We represented Polybius Foundation ‒ which had conducted an initial coin offering (ICO) ‒ in a landmark dispute where one of the buyers, Maksim Velitško, attempted to force a reversal of his token purchase. This was a landmark case, as the position of the courts is a further guidance for both the organisers of the ICOs and the parties wishing to buy tokens.

Innovative way of rising money was fair to token buyers

Dispute began as Maksim Velitško, who was disappointed that the value of the tokens had decreased, claimed his money back by first filing a bankruptcy petition to put pressure on Polybius Foundation. His claims were not successful and on 13th of April 2020 the dispute was finally resolved when the Supreme Court dismissed Velitško’s appeal in cassation, where he demanded the refund of the purchase price of the tokens from the Polybius Foundation.

The courts held, for example, that the decrease in the value of tokens is a possibility that the participant had to take into account when concluding the sales contract and it is a buyer’s risk for which the seller is not responsible.

The dispute gave the company the opportunity to prove in courts that the innovative way of raising money was fair to token buyers.

Study material for ICO organisers and participants

In conclusion, our attorneys representing Polybius suggest to the organisers of future ICOs that information should be shared with all the participants before the sale of tokens begins  pursuant to the “consumer information standard” to protect yourself against possible malicious claims. It is also important to set out the rights and obligations of the parties in the terms and conditions of the ICO and in the sales documentation, including, for example, the buyer’s right of withdrawal, so that it is clear when this right applies and when it does not.

It is also important to clearly state the risks associated with acquiring tokens. In addition, attention must be paid to the need to keep virtual evidence unchanged for a longer period of time. If a dispute is held over past virtual transactions, the registration forms, account creation options and terms and conditions that were visible to participants at the time of the ICO may have critical evidentiary value.

Collaboration between teams

The case demonstrated effective collaboration between our finance and litigation teams. The client was represented and advised by litigators ‒ counsel Karl Kask with senior associate Triin Toom ‒ and by capital markets and financial services partner Reimo Hammerberg.