invest and get 1000% profit in his thoughts and deeds there is no rationality.
Is there a legal reason?
Of course. The first reason is the presence of holes in the legislation in the evaluation of smart contracts. No country in the world except the USA, have not defined the judicial approach and the approach of the legislator to the assessment of smart contracts. Therefore, the investor cannot protect their rights in court, if the developers had not fulfilled obligations to him.
The second reason is the lack of a definition of the status of the token and crypto-currencies in the Russian legislation. As long as article 128 of the Civil code in the list of objects of civil rights does not appear these concepts, we will not be able to impute the crime to the person who committed theft or fraud against tokens and cryptocurrencies. Any theft under Russian law, involves theft of property or property rights, in this case we don’t see neither one nor the other. Meanwhile, the number of crimes related to trafficking in cryptocurrency and token, is increasing every day. If earlier we spoke only about three or four kinds of Scam, you’re talking about two dozen. Notice, 99% of the Scam do not fall under existing legislation.
What types of fraud do you highlight?
The most primitive form of Scam is the creation of so-called phishing sites. It takes a minimum of 60% of all skipovyh projects. In this case, the investor has nothing to prove, because scammers appeal to the third party, which is usually impossible to establish.
Also common situation when there is a hacking site, and was responsible for one of the project participants. This kind of Scam happened on the South Korean stock exchange.
Developers often establish a complex scheme of transfer to the investor dividends. Meanwhile, the documents indicate that it is not about crowdfunding, but about investing, and investors ‘ money go to a charity.
Can you trust investment funds?
The existence of unscrupulous investment platforms or funds is the worst kind of scum, in my opinion. In the world there is no regulation of the activity connected with trust management by scriptactive. Constant talk about what the stock market will be allowed only qualified investors, create favorable conditions for the further development of such Scam. If tomorrow the creators of the investment funds will want to bid farewell to the users without paying them a penny, they will be able with impunity to do it.
I’m ready to say that if tomorrow at the legislative level will not accept mechanisms to keep unscrupulous securities firms, we will observe the situation equal to or even worse than in the case of MMM. Once again, I stress that none of the Fund on the territory of Russia and most of the funds in the world has no reliable system of safeguards for investors. So here, as in any other institution, the investor can only hope to the good name and clear the eye of the organizers of the Fund.
How to understand what is before us scammers?
If the developer promises to investors high profits, the latter should consider not Scam there in front of him. Also the investor should be wary if the developer is in a hurry to make a decision or sets the amount of input to the project. Finally, the investor needs to pay attention to the absence or presence of a contractual framework. If the project site is not published the user agreement in the language of the investor, the offer with the minimum KYC requirements and with certain established by the site safeguards and not formal legal advice, there is every reason to believe that this is a Scam.
Unfortunately, investors only pay attention to the interest promised, and the short time during which they must make a decision.
As people advance to protect yourself from fraud?
I don’t advise people without legal or economic education to embark on a liquid soil cryptoeconomy until then, until there is legislation. If a person expects to find in the fog unicorn and decides to invest in a particular project, it should conclude with the developer the loan agreement. Also it is necessary to collect feedback on the project. Now there are many cryptologist, discussion forums, where online can quickly obtain information about any ICO. Finally, the investor should show the lawyer the documents that the developer offers him to sign.
Elina, what should be the algorithm of actions of the deceived investors?
Unfortunately, the investor will have to accept the loss of their investments. Due to the lack of legal regulation cryptoeconomy, it will be difficult to prove in court the fact of fraud.
If article 128 of the Civil code adds the concept of digital rights, the defrauded person will be able to contact the police or the court with the statement for excitation of criminal case. Notice, in Russia there is the concept of retroactivity of the law. Therefore, to prosecute it will be possible only to those crooks, who conducted the ICO after the entry into force of the amendment.