Former New York Times Journalist Caught in $3.5 Million ICO Scam

  • Chinese-American Jerry Ji Guo has allegedly been involved in a $3.5 million ICO-related scam.
  • Guo, a former Newsweek and New York Times journalist, may face up to 20 years in prison for orchestrating fraudulent crypto-related schemes.

Jerry Ji Guo, a former journalist at Newsweek, New York Times, and the Washington Post, has reportedly been involved in a number of scams - including securing funding for a group-dating service from VC firm YCombinator, but then abandoning the project just eight months later.

Guo, a Chinese-American Yale University graduate, has also worked as head chef and owner at a burger joint in Beijing, China and helped start an Atlanta-based “growth hacking” marketing firm. In 2017, Guo launched a $2 million initial coin offering (ICO) to raise funds for a content-sharing program - which he claimed was backed by partnerships with American Idol and The Voice.

On November 9 2018, Guo was arrested by US Federal Bureau of Investigation (FBI) agents in Puerto Rico - on charges for allegedly being involved in a $3.5 million wire-fraud scam. Guo, who refers to himself as a “serial blockchain entrepreneur”, has been accused by American prosecutors of stealing large amounts of digital currency from blockchain startups that employed him as a consultant.

Facing Up To 20 Years Prison Sentence

On Friday, November 30, a San Juan, Puerto Rico federal judge ordered that Guo’s case be transferred to courts in San Jose, California. Notably, the Chinese-American 31-year-old will be facing an eight-count indictment. If found guilty, Guo may be sentenced to 20 years in federal prison by statute.

At a minimum, Guo would have to serve 5 years in prison if found guilty - as law enforcement agents have found that the so-called serial entrepreneur is behind a fraudulent scheme which was allegedly carried out under the guise of a firm called pressICO. According to US federal prosecutors, Guo had been promoting himself as an ICO expert and claimed to have help many projects successfully raise funds and launch innovative products and services.

Claiming To Launch Equitable Content-Sharing Platform 

As payment for his services, Guo allegedly asked his clients to deposit a retainer in what he claimed was an escrowed bitcoin (BTC) and ethereum (ETH) wallet - held with Palo Alto-based crypto firm BitGo.

In addition to promoting the questionable pressICO, Guo had launched another ICO called ICST (Individual Content and Skill Token) - which he said was a content sharing platform that would help talented musicians receive better compensation and recognition for their work.

Notably, Guo released several promotional videos, including one where he is pictured in a luxury yacht in Singapore. In the video, Guo says: “Imagine a future where anyone could be a content creator and be able to monetize their content.” As mentioned, he also claimed that his ICST project had managed to partner with The Voice and American Idol.

Running "ICST Idol" Talent Show

In fact, one of his promotional videos was titled: “Creators of American Idol’s crypto platform tour Asia”. Guo also reportedly ran an online talent contest called “ICST Idol” - which had been scheduled on key dates (before and after his ICO).

The winning prize for the online contest was 100,000 ICST tokens, an amount he claimed would be worth at least $5,000. Although it’s unclear who actually won the contest, Guo walked away with $2.5 million in ether in only 17 days from the ICO.

Shortly after raising the large sum of money, there were no new announcements regarding ICST. Vaibhav Namburi, who was listed as chief technical officer for ICST, told the Daily Beast: 

Ah weird. I helped them in their technical direction, as a technical advisor, for a few weeks and that was about it.

On August 19, Guo moved approximately $300,000 in ETH from ICST’s BitGo account to his personal crypto address, according to US federal prosecutors. Mark Matulich, a special FBI agent assigned to the case, revealed that Guo made many more transfers that same day - which were described as “systematically looting” escrowed BitGo wallets that he had opened on behalf of his clients.

Matulich also noted that Guo’s clients were not expecting that he would be able to transfer the funds by himself - as he had claimed that “he would not be able to transfer the cryptocurrency without their knowledge and consent because of BitGo's multi-signature solution to ensure security of funds.”

However, Guo reportedly bypassed the two-signature requirement by using backup keys that BitGo had provided him at the time he opened the accounts for his clients. In court documents, Matulich has alleged: “Guo provided little to none of the services promised to clients within the contract period.”

Genearing "Fake Facebook Likes", False Claims

Court papers note that Guo’s victims include Rate3 and Pental Global and that the Chinese-American citizen has so far transferred $3.5 million in BTC and ETH to his personal wallets.

The FBI’s investigation also found that Guo had claimed (on his resume) to have managed a $100 million ICO for Polymath. However, Matulich revealed: 

Polymath ended its relationship with Guo after about a month and a half because Guo did not actually do anything … [he also allegedly] generated what they believed were fake Facebook likes for Polymath, thus defrauding Polymath out of approximately $50,000 in up-front fees.

tZERO Opened Its Doors to Non-Accredited Investors, but Their Options Are Still Limited

Samuel Haig

Last week, tZERO announced that its securities tokens (TZROP) are now available to be traded to non-accredited investors, as per Rule 144 of the Securities Act of 1933.

Despite the launch, the platform offers limited functionality, Overstock's OSTKO security token and TZROP comprising the only markets that are currently available for non-accredited investors to trade. Traders are only able to place limit and market orders to purhcase security tokens using fiat currency, with tZERO's markets open for trade during weekdays between 9:30am and 4:00pm EDT.

Signing up to trade on tZERO requires submitting identifying documentation to the platform, with verification taking several days for the company to complete. As the platform develops and evolves, however, more functionality is to be expected.

TZROP Tokens to Generate Divident for Investors

TZROP were first issued via a private placement during August 2018, and have been tradable among accredited investors since January of this year. The tokens are now exclusively tradable on the PRO Securities alternative trading system (ATS) to investors who hold an account with Dinosaur Financial - a broker-dealer headquartered in New York.

According to a press release, the TZROP token offers investors “direct exposure to tZERO’s revenue growth through its quarterly dividend model,” with tZERO pledging to distribute 10% of its adjusted gross revenue to holders of its security token . Investors can reportedly choose to receive dividends in the form of BTC, ETH, TZROP, or U.S. dollars.

However, the release notes that the distribution of dividends is subject to approval from tZERO’s board of directors, and Delaware law.

Peer-to-Peer Trading of TZROP Tokens Prohibited

TZERO emphasized that peer-to-peer transfers of TZROP have not been authorized, asserting that TZROP holders must exclusively resell tokens “on the PRO Securities' [...] ATS only through a brokerage account established with Dino, a subscriber to the ATS, with clearing and custody provided by Electronic Transaction Clearing, a registered broker-dealer, and Computershare, as transfer agent.”

To comply with the company’s regulatory obligations, tZERO also reserves the right to prohibit tZERO security token holders from moving TZROP from Dinosaur Financial brokerage accounts to personal wallets.

The chief executive officer of tZERO, Saum Noursalehi, stated:

“Following the one-year anniversary of the close of our security token offering, non-accredited investors now have the ability to purchase and trade in our security tokens. Today marks another milestone as we further democratize access to all investors, regardless of net worth, can invest in the business opportunity of a blockchain-based capital market.”

TZERO Receives Patent for ‘TOME’ Technology

On Aug. 6, 2019, tZERO was awarded a patent for a process for recording trading data on a public blockchain, dubbed the “Time Ordered Merkle Epoch (TOME) methodology.”

According to the company’s announcement:

TOME is a base-layer technology that uses digital signatures to record and verify time-series data such as trades, executions and settlements. This technology enables low-latency systems, including traditional matching engines or private blockchain ledgers, to be anchored into immutable public blockchain ledgers.

TZERO plans to incorporate TOME into its product suite, in addition to licensing the technology to other firms.