ICO Litigation: What’s Legal About It?
Note: This story was originally published at medium.com on May 5, 2018. It is written by Dunaton co-founder Daniel Mark Harrison about the Monkey Capital ICO in July 2017.
A couple months ago a journalist — who is now being investigated by the UK press regulator — published this completely unresearched piece of journalism:
A former public schoolboy has been accused of being the mastermind of a multimillion-pound international cryptocurrency fraud, which netted him $30m and saw one investor commit suicide.
Daniel Harrison, who is the son of a senior City financier, is alleged to have lured American investors with an initial coin offering (ICO), used to fund the creation of a cryptocurrency.
A day later, the story appeared on the Citywire news:
The son of a senior London banker has been accused of committing a $30 million (£21.7 million) cryptocurrency fraud.
Daniel Harrison is the founder of US-based Monkey Capital LLC and Monkey Capital Inc in Singapore which raised the money for an advertised initial coin offering, according to court documents filed in a class action lawsuit.
The company has failed to distribute any tokens, however. ‘At least hundreds if not thousands of putative class members,’ lost their money, the documents claimed, adding one investor committed suicide.
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Around a month after that, it so turned out that the law firm prosecuting the case, Silver Miller, could not gather the requisite number of “victims” to form a class action, and so they de-classified the case on lack of substantive harm.
And, now, around 45 days after that little blooper, my legal team has handed me the transcripts for the Monkey Capital ICO. There are pages and pages and pages that Silver Miller and their four clients might be interested in reading, but here’s a sneak peek (from 7/7 the day COE was first announced):
DANIEL: “Since you ask … You can buy coeval off waves \/ these are discounted tokens (put in coeval\/btc) and then sell the coeval for MNY on the day. Don’t tell anyone I told you this but this gets you 5x the number of tokens (look at the description of the coeval token and you’ll see what I mean) “I actually did NOT mean to put this in the general chat room! LOL. Oh well we may as well leave it here now. But we don’t bring it up again. “
INVESTOR: ”So if bitcoin is set to go 15x in the next 3 years as per the article you linked, why shouldn’t I just hold my btc? Do you see the monkey token appreciating much more than 15x in value over the same timeframe?
DANIEL: “It’s a great question and I think there is a great argument for holding. MNY will likely go higher in that period IF WE GET IT ALL RIGHT but with BTC you don’t have that IF. So while I suggest that MNY is worth the risk (or I wouldn’t be doing it in the first place), frankly it will a) increase so much you don’t need to invest much and b) you shouldn’t diversify away from BTC like that in that quantity anyway in my view. Just fractionally.”,
INVESTOR 2: What is COEVAL?
DANIEL: OK I may as well explain what COEVAL is as there are a ton of questions about this. First of all, COEVAL are not sold by us; they are more like options that belong to various people in the project (I say they are LIKE that. They actually belong to some people in the project and some other people who when we made them we let have 5 COEVAL here and there just to see how this whole thing played out. Like I say, we are innovating with this market; we are doing things no one has done in crowdfunding EVER BEFORE. Now THAT is something I am proud of, yes.) They let the holder convert at a discount. There’s 100,000 COEVAL in total, which means there is 1 COEVAL for every 1000 MNY, plus the 80% discount (which is to say 5-for-1). Therefore, 1 COEVAL has a price of 5000 MNY. Now, if the COEVAL you buy is 0.2 BTC, that means you paid about $500 or so for it. So, that would mean that we’d have to raise $10m for the COEVAL to have real value. Like I say, in effect this is a call option. I haven’t encouraged people to go out buying up COEVAL for 2 reasons: there is mathematically complex issues in the price calculation of COEVAL-MNY and also it belongs to individuals, but if individuals who hold COEVAL wish to trade COEVAL that’s their choice. For disclosure purposes, I own approximately 5,000 COEVAL but I will not sell any of the COEVAL I personally own for a minimum of 3 years as per the agreement in the WP regarding Management sale of MNY etc. COEVAL are tradable at the 80% discount on any ICO carried out by Monkey Capital now or in the future too.
I hope that answers all the questions I have had flood my inbox on the functionality of COEVAL. As to what price COEVAL are worth buying at, hmmm … I am not gonna answer that. If 0.2 BTC \/ COEVAL is $10m raised, then that just means you gotta guess how much we are gonna raise and buy below the price we are gonna raise at. Why did we create COEVAL? OK here is why: I love mathematical complexity and wanted to make the whole crowdfunding process a bit more fun and it’s also part of the whole evolution of the product process we figured that could catch on. If you think about it, just as options price in the likelihood that a particular event will or will not happen, so do COEVAL price in confidence in the raise. It’s probably one of the cooler innovations we came up with in that sense and I should probably be making an even bigger fuss about it. But as the ICO process began to get underway, I thought it was just one thing too many to discuss. Well, I mentioned it by accident in Slack last night (I thought it was a private chat I was on) and now I have had a zillion private questions about it, so … reap what you sew I guess. That’s how COEVAL work anyway.,
INVESTOR 3: When will COE be green ticked by Waves as an official asset?
DANIEL: I have not discussed it with the guys with respect to COEVAL and very much doubt I will bother as I am not sure I necessarily think it’s a good idea to have them Green Ticked. Are you a gambler? Can you price events for killer profits? If yes and yes, try it. If no: steer clear of these kittens!
INVESTOR 2: How do we know what price is a good price for COE?
DANIEL: It’s fucking hard to price. A bit like buying BTC in 2011. It’s a risk. Worth it? Well, funnily enough, I think long term these COEVAL could be crazy crazy. But. Who knows. I would not suggest trading them. I would actually suggest doing what I am going to do and hang on to them. Hang on to tiiiiny bits maybe if you are tempted to buy them I guess.
INVESTOR 4: COEVAL is $4 — so should I buy it here?
DANIEL: … right NOW IF you can find COEVAL for sale at where it’s been trading I guess it’s very a good bet. But I don’t know how long that statement holds true for.
The issue is, Silver Miller does have these documents in their possession. It is pretty clear that no one was pressure sold COE so the question remains: why file a class action alleging “hundreds … thousands” of potential complainants when you only have four? Why push the story over the national newspapers and make a song and dance about what a huge multi-million dollar fraud a simple token sale on a decentralized exchange conducted by multiple parties was, and try and pin it all on one guy? is it the money? or the fame?
Whatever the reason for this shoddy piece of pseudo-litigation, the whole filing begins to smack not just of legal negligence, but real damage. True injury. As a direct result of all this rubbish, there are people who have been delayed on getting delivery of their product, personal finances have been damaged, reputations have been nearly ruined — one wonders if it is even legal to willfully ignore the truth in such a way.
We shall see.
