SONM ICO Scam: Did The Cryptocurrency SONM Rip You Off?
Another day, another cryptocurrency in hot water. Recently, numerous law firms stepped forward to announce investigations into the cryptocurrency SONM, and furthermore, the SONM ICO. Evidently, in April and June of 2017, SONM and its owner raised approximately $42 million in digital currency investments by offering and selling unregistered securities in the form of SONM Tokens to investors in the United States through its SONM ICO, which happens to infringe on the Securities Act.
The SONM ICO was put in place to raise capital to create and launch a decentralized universal “fog” supercomputer that makes use of distributed ledger technology for general purpose computing, such as site hosting and scientific calculations. The SONM ICO raised over $30 million in digital currency investments in exchange for SNM tokens in the first 24 hours along, and about $42 million overall. Nearly 9,000 investors participated in the SONM ICO, using other crypto coins such as Ether and other major digital currencies to create a total of 331,360,000 SNM Tokens which were distributed to these investors.
These SNM Tokens are considered securities under the Securities Act, and SNM Tokens also qualify as investment contracts due to the fact that the SONM board (for lack of a better word) referred to the SONM ICO participants as “investors,” while repeatedly stressing the profit potential from purchasing SNM Tokens as being a “direct analogue of holding shares and receiving dividends from operational profit.” The SONM ICO was a clear offer and sale of securities because SONM touted, as SONM ICO investors expected, that the SNM Tokens received in exchange for their investments would be worth more than the digital currencies invested, and that these SNM Tokens would provide a stream of income.
Furthermore, and in hindsight, many avid crypto investors weren’t all too familiar with SONM’s team of directors. Though Max Kordek (LISK) is an adviser, the coin was never too upfront over what his role entails, so who knows how much legitimacy this would have added to your investment. Similarly, SONM was also using SebastianJu (a long time, trusted, community member for escrow), and this was definitely a plus… until, of course, the following unfolded. The following is the statement SebastianJu had made via Bitcointalk:
Hello everyone, SebastianJu here, official escrow of SONM. Normally I would have written something already days ago about how things will move and would have given more details. Unfortunately I lost contact with everyone from SONM some time ago. I requested to speak about and check the new contracts some time already and was told it will happen before the ICO.
Well, I often tried to get in contact the last days also, sent pm’s on bitcointalk as well as email and dm’s on slack to rebel.salesman, who normally is my contact, alexey and sergey. I was ignored except finally sergey answered me with the actual link to the ico contract on github. I checked and found it a bit strange to read nothing about anything pointing to the use of an escrow.
So I used a channel with sergey and rebel.salesman on slack and wanted things to clear. Time already was pretty far by that point because no one bothered to speak with me:
@channel it looks to me like there is no escrow involved anymore in the ico contract. I would appreciate to hear something else but the code leaves a different impression. Also you did not communicate with me at all about the ico even though I was told we would speak upfront about it. I tried to get in contact all the last days. Time is forward way too far now so it does not sound believable to happen. Also having too much work to do is not believable since the seamless work of the escrow part is fundamental for the safety of the ICO into both directions.
I do not know what happened. Maybe you would have wished to renegotiate the escrow fee. You did not try that at all. Maybe you wanted more safety… in that case I would have been able to bring in one or two other trustworthy escrows and create a 3 of 5 multisig. but no communication happened.
Guys, I will go to bed now. Please answer me in a proper way so that it looks like you take this serious. I hope this can be cleared earlier than 6 hours before the ICO starts.
I really hope you can tell me I interpreted everything wrongly.
Well, 2 hours earlier rebel.salesman answered me with this:
“Sebastian, hi, sorry for delayed response – lots of work to do at the moment. We are going to use ICO smart contract with multisignature as the escrow. Multisignature will be held by Sergey Ponomarev, Alexey Antonov, and SONM advisers.
I’m really sorry we didn’t contact you earlier to discuss it. Lots of work is not an excuse, we should tell you about it before.
Anyway, it’s pleasure to have business with you. Thank you for your help and your time during the preICO!”
So the ICO is NOT escrowed anymore. The invested funds will be held by the SONM team totally. I cannot provide any safety from now on and I need to take my name from the safety sign of the SONM ICO. Just to make clear that I will have no access nor control about invested funds.
Not sure what to say about that behavior. I believe nobody would have contacted me without me pressuring that way. People would have invested believing I hold the funds in escrow. Which is not the case.
Nobody contacted me about negotiating something upfront, telling me about a change or tried changing something in the deal for the ICO.
So that’s what I unfortunately only found out by putting pressure on the topic.
So again… this ICO is not escrowed anymore. Funds will be hold and controlled by SONM totally from the start.
– Source bitcointalk.org
When this was all said and done, it appears that SONM used a multi-signature contract rather than an escrow account, however this multi-signature contract was to be controlled entirely by the SONM team, a stunt not many investors were happy with.
From the start, SONM, and the people backing SONM, appeared to be making very grand claims about their cryptocurrency. Often times, this results in an over promise, leaving investors upset when they hold the actual delivered result. In the case of cryptocurrencies, this also reflects heavily on the core team behind the coin. A competent team would be hard pressed to promise more than what they can undoubtedly deliver. It suggests a lack of experience.
Unfortunately, in this world of crypto-mania, it is very easy to get caught up in the fear of missing out, and almost unintentionally investing an ICO such as this. Consider The Consumer urges you to do your research, or even reach out to us first so we can do it for you, before investing. Always know where your investment is going and get yourself an understanding of the players involved.
If you have been affected by the SONM ICO, please know that you are not alone. We are asking, however, that you reach out to us immediately to share your story and get involved in stopping this scam. We can be reached via Email at Outreach@ConsiderTheConsumer.com, or you can find us on Twitter, Facebook, or even connect with us directly on our website! We look forward to hearing from all of you, and to finally seek justice for the SONM ICO investors.
Furthermore, if you believe to have been the victim of another ICO scam similar to SONM, tell us about it immediately, as we may be able to help! Again, we can be reached directly on our website, or via email at Info@considertheconsumer.com for this matter.