A budding cryptocurrency firm located in Vietnam is accused of raising funds from an initial coin offering and disappearing with the money. Modern Tech, based in Ho Chi Minh City, set out to launch two cryptocurrency platforms: iFan for making payments between celebrities and fans, and Pincoin for general transactions backed by a rewards system. The company raised $660.79 million from around 32,000 investors before throwing on its invisibility cloak.
An initial coin offering is a means to raise funds to launch a cryptocurrency platform. Investors shell out money in return for tokens (think stocks) that appreciate in value over time. Once the cryptocurrency platform is fully funded and goes live, these tokens can convert into virtual currency. The tokens served up by Modern Tech promised to “skyrocket” once the platforms went live.
On the iFan front, the value of this specific cryptocurrency was expected to rise “on a daily basis” as the company signed on Vietnamese singers. Meanwhile, the value of Pincoin would rise as investors brought other individuals into the network, providing an 8 percent commission for each new Pincoin member. Ultimately, investors were promised a profit rate of 48 percent a month, and a full recoup all investments within four months. After that, investors could seemingly shower in money.
At first, Modern Tech began paying commissions with real money. Investors watched as both cryptocurrency platforms increased in value on a daily basis, as promised. But eventually the company replaced cash payments with tokens that couldn’t be withdrawn for real world money. That suddenly raised a red flag for all investors.
Victims turned to social media and forums to report their investment loss in Pincoin and iFan while on Sunday many parked in front of Modern Tech’s headquarters with signs to denounce the company and demand a refund. Victims are also currently signing an official complaint demanding a return of their investments.
According to a report from Vietnam, the team behind the Pincoin and iFan initial coin offerings consist of seven Vietnamese nationals that lured investors by holding conferences in Hanoi, Ho Chi Minh City, and other remote areas.
Using initial coin offerings to raise cash for cryptocurrency platforms and disappearing with the money isn’t anything new. The method is called an “exit scam” and previously used by Confido, LoopX, Prodeum, Starscape Capital, Knoxcoin, and many others. The problem is that initial coin offerings, along with all cryptocurrency platforms, aren’t regulated, so there are no federal laws protecting investors.
In North America, the Securities and Exchange Commission (SEC) admitted that it was investigating companies and individuals for possibly violating securities laws through initial coin offerings. The SEC says virtual currencies should be listed as securities and registered with regulators given all promoters of initial coin offerings and cryptocurrencies won’t “act responsibly” and abide by federal laws.
“The SEC is undertaking significant efforts to educate the public that unregistered securities investments offered by unregistered promoters, with no securities lawyers or accountants on the scene, are, in a word, dangerous,” stated SEC chairman Jay Clayton.