Cryptocurrency

Buying crypto coins is extremely easy and can be done very quickly. From the comfort of your own chair, you can create a wallet and/or an account, deposit money into your account and then you can get started right away. Projects anywhere that use blockchain tokens, such as Crypto and NFTs are accessible to people all over the world.

The prices of crypto currencies went up rapidly in earlier years. Some analysts predicted that Bitcoin would reach the five-ton value in the foreseeable future. As a result, a lot of investment money flowed into that sector, both institutional and private. A striking example is that the total market value of Bitcoin darkened a thousand-fold in less than 10 years from around 1 billion euros in 2013 to more than 1 trillion euros at its peak in 2021.

However, this enormous popularity also came with a downside. Recent years have shown that the fast-flowing money has also ended up with less trustworthy parties. In this article, I discuss examples where things have gone wrong, what the developments are and what you can do right now if you have fallen victim to this.

The role of influencers

As mentioned, the barrier to investment is very low in crypto projects. Therefore, investing in crypto was also popular among young people and people who were not investing before. This was cleverly capitalized on.

Influencers were approached to promote crypto projects among their followers. Often they were paid very handsomely to do so. Some launched their own coin. They promoted a so-called Initial Coin Offering (ICO). The more successful projects raised as much as hundreds of millions of euros.

Lawless

Market regulators such as the AFM and DNB in the Netherlands and the SEC and CFTC in the U.S. initially mostly kept quiet. They apparently did not want to get in the way of new developments, not to stifle innovation.

At times it seemed like the Wild West, the cowboys had free rein. Examples of practices so evil that the impression was given that the law did not apply when crypto came into play. Not surprisingly, there are already several examples where things have gone wrong.

Painful

A well-known example is the FTX group. FTX was the second largest crypto exchange. FTX promised “savers” an 8% interest rate on crypto coins deposited with the exchange. This is all without any risk. Its founder Sam Bankman Fried (SBF to insiders) was lauded as a prodigy. How did he do it anyway? In retrospect, the answer turns out to be simple: it wasn’t true. The records of the U.S. trustee show that the management of the group was a complete mess.

Things also went wrong with influencer Logan Paul’s project. His project, a coin called CryptoZoo, could be used in a game he would develop. He sold it to his fans as: “A really fun game that makes you money.” The ICO raised a lot of money. Problem was that the promises were not fulfilled and the promoters it. In the Netherlands, there are also crypto projects where things went wrong, such as Xpose Protocol and WindNL.

Disclosures on Youtube

On Youtube, the channel Coffeezilla, run by American Stephen Findeisen, has become big doing research into abuses on the Internet. To his credit, we know what happened to the CryptoZoo project.

In the Netherlands, the BNNVARA program and Youtube channel BOOS, with presenter Tim Hoffman fulfills a similar role.

Even a lawsuit requires information. Therefore, the revelations of these Youtubers are not only entertaining to watch, but also very useful for anyone who has lost money in the projects they have investigated.

Changing attitudes supervisors

The days of regulatory reluctance are now over. Nowadays, the DNB warns investors against ICOs. International warnings and enforcement actions are also on the rise. Increasingly vigorous action is being taken by regulators and the judiciary at home and abroad against excesses.

The U.S. government is leading the way. For example, the owner of the bankrupt FTX concern has been arrested and the SEC is now litigating Kim Kardashian who advertised a crypto product without disclosing that she was paid for it.

Empty hands?

Among investors in crypto projects who have lost money, there is often a perception that the law cannot offer solutions to them. However, that image is far from always correct. In many cases, there are possibilities for victims to take action through civil law.

This does not necessarily require that something criminal actually happened. Several grounds for liability are conceivable. Sometimes there is in fact the issue of a security. Then a liability can be based on the absence of the mandatory prospectus.

In the US, some investors have started cases against the influencers who convinced them to invest (including in FTX) with false promises. At CryptoZoo, Logan Paul has announced initial (incomplete) compensation under heavy pressure from Coffeezilla’s disclosures. Even in FTX’s bankruptcy, there is still a chance that a significant amount will be secured for creditors by the trustee.

Take action

In other words, don’t jump to conclusions. It won’t be the first time that those people who take action themselves get their damages compensated, while the wait-and-see person misses out.

Have you lost money by investing in a crypto project that failed? Then contact one of our lawyers immediately via mail, phone, or fill in the contact form for a free initial consultation! We will then assess whether we can do anything for you.