If you’re considering an ICO, here’s what you need to know to avoid offshore ICO fraud
I use the word “fraud” here very carefully and consciously. There is an ICO offshore fraud committed by lawyers and incorporation agents, I have witnessed this ICO fraud in Belize, Nevis, Cook Islands, Cayman and a series of offshore countries.
This article is intended for those who want to finance their business with an “offshore” ICO. I am not talking about ICOs in regulated jurisdictions. Furthermore, this fraud in general does not concern ICO investors.
With all that has been said, here is the offshore fraud of the ICO that often occurs in the offshore Islands:Those who want to issue an ICO call a lawyer or a founder and say:“I need an offshore company that will issue an ICO for my new business”.
The agent says: “Sure, no problem. Send us $10.000 and we’ll start your company.”
The buyer pays and gets his business. Fraud completed.
Well, you’re thinking, the buyer got exactly what he paid for. How come this is an ICO swindle committed by the lawyer or founder?
This is an ICO scam because the agent knows very well that the buyer will not be able to get an offshore bank account. They know that the buyer does not have the legal form or the necessary documents to issue an ICO. You know that it will be a cold day in hell before this customer opens an offshore bank account for his ICO.
They are aware that the offshore Islands cannot be used as intended. These lawyers deliberately sell a useless company to make money. They exploit a buyer who has no idea what he is doing and does not have the financial support to issue a proper ICO.
Why the offshore company will never work:
Even if the acquirer could open a bank account, it would be closed after the first deposit…. and the ICO would probably be blacklisted.
The only way to open an account would be to deceive the bank about how you intend to use this offshore company. They say that the company will sell a service like internet marketing or whatever. You won’t get an account in the Cayman Islands, but you might get one in a smaller offshore jurisdiction.
Now you issue the tokens and the investment deposits begin to roll in. You convert Bitcoin to FIAT and transfer it to your offshore account to finance your business.
Do this a few times, the bank will become suspicious. They will want to know the source of the money and see your sales agreements.
Assuming you somehow bypass the bank’s KYC, AML and compliance systems (that won’t happen), what will the regulators say? If you somehow manage to make a million dollars, regulators will be on top of you faster than you can say bitcoin.
What is expected of you:
The bottom line is that these offshore islands companies are useless to an ICO without all the legal framework and planning that goes into a proper ICO.
Of course, the Cayman Islands are one of the most important jurisdictions for offshore ICOs and crypto funds. I recommend Cayman to my clients all the time….
The characteristic components of an offshore company that will issue an ICO are the following:
1. Corporate entity,
2. Financial Services Entity,
3. Anti-Money Laundering Manual (AML),
4. Know Your Customers (KYC),
5. Committed money laundering reporter or Chief Compliance Officer with many years of experience,
6. Sufficient capital to attract a correspondent bank to accept you as a client.
Setting up an ICO in 2019 is not cheap and all shortcuts will lead to dead ends.
Proper licensing, approval and compliance with laws and regulations, especially US securities laws, is required when US persons are involved.
They must also address issues such as utility tokens or security coins from the outset.
If it is a security, we must start as a free offer under 506(D), if US persons are involved. Otherwise, we still need a proper offer document wherever you want to open a shop that matches the countries you want to sell to.
So, how do you avoid this scam?
Simply ask them in writing to guarantee that they will open a offshore bank account that will allow them to receive ICO funds. Also let them know that you plan to visit the bank to verify your ICO.
This will shut them up very quickly.