Hackathon team tackles ICO fraud by streamlining class actions

Global Legal Hackathon finalists tell us how smart-contract based platform Spicekit helps keep ICOs accountable and enables ‘decentralized collective legal action’

“The digital assets industry is rife with fraud,” says Global Legal Hackathon finalists in San Francisco who created the decentralized platform Spicekit. Developed in one weekend, Spicekit helps “bring justice” to investors by streamlining the collection of evidence for potential class action suits against fraudulent ICOs.

Class actions are often expensive and risky, but Spicekit changes this by allowing users to contribute funds or evidence — such as marketing materials from the alleged fraudsters — to potential class actions.

Attorneys on the case can then access the evidence and, eventually, the funds, so long as they are the first litigation team to complete certain smart contract “milestones.” If no firm achieves these milestones, then there’s no payout, thus eliminating the risk for financial backers.

“As scams become more prevalent and lawyers become more selective, there is a need to connect backers with lawyers,” explains the team of their unprecedented smart contract platform.

Team Spicekit comprises six members from consulting firm Keystone Strategy who had brainstormed ideas before heading into the first hackathon weekend. That’s where they met an attorney from Orrick and two Berkeley students from the group “Blockchain at Berkeley Law.” And the platform was born.

The team faces off against the 13 other finalists on April 21 in New York at the Global Legal Hackathon Gala.

We spoke to Spicekit’s product manager Mohamed Shakir about their hackathon experience and how Spicekit enables “decentralized collective legal action.”

First, could you tell me about how you got involved in the hackathon and your role on Team Spicekit?

Mohamed Shakir: I heard about the Hackathon via Anand, my colleague at Keystone Strategy, and thought it was a natural thing to try given my experience working in litigation consulting as a software engineer for the last five years and most recently thinking about tools for the legal space!

I lead product development at Keystone Labs and act as a technical engagement manager at Keystone Strategy for our business strategy and litigation consulting practice. I am the Product Manager for our team. My role is to ensure alignment across all aspects of our team, namely, product design (Andrew Glidden), engineering (Solomon Sia and Sterling Whitley), business (Anand Natu and Chaitanya Potluri), legal (Zac Padgett), and marketing (Chante Eliaszadeh and Pedro Veintimilla).

Why tackle ICO fraud to start with?

We wanted to start with the type of fraud that would help us unambiguously validate our hypotheses around the weaknesses of the current class litigation financing space.

Focusing on ICO fraud provides several benefits, including the fact that backers are likely to be early adopters of the decentralized economy, and legacy financiers cannot fully cover financing needs due to volume, frequency, and novelty.

We determined that evidence collection would be uniform across most cases, and that it would be relatively easy to collect objective facts using a predefined questionnaire with little need for anecdotal evidence.

Also, timing gives us a marketing advantage as this is on top of many people’s minds — including regulators!

What was the biggest challenge for the team when creating the platform, and how did you work through it?

One of the biggest challenges was achieving alignment between regulations, product design and engineering — essentially ensuring that the implementation of the smart contract and the evidence collection flow matched the decentralized solution design and legal constraints.

Fortunately, we were able to work through this thanks to the relentless and constant communication between legal, design and engineering. We also adopted tools like MetaMask to help engineering focus on our core offering and reached out to experts when necessary to clarify engineering or legal questions.

Can you explain the smart contract “milestones” that get unlocked once certain criteria are met and how you chose them?

Our team strategically designed the platform to payout upon “Denial of Motion to Dismiss” and “Grant of Class Certification” milestones. Our goal is to ensure that high quality legal teams are incentivized to take on seemingly difficult/risky cases.

We believe that if a case surpasses these two milestones, the case then becomes significantly less risky, making it more favourable to legacy financiers.

As we validate our product market fit, we hope to expand into other milestones depending on user feedback.

Legacy financing models often require legal teams to wait until settlement or litigate through to a final judgment to get a payout. Average class action lawsuit could take 3–5 years of litigation and pose an opportunity cost of thousands of hours of attorney fees.

These two milestones are specifically designed to opens the space for more competition by giving attorney’s a way to get a payout without having to wait for final judgement.

Currently, what type of currency does the platform accept and pay litigation teams in? And what about your service fee?

The platform accepts ETH. Users can convert their fiat currency to ETH relatively easily today, and we believe it will continue to get easier. We do, however, have plans to expand into other digital assets and cryptocurrencies as we grow.

We don’t have a service fee in the traditional sense. Currently, our focus is to get adoption rather than focusing on becoming revenue positive, so we only take 1% of the bounty and only when milestones are successfully met.

When you say Spicekit offers easy integration with AI and machine learning algorithms, how do envision this being utilized?

We want to build tools for attorneys to evaluate quality of evidence. We provide a structured way to collect evidence at scale and allow users to associate submitted evidence with bounty funding.

What do you think will be the biggest hurdle for the project going forward? Do you have plans to address it?

The main hurtle going forward will be designing a 100% trustless platform for matching bounties to class action cases by matter number, validating whether or not the case has reached a specific milestone, and verifying the wallet address of the payout recipient. We are still working through this challenge by exploring partnerships with other decentralized services or via a physical consortium of decision-makers such as respected judges and law firms.

Will you continue working on the platform post hackathon?

Of course! We truly believe that there is a need for a decentralized financing mechanism for collective legal action. Spicekit might pivot to a different user base or a type of class action based on market validation.

What kind of fraud do you hope Spicekit will tackle next and why?

It all depends on how our experiment with ICOs work. From a technical perspective, it makes sense to expand into other types of securities fraud. But we are also interested in exploring the applicability of our platform to social movements that need collective legal action to bring about change in real life, as opposed to just signatures, petitions and marches.

For more information on Spicekit, visit their website and follow them on Twitter (@Spicekitlegal). Want to watch them compete one last time in person? Join the Global Legal Hackathon community at the finals on April 21 in New York, New York! (Tickets available for the Global Legal Hackathon Gala & Finals here).