The police of Canada have frozen assets which were previously owned by the founders of blockchain services firm, Vanbex, as part of a fraud investigation into a 2017 initial coin offering (ICO) which had raised $22 million at that time.
According to court documents which are dated at March 13, the firm, handled by Kevin Hobbs and Lisa Cheng, raised around $30 million CAD (which is nearly equal $22 million USD) worth of crypto asset by the sale of a token named as FUEL. Vanbex informed its investors that the token could be used in the upcoming smart contract system named as Etherparty and that the value of the FUEL token would be increasing majorly.
According to a filing by the director of civil forfeiture at Canada’s Ministry of Attorney General,
“Vanbex developed no usable products and Hobbs and Cheng did not intend to develop the products they were marketing but rather [acted] with [the] intention to misappropriate the corporately invested funds raised for their own personal benefit.”
The director said,
“FUEL tokens became virtually worthless in dollar value while not being capable of use in the non-existent smart contracts system or for any product or service other than a cryptocurrency coin creating service called Rocket.”
But in response to the application of the government, Justice J.A. Power on March 14 authorized the government to seize the two Land Rovers of the owners; ordered Bank of Montreal to freeze Hobbs’ two accounts which had an amount slightly less than $1 million USD; and ordered him and Cheng not to sell, damage or borrow against their Vancouver condominium for a minimum of 30 days. The investigation of Vanbex and its founders was started by The Royal Canadian Mounted Police (RCMP) in May last year. The Canadian Revenue Agency (CRA) began a tax probe, according to the filing.
The founders straightaway denied that they had made promises regarding the dramatic change in the value of FUEL tokens, saying,
“The tokens integrate bitcoin and Ethereum and the value of any currency is beyond any company or individual’s control, obviously. … Fuel tokens pay for transaction fees on the network for Smart Contracts deployed through our architecture.”
When Cheng and Hobbs were aware of this investigation, they made attempts to liquidate their huge amount of assets which included taking out mortgages against their condos and then putting them up for sale.