Canadian police have seized luxury vehicles and frozen bank accounts linked to blockchain services firm Vanbex Group Inc. over its involvement in an allegedly fraudulent initial coin offering.

Vanbex, which has been around since 2013 and offers various blockchain-related services, is in strife over its offering of Etherparty tokens, also known as FUEL tokens, in an ICO in October 2017 that raised around US$22 million.

Court documents claim that Vanbex raised the money to build out the FUEL blockchain but never had any intention of doing so. Worse, the ICO promised investors that “the value of the FUEL token would increase dramatically.”

Instead, Vanbex founders Kevin Hobbs and Lisa Cheng are alleged to have used the money raised in the ICO to fund a lavish lifestyle, including the purchase of luxury vehicles and homes.

“Vanbex never launched the Smart Contracts system even though it raised millions of dollars over the course of several months in 2017,” one document reads. “Contemporaneously, [Hobbs and Cheng] acquired sudden and substantial personal wealth including the real property and vehicles by diverting investor funds from Vanbex into their own personal accounts for their own personal use.”

At least some of the funds were spent on gambling, with the court documents claiming that Hobbs misappropriated funds on gambling “domestically and internationally at the high roller level.” The paper trail includes Hobbs withdrawing $1.3 million from casinos in British Columbia alone.

Hobbs and Cheng have denied the allegations, telling CoinDesk that the fraud allegations are “false” and said that the investigations were the result of “false claims by a former contractor.”

They also denied making any promises as to the future value of the FUEL tokens, saying that the tokens had always been designed to “pay for transaction fees on the network for Smart Contracts deployed through our architecture.”

Unlike previous fraudulent ICOs and other exit-scams, the case against Vanbex is not clear-cut. Excessive spending — at one point, the company had rented a Lamborghini — is not unknown among high-flying companies in the blockchain market and does not provide proof of guilt.

The Etherparty token is down 97% from its all-time high and 87% from its ICO price, but that is not proof of fraud either given that all cryptocurrencies dropped precipitously during 2018.

In the meantime, Vanbex continues to trade, along with the Etherparty token.

“We will continue to innovate and deliver quality products,” the company told employees. “Our counsel are working to put this astern in a fashion that decisively confirms our leading role in this industry, which we intend to maintain.”

Image: Vanbex