Even though the website for Caviar had stated that its ICO was not open for U.S. residents, it was reported through the filed complaint that at least two U.S. residents were able to buy the native token through the ICO.
What does the complaint say
The complaint alleges that Kirill Bensonoff, a resident of Brookline, has been running an ICO for his company Caviar that is based in the Cayman Islands.
According to the filing, Caviar had explained to its potential stakeholders that the company would be generating its revenue through a hybrid model of investing in other digital currencies and providing loans backed by real estate.
The complaint also alleged that Caviar has no place of business in the Cayman Islands and its business operations are run through Bensonoff’s home in Brookline. It further argued that the company was set up in the Cayman Islands in an “attempt to avoid U.S. securities registration requirements.”
It was further alleged that Bensonoff and Caviar had been telling their potential investors that they will be receiving quarterly dividends of 75 percent of the company’s profit, generated from the pooled investment fund on cryptocurrency along with the company’s real estate debt program.
The complaint also alleged that through the ICO, which had been going on since December 1, Bensonoff and Caviar have been offering these tokens, investment opportunities and promises of significant rates of return “without registration or exemption from registration in the Commonwealth.”
Citing these significant reasons among several others, the complaint had been filed through the Secretary of the Commonwealth, William Galvin.
In a statement, Galvin explained that this instance would serve as a cautionary tale to other people who were trying to get creative with their offering. He further stated that his office would not let anyone take advantage of investors within the State of Massachusetts.
“This serves as a warning to those who would try to use the recent bitcoin craze to circumvent securities laws in Massachusetts. My Securities Division will be monitoring these cases closely to ensure Massachusetts investors are not being taken advantage of by so-called ICO promoters trying to cash in on the latest get-rich-quick scam.”
Bensonoff denies the allegations
According to reports, Bensonoff denied the accusations by stating that his company ensures not to “implicate” any laws about securities. He further mentioned that he does not believe that the company had harmed anyone.
He also expressed that he is “disappointed” on the filing and stated that the Caviar team had been in dialogue with the Commonwealth about resolving concerns regarding investors from Massachusetts.
“We expect to continue that dialogue and believe that we can meet the Secretary’s concerns regarding Massachusetts purchasers.”
On the other hand, Galvin stated that he is not looking into the legitimacy of the company’s operations for now, and his primary concern is that the company needs to be registered with the authorities due to the investment returns that it is offering.
He mentioned that if the company does have any issues in the future, then the investors will be left in the dark with nowhere to go, which is why it is essential for such investment-based companies to have themselves registered with local authorities properly.
Information from caviar.io
Caviar’s website, which is still functional with eight days remaining to its ICO’s completion, states almost all of what has been mentioned in the complaint.
For instance, an excerpt from the homepage is provided below.
“Caviar seeks to reduce investment volatility (“beta”) while capturing higher than average rates of return (“alpha”). Caviar will achieve these goals by combining investments in fast-appreciating crypto-assets with income-generating short-term loans, backed by real estate.”
It is also mentioned on the homepage that the “token holders receive 75% of quarterly profits via smart contract.”
The website also mentions an “Intelligent Predictive Model” to forecast cryptocurrency values in the future, which allegedly would help the company in deciding which cryptocurrencies to invest in. It is also stated that this particular model of the forecast is “backed by real data science.”
The website also states that it will provide its first quarter’s profit distribution by April 2018.
It remains to be seen how this case progresses forward. Until then, saying anything about the authenticity of the company’s operations would be premature.