Rchain, the crypto project that came under scrutiny in December 2018 for the way in which it has handled its finances, was hit last week by a scam which involved the project losing an undisclosed number of tokens to a team of fraudsters. The incident occurred when a supposed team of investors sent fraudulent funds in return for 11 million RHOC tokens, having spent weeks building up a relationship and passing KYC checks, which also brings into question the actions of other agencies involved in the deal.
Fake Investors
RChain released a statement regarding the fraudulent exchange on their website, where they explained the actions that took place in the lead up to the transaction. The transaction was conducted over a number of weeks, with CEO Greg Meredith travelling to Barcelona to meet the team of ‘investors’, who passed all KYC checks prior to the meeting. This group agreed to put their funds into a third-party escrow, and upon the receipt of this money into the escrow account, the 11 million purchased RHOC tokens were sent. However, the tokens were not sent to the escrow company but were instead sent directly from RChain to the investors as the deal had implied. Only when the transaction had been completed were the team alerted that the funds were counterfeit, at which point the authorities, including the FBI, were contacted and the tokens immediately frozen, so at least the criminals didn’t and won’t have a chance to profit from their activities.
RChain Takes the Blame
In terms of who is to blame for the fact that the deal got as far as it did, it seems that RChain should shoulder most of the burden. There are plenty of fiat/crypto escrow services that take care of the whole process rather than RChain using escrow just for the fiat side and dishing out the tokens themselves. Why did they not use one of these more comprehensive services, especially when the sum of money involved was some $365,000? Was it to save money? Potentially. The other aspect to the deal involves the escrow company themselves and how complicit they are. It’s unclear if the timeframe in which they discovered the money was fraudulent was slower than expected or not, without even considering how fraudulent funds were accepted in the first place. Were RChain too quick to send the funds out, or were the escrow company too slow in reporting the fraud? We’ll never know, but something clearly went wrong somewhere along the line. Given RChain’s previous financial problems and now this situation on top, their ability to run the company and lead it to success will continue to be questioned.
