In a December 10, 2018, Reddit post, user timberland outlined the shady practices behind “the world’s largest DNA data and healthcare services platform,” Shivom. Details regarding the departure of the firm’s co-founder missed deadlines, and the technical aspects backing the protocol have all been neglected. When pressed further, interrogators were reportedly banned from the community’s Telegram channel.
Legal Troubles left Unanswered
During the ICO boom of 2017, Project Shivom raised $35 million in the sale of their native token OMX. During the offering, the project leads convinced investors that the group would be launching a blockchain-based healthcare services platform. Research groups and healthcare providers would allegedly pay participants in the OMX token to gain access to participants’ DNA data.
The token’s utility is based on “fueling the Shivom ecosystem” in which participants would be incentivized to participate in the services on offer. The necessity of the blockchain allows users “ownership and total control of their DNA data,” reports the company’s website. As of late, however, the validity of these claims has come under close inspection.
Reports from October 2018, reveal that one of the advisors in the Shivom fundraising campaign, DigitalX, is being sued for their promotion of Shivom. The consulting firm reportedly represented over ten different ICOs in 2017 and raised a total of $8.1 million. These have included Bankorus, INS Ecosystem, CoinPoker, SingularityNET, BitCar, Power Ledger, Bankera, and Shivom.
— Crypto Mermaid (@Crypto_Mermaid) December 11, 2018
It is the inclusion of Shivom that has caused so much controversy for DigitalX. Specifically, plaintiffs claim that DigitalX’s showcasing of the genomics project were deceptive and untrue regarding the ICO process. Amidst this, the legal representatives of OMIX Ventures, the parent organization behind Shivom, have terminated their agreement. A subsequent “Striking Off” of the company has commenced according to records from the Isle of Man Government, where OMIX is incorporated.
When questioned about the legal developments, members of Shivom’s Telegram channel are reportedly being banned outright. This, along with ignoring questions regarding the project’s technical development, has led some to believe that Shivom is an exit scam rather than a failed startup.
Determining whether Shivom is indeed malicious or if it’s merely another victim of crash-and-burn startups is difficult. This is made all the more complicated as statutory bodies and observers alike have yet to identify best ICO practices.
It’s for this reason that fully-regulated Security Token Offerings (STOs) are gaining popularity. The funding mechanism claims compliance with the SEC via registering the digital asset, and from there the offering is only available to institutional investors. If a firm wants to open the offering to the retail-side, they must then apply for Regulation A+.
The American regulatory body has recently perked up to the myriad security frauds in the crypto space. Most recently, Hip Hop DJ Khaled and Boxing champion Floyd Mayweather were forced to pay penalties for promoting the fraudulent crypto project Centra. Exchanges that trade unregistered securities also fall under the SEC’s jurisdiction, as was witnessed in the disgorgement of EtherDelta founder in November 2018.
As much as founders and crypto startups attempt to avoid the securities title, the Commissioner Jay Clayton has made his stance very clear: “Every ICO I’ve seen is a security.”