Assets belonging to the founders of blockchain consulting firm, Vanbex, have been frozen by the Canadian police.
They are accused of running a fraudulent initial coin offering (ICO).
According to the court documents, Vanbex, which is operated by Kevin Hobbs and Lisa Cheng, raised $30 million CAD (about $22 million) worth of fiat and cryptocurrency through the sale of a token called FUEL.
FUEL also known as Etherparty was launched in 2017 by Vanbex to provide an ecosystem for the company’s smart contracts system. It had also promised investors massive returns.
The filing by the Director of Civil Forfeiture at Canada’s Ministry of Attorney General, reveals that FUEL was in fact, a shell company that developed no usable products, adding that, 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.”
“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,” this was different from what investors were promised, the director said.
He added that, during the pre-sale period of FUEL, Hobbs and Cheng reportedly bought a substantial amount of properties and also en massed wealth within that short period.
The allegation reads, Hobbs and Cheng “acquired sudden and substantial personal wealth” around the time of the ICO, purchasing two condominiums – the one in Vancouver, another in Toronto – for about $3 million each and the two Land Rovers, and leasing a Lamborghini worth $375,000 for a three-year term.
It also noted that, Hobbs spent a substantial amount of the fraudulently acquired funds on gambling “domestically and internationally at the high roller level.”
Recall that in May 2018, the Royal Canadian Mounted Police (RCMP) launched a fraud investigation into the ICO scheme by Etherparty and Vanbex, in which it discovered that from May 2017 through July 2018, Hobbs and Cheng, were defrauding investors by falsely offering corporate investment in FUEL tokens with no intention of using the invested funds to develop products, but rather with the intention of using them for their personal enrichment.
The police have now frozen two accounts belonging to Vanbex co-founder Hobbs and seized the founders’ two new Land Rovers. It also ordered them not to sell, borrow or damage their Vancouver condominium for at least 30 days or prior to a court order being issued.
The document also mentioned some of Hobbs’ criminal history, including money laundering and marijuana trafficking.
However, Lisa Cheng, has debunked the claim by RCMP.
In a statement issued to Cointelegraph, she said the firm is being falsely accused based on allegation by a former contractor.
In her words, they are well informed that “a former contractor have created files with several government agencies.”
“Vanbex is dealing with an investigation and a lawsuit. The business accounts of Vanbex have not been frozen. We remain confident that the truth will prevail, and this will be behind us soon. The suit wrongly claims that our business is a fraud. […] Our staff have been encouraged to cooperate fully with the investigation and they are,” she added
“We remain confident that the truth will prevail, and this will be behind us soon.”
“Unfortunately, these things move at a pace beyond our control. In the meantime, we will continue to innovate and deliver quality products. Our counsel are working to put this astern in a fashion that decisively confirms our leading role in this industry, which we intend to maintain,” she said.