Police Freeze Bank Accounts, Seize Luxury Cars in Probe of $22 Million ICO Promoter Vanbex

Canadian police have frozen assets owned by the founders of blockchain services company Vanbex, as part of a fraud investigation into a 2017 initial coin offering that raised $22 million.

According to court documents dated March 13, the company, led by Kevin Hobbs and Lisa Cheng, raised $30 million CAD worth of fiat and cryptocurrency through the sale of a token called FUEL. Vanbex told investors that the token would be usable in a forthcoming smart contract system called Etherparty, and that "The value of the FUEL token would increase dramatically," says the civil forfeiture action filed in the Supreme Court of British Columbia.

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," according to a filing by the director of civil forfeiture at Canada's Ministry of Attorney General.

No criminal charges have been filed so far, and when reached by CoinDesk on Sunday evening, Cheng and Hobbs denied the fraud charges and said Vanbex is cooperating with the investigation.

In response to the government's application, Justice J.A. Power on March 14 authorized the government to seize the founders' two Land Rovers; ordered Bank of Montreal to freeze Hobbs' two accounts there containing slightly less than $1 million; and ordered him and Cheng not to sell, borrow against or damage their Vancouver condominium for at least 30 days, court papers show.

In a statement provided to CoinDesk, Hobbs and Cheng called the fraud allegations "False," and said that the investigations were the result of "False claims by a former contractor."

The Royal Canadian Mounted Police began investigating Vanbex and its founders for fraud in May 2018 and the Canadian Revenue Agency subsequently began a tax probe, according to the filing.

Further, Hobbs and Cheng took issue with the authorities' claim that Vanbex produced no usable products.

Still, the court papers go on to allege that 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.

Employees have been "Encouraged to cooperate fully with the investigation and they are," Hobbs and Cheng told CoinDesk.