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Wallet Provider Blockchain is Suing Allegedly Bogus ICO in US Court

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Blockchain, the hugely famous start-up company, not the ledger architecture, is suing a company in US court. They claim that a seemingly abandoned company has created a web-presence that emulated their own, and is on the cusp of launching an ICO. The mostly unregulated nature of the crypto market makes these kinds of issues nearly unavoidable, but it looks like the US court system is beginning to take the crypto world seriously.

It is ironic that Blockchain would be targeted by scammers, as they have stated that their goal is to help the crypto community to root-out scams. The potentially crooked company on the other end of the lawsuit is the apparently abandoned “Paymium”, which was thought to be long relegated to Bitcoin history.

Blockchain to Sue

Paymium was at the center of a crypto controversy dating back to 2013. The company claimed to the the victim of a hack, wherein numerous clients and creditors lost substantial amounts of their cryptos. Their “Instawallet” service ended up being a full-on debacle, and the company seemingly went out of business after they suspended their claiming service.

The Law Appears to be With Blockchain

Fast-forward to last week, when Blockchain filed suit against whoever is at the helm of Paymium in US federal court. For now the details are scant, but a recent move by a New York court could land whoever is running Paymium in some very hot water.

A case in New York could be setting some heavy precedents for ICO scammers. The judge in a case being brought against Protostarr ICO decided that the Securities and Exchange Commission (SEC) could move legally against potentially fraudulent ICO.

Lawyers for Maksim Zaslavskiy had argued that because US securities law is vague, ICOs were outside of the SEC’s jurisdiction. Maksim Zaslavskiy was connected to numerous crypto companies, including RECoin and PlexiCoin ICO.

Massive Global Implications

These cases might sound obscure, but they could have widespread consequences. Blockchain is registered in Luxembourg, but they chose to sue Paymium in US courts. The SEC oversees one of the largest financial systems in the world, and if they decide to go after a violator, the US has law enforcement treaties with numerous nations.

It appears that the US has decided at a (potentially federal) judicial level that tokens are considered securities, and fall under the jurisdiction of US regulators. The crypto markets have been largely under the collective radar of both law enforcement and regulators since their inception, but that looks like it is changing.

Apparently Maksim Zaslavskiy made the specific argument that tokens can’t be considered securities. Now that a New York court has found the contrary to be true, the weight of the precedent is difficult to overstate. It would be fair to assume that if anyone wanted to allege wrongdoing in an ICO, they will be able to do so in New York’s courts.

There has Been a lot of Scamming

A study prepared by Statis Group that was released earlier this year estimated that more than 80% of the ICOs from 2017 were fraudulent to some degree. Thankfully the money that was raised by ICOs last year wasn’t distributed equally. Of the roughly $12 billion USD that flowed into ICOs in 2017, Statis estimated that more than $1.3 billion USD found its way to ICOs that looked like outright scams.

Not that it looks like US courts are allowing tokens to be considered a security for purposes of prosecution, the hunt could be on for an major ICO scam to make an example of. In most cases financial crime isn’t prosecuted with this same vigor as violent crime, but with cryptos, this may not be the case.

To be clear, there has been no new law, just a clarification of existing regulations. Because the regulations that are being used to prosecute Maksim Zaslavskiy were in effect last year, fraudulent ICOs have little legal room to maneuver.

With all the jilted ICO investors who must be out there, this isn’t great news from the perspective of the dishonest people who thought they could get away with hundreds of millions of dollars without any consequences.

The post Wallet Provider Blockchain is Suing Allegedly Bogus ICO in US Court appeared first on Blockonomi.