We need to catch up with KodakOne and KodakCoin. But first, let’s catch up with their competitor — Copytrack.
WENN Media split with Ryde GmbH in July. Their joint ICO company, WENN Digital, which was running the KodakCoin ICO, changed its name to Ryde Holding. WENN Media then signed up in September with Copytrack instead.
Copytrack is a Berlin startup, founded in late 2015. They do “post-licensing” — they find copies of your images online, and send a copyright claim.
Copytrack ran an ICO in January, which took in somewhere between 9-15m EUR. The white paper proposal was very similar to KodakCoin’s — a photo stock site, with “post-licensing,” that protects your copyright with a “global copyright register,” using a blockchain for some reason. And pays you in their tokens.
The ICO was advertised by Copytrack GmbH, using Copytrack GmbH’s track record of achievements. But the ICO was run by, and the funds sent to, a company in Singapore of a similar name, Copytrack Pte. Ltd. — with no corporate links to the German company. Copytrack GmbH are now being sued over the ICO because of this.
Promoting the wrong company
The promotional material for the ICO — the assorted now-deleted web pages, the blog posts, the now-wiped Telegram channel, the short promotional video above — spoke at length about the ICO in terms of the achievements of the German company. Their Q&A video does so explicitly, e.g., CEO Marcus Schmitt at 9:32:
Many people ask us why should they invest into Copytrack and not others. I think there is a pretty easy answer, that we are one of the few ICOs that has an existing business to show, so we are pretty deep in the market. That’s what I want to say.
KodakOne is a brand licensing cooperation between Kodak and Wenn Digital Inc., a Delaware company founded in Nov.2017. Copytrack has a proven track record of several years and has developed its technology fully in-house with enforcement services in 140 countries.
(The Copytrack site now talks about their work in only 83 countries. It’s not clear if their service ever did anything in the other 57 countries.)
The ICO money in fact went to Singapore corporation Copytrack Pte. Ltd. — known since July as Concensum. As of September, this second company was owned by Marcus Schmitt and Stefan Bär, the CEO and CTO of the Berlin company — but the Pte. Ltd. has no corporate connection to the GmbH.
The problem is that the white paper and promotion spoke at length of the track record of the Berlin company — and not of the unlinked Singapore corporation that was collecting the ICO money.
Several investors consider this a material misstatement — they thought they were investing in an established and profitable company, not a corporate shell with no history and no link to the company that was described — and are suing. One has brought a criminal complaint. A law firm is seeking prospective plaintiffs.
Wired.de dissected the ICO and the suits in September. The details of which company was receiving the money were listed in the “Legal Disclaimer” at the end of the white paper.
Schmitt pointed out that “the white paper was clearly divided into two parts, ‘TODAY’ and ‘POST-ICO.'” However, he notably couldn’t explain why he spoke in his own words as if the GmbH was running the ICO in the Q&A, the interviews, or the promotional materials — “Das ist mir so nicht bekannt.” (“I don’t know that.”)
A blockchain copyright register, with no legal standing
The blockchain bit is just to hash a pile of information about the photo, and put it into a blockchain:
COPYTRACK will automatically detect and connect all meta data with the registration data. At the same time, COPYTRACK will create a unique fingerprint of the image and store the hash in the blockchain.
Of course, that’s not the same as ownership — which is a function of (a) who’s performing the action of taking the image (b) the legal circumstances concerning the ownership of the copyright thus created — and nothing whatsoever to do with data such as the camera’s ownership, which Copytrack also wants to record.
The explicit intention (archive) is to have this function as a register with legal standing. It’s not clear how this will ever happen — private “copyright registers” are a common scam, for example, and rarely provide anything that has ever had legal power.
Who is Concensum, or Consensum?
The Concensum website speaks of “CONCENSUM PTE Ltd.” (with a “C”) — but the company is actually Consensum Pte. Ltd. (with an “S”), a Singapore corporation. Per its ACRA record, it was founded on 2 October 2017 as Copytrack Pte. Ltd.
The company is owned 45% by WH13 UG (owned by Bär), 45% by Front Equity (owned by Schmitt) and 10% by Trigger Ventures UG (which I can’t find the ownership of). Wired reported that the company was 10% owned by Tokyomaru (also owned by Schmitt).
Copytrack also explored new areas in unforeseen ICO hazards. Someone in Canada bought 530 Copytrack tokens, for CDN$780. Copytrack mistakenly sent 530 ETH instead — about CDN$495,000. Copytrack Pte. Ltd. asked him for the ether back — but he said he’d been hacked, so sorry, too bad. Copytrack sued him for the return of the ether … but the recipient has since died.
Neither party contests the facts of the case, so the Supreme Court of British Columbia has ordered those particular ETH tokens must be returned to Copytrack Pte. Ltd. — not any old 530 ETH, nor the CDN$495,000 cash value. It will be interesting to see how this is resolved.
The court judgement lists the ICO as having run from “on or about September 10, 2017 to February 10, 2018” — presumably because Copytrack Pte. Ltd. said so, and it wasn’t contested. It’s not clear what entity was accepting ICO funds before the corporation was founded in October.
The intention, per the January version of the white paper, was to turn Concensum from a private limited company into a foundation, in … Q3 2018. The plans to turn Concensum into a foundation were absent from the timeline diagram in the March version.
Virtual offices, virtual employees, virtual web crawler
Copytrack’s Tokyo and New York offices are mentioned in the white paper. The investor criminal complaint suggests that these offices don’t … exist.
Concensum’s listed Singapore address may or may not be virtual — but it shares an address, 38 North Canal Road, with a company supplying virtual offices, and none of the four employees listed on LinkedIn are in Singapore.
Three of the Copytrack employees listed in the white paper as “Team Copytrack” — the software developers and the QA lead — turn out never to have been employed by Copytrack. Schmitt told Wired that they worked for a Copytrack shareholder, and “were in the team back then and are still in the team today.” Other listed team members stopped working at Copytrack before the ICO started.
Copytrack claims it runs a “high-performance web crawler” and “unique image matching”. The images found on a Copytrack search are almost always the first hits from a Google reverse image search. Copytrack’s excuse is that “someone who logs on for the first time is not immediately classified as a top customer, and receives only hits from a standard search.”
The disappearing ICO
Since the Wired article appeared, all materials concerning the ICO have disappeared from both the Copytrack and Concensum websites. The Telegram channel was deleted and restarted afresh. The Twitter is now in the name of an entirely different coin, LevoPlus, which is long dead.
The words “blockchain” or “ICO” can no longer be found on Copytrack’s site.
After the Wired article was posted, Concensum put up a “response to recent rumours,” which doesn’t seem to show any of Wired’s claims about the Copytrack ICO as being incorrect — particularly that one company’s claimed expertise was used to promote an entirely separate company. Concensum’s FAQ speaks of Copytrack GmbH as its “sister” — but there’s still no actual corporate connection.
The German regulatory environment
BaFin, the German financial regulator, has posted an advisory letter on the classifications of tokens as financial instruments. Licensing requirements would need to be looked at on a case by case basis.
Most ICO tokens would be classed as “virtual currencies” — and Copytrack’s would almost certainly qualify, as it was to be the payment method in their system.
Copytrack bragged that the offering was open to all, not just “accredited” or “sophisticated” investors. (They were sensible enough not to attempt to sell it to US customers.) But you can sell almost anything to accredited investors, as long as you don’t lie — the expectation is that if they’re rich, their money is their problem.
Retail investors generally have much greater protections — and scope to sue. In particular, making claims in the large print that you contradict in the small print tends not to go so well — as Copytrack is discovering.
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