How investor tricked to invest $2 million in crypto tokens?


Following a lawsuit filed at the US district court of New York on February 1st 2019, an investor in the cryptocurrency MCash, claims he was misled in investing $2 million in the crypto.

Lijun Sun, the plaintiff, transferred $2 million of his money to the investment group Blue Ocean Capital Group, with intentions to purchase the MCash tokens. Sun is accusing that the documents that were provided to him about MCash did not accurately represent the token or the terms of the purchase. He claims that he only became fully aware of the terms after buying the tokens.

Sun entered a Token Purchase Agreement with a company other than Blue Ocean Capital, in which the defendants did not disclose and which he did not know about until after making the purchase. MCash tokens are also unregistered securities, which means there is no legal market for in the United States.

As quoted from the filing:

“Not only was the MCash Token not properly registered with the U.S. Securities and Exchange Commission (SEC), but more importantly, in connection with selling the MCash Token, Defendants made numerous misrepresentations and omissions that induced Plaintiff to invest $2 million.”

Sun also alleges that some of the defendants are committing federal securities fraud along with common law fraud, on behalf of Blue Ocean Capital. According to court documents the plaintiff is entitled to recission of his investment, along with compensation for damages worth $6 million.

How did this happen?

  •  On May 29, 2018, Defendant Zhang first orally informed Plaintiff about an opportunity to invest in MCash Tokens at an in-person meeting in New York City.
  • Defendant Zhang described the opportunity as an investment and represented that, in exchange for Plaintiff’s investment, Plaintiff would receive MCash Tokens, and the MCash Tokens would increase in value over time.
  • On May 30, 2018, Defendant Zhang sent Plaintiff the MCash White Paper via WeChat, a mobile messaging application. The White Paper, which was written in Chinese, purported to describe the MCash Token and its functionality.
  • A website affiliated with MCash describes MCash as the “Next Generation Digital Currency.” It suggests that MCash will permit users to “TRANSACT Much Faster Than VISA, PayPal, Bitcoin, Ethereum, IOTA, etc.”
  • Defendant Zhang asked Plaintiff to download an application on his mobile phone and said that she would send 2 million MCash Tokens to Plaintiff’s virtual currency wallet using the application. Plaintiff downloaded the application.
  • On June 2, 2018, Defendant Zhang sent Plaintiff wiring instructions for him to transfer the investment funds to an entity called Blue Sky Capital Group LLC (“Blue Sky Capital”) at a JPMorgan Chase Bank account in New York.
  • On June 4, 2018, Plaintiff sent Defendant Zhang a message on WeChat stating that he wanted more time to consider the potential investment. Within minutes, Defendant Zhang requested to speak to Plaintiff by telephone.
  • At no time did Defendant Zhang advise Plaintiff that the MCash Token investment opportunity was not registered with the SEC and was therefore an unregistered securities offering, even though Defendant Zhang knew that Defendants had not taken steps to register the MCash Tokens with the SEC.
  • On June 12, 2018, Defendant Zhang again sent Plaintiff wiring instructions to the same New York JPMorgan Chase account in the name of Blue Sky Capital. Plaintiff stated via WeChat that he would promptly wire $1 million and that he would transmit the remaining funds later that week.
  • Less than four hours later, Defendant Zhang sent a message stating that the funds had not yet been received. She asked for the name of the company that was wiring the funds. Plaintiff responded with the company’s name and account number. Plaintiff informed her that the funds likely would arrive the next day.
  • The next day, June 13, 2018, Plaintiff learned that his bank had blocked the wire transfer. The bank informed Plaintiff that the Blue Sky Capital account was deemed high-risk because of potential connections to Iran.
  • Plaintiff sent Defendant Zhang a WeChat message that same day informing her that the payment had been blocked due to potential connections to Iran and that the bank had requested more information about Blue Sky Capital. Defendant Zhang responded that the account was a U.S. account, had nothing to do with Iran, and had never received any payments from Iran.
  • Defendant Zhang also provided information regarding the transaction that she intended for Plaintiff to provide to his bank. Defendant Zhang described the purpose of the payment as follows: “This payment is from an investor to invest in our fund.”
  • Defendant Zhang also provided a Delaware incorporation document for Blue Sky Capital, which showed that the company was registered on April 21, 2018, which was around the time Defendant Zhang first approached Plaintiff about investing in MCash Tokens.
  • There is not, however, an entity named “Blue Sky Capital Group LLC” listed on the Delaware Secretary of State’s website.
  • On June 19, 2018, Plaintiff initiated another wire transfer of $246,000 to Blue Sky Capital’s account in New York. Again, his bank blocked the wire as suspicious for potential
    connections to Iran.
  • Defendant Zhang then provided new wiring instructions and asked Plaintiff to wire the funds to a different U.S. bank account held by Defendant Blue Ocean Capital.
  • According to the Delaware Secretary of State’s website, Defendant Blue Ocean Capital was incorporated only days earlier – on June 6, 2018.
  • On June 27, 2018, Plaintiff told Defendant Zhang on WeChat that he had completed multiple wire transfers to Blue Ocean Capital totaling $2 million. In response, Defendant Zhang told Plaintiff that she had just transferred $2 million worth of MCash Tokens to Plaintiff’s virtual currency wallet via the mobile application she had asked him to download. Defendant Zhang then represented, “The value of the tokens will double very soon!” She further stated that she would “tell you when to cash out and when to unlock later,” which was the first time she had mentioned anything suggesting that a lockup was associated with the investment.

More info Document 1

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