Spotting a Scamcoin: Keplertek
In this edition of our Spotting a Scamcoin series, we bring you the tale of a great idea pitched perfectly that turned out to be just that, and only that. We explain why having advisors who know how to bring home the dough is actually a bad sign for an ICO, why transparency and staying the course is a must, and why it’s rather tactless to blame the people giving you money for your own failings.
Spotting a Scamcoin: Keplertek
At the outset of things, Keplertek, or Kepler Technologies, seemed like more than just another ICO. It was an attempt to combine three groundbreaking industries – AI, robotics, and the blockchain – and it seemed to be at the forefront of modern tech. It possessed what appeared to be legitimate backers and underpinnings, which included support from not only academic institutions but government agencies as well. It got a strong rating from ICObench, who rated it 4.4 out of 5, and apparently collected around $12 million in private sales which ran independent from the ICO. Surely, it was a technologically revolutionary project destined for great things — or so it seemed. From the About section of the Keplertek website:
“Keplertek is conceived and developed in partnership with MIT’s Global Partners: Tech Park Georgia and GITA (Georgian Innovations and Technology Agency), government backed organizations that would act as intermediary business incubators for the successful startups developed through Kepler Ecosystem. Since its inception, the GITA team has worked with 149+ startups and has proven competency in the ability to forge high-level partnerships between startups, angel investors and venture capital funds.”
One of Kepler’s advisors was Reuben Godfrey, who according to icoholder.com has been an advisor for 22 different ICO projects, which raised a combined total of over $115 million. A tech startup operations manager and co-founder the Blockchain Association of Ireland, Godfrey is something of a godsend to those running an ICO, due to simply being associated with a string of well-funded ICO projects. But for the investors of such ICOs, a different story is told. Out of the 22 ICOs (not including Keplertek) for which Godfrey acted as advisor, a few of them are doing pretty good (token price currently above ICO price), a handful of them are alive and kicking (token price marginally below ICO price), and the rest can pretty much be written off as failures.
Take for example the instance of Play2Live, an eSports streaming platform that reportedly raised around $30 million and of which Godfrey was an advisor. A year and a half after the close of its ICO, it has a dismal market cap of $108,000, with token prices down 99.8% since the time of ICO. A similar example can be found in a Godfrey-advised project named Ubex, which claimed to have raised $8 million, only to fall apart rather instantly after. Then there are stories of Godfrey having participated in all-out scams in the past, though admittedly the line between “scam” and “failed project” can be extremely blurry.
One thing for certain is that Godfrey’s track record tells two stories: a highly favorable one from the standpoint of the fundraisers, and a highly unfavorable one from the standpoint of the investors. Another thing for certain is that there were several bunglings by Keplertek that have made it near impossible for the project to ever fully realize its grand visions of connecting AI and robotics developers through blockchain technology.
Ambition to Match Silicon Valley
There were a few problems with Kepler from the get-go; one of them was a sudden shift in plans by CEO Giorgi Topuria involving the token sales structure. Initially, Topuria aimed big – really big – hoping to raise $250 million in ICO funds, which would be put toward developing their platform, offices for a research and development staff of 150, a university with 2 campus buildings, a laboratory, a factory for the assemblage of robots, and warehouses to contain components as well. In essence, nothing short of a full-on Google Headquarters-esque smart city would be developed where AI and robotics development could achieve new heights, unlike anything that had existed before it. According to a marketing blurb taken from Kepler’s Bitcointalk Announcement thread, the business plan sounded fantastic, delving into areas that were previously unexplorable before the advent of AI-driven robotics:
“Kepler Universe Platform is an innovative ecosystem that will commission scientific initiatives for developing breakthroughs through global teamwork. The platform will afford talented and gifted minds to participate in the development of technological solutions or link up with the right resources and personnel to bring their ideas to life.
Not only does Kepler act as a direct gateway for disintermediated connections, the network also provides investors with unique investment opportunities. The decentralized platform allows inventors, developers, and innovators all over the world to simply upload their AI, robotics and high-tech based projects and proposals onto Kepler Universe Platform for seamless access to financial and technical support.”
The Nearly Never Ending ICO
By the time ICO dates were announced, however, the plans had been changed. A new draft of the white paper had shaved off a good portion of the desired hard cap, which was knocked down to $62.5 million. Following a private presale which reportedly raised around $2.7 million, there was a short public presale, then an “extra sale,” and then the ICO itself was to last through the months of June and July, 2018. At first, tokens were sold for $1.25 each through the Kepler website dashboard, but then the price was later changed to $0.05 a token for the reason of what was explained as making trading volume appear bigger for the sake of gaining attention from major exchanges.
Months passed, and the ICO continued in different forms, well beyond the initial July end date. Various discounts and offerings were made which continually extended the ICO all the way until December, which was about 5 months longer than initially advertised. Topuria’s fundraising needs were insatiable, offering fixed BTC and ETH prices for tokens while the market crumbled in the late quarter of 2018, at one point offering investors tokens at prices based on a $300 ETH (even though ETH was trading as low as $86 in December, when ICO sales finally came to an end).
In total it is estimated that around 10 different sales were held, lasting through December 25th. These sales included founding sales rounds, community building rounds and sales to large investors, in addition to public presales, bonus sales, special offers for early investors, and the ICO itself. After the conclusion of the final sales round, Topuria estimated that $12.2 million had been raised in private sales and $1.5 million from public investors via the actual ICO, making the total funds raised $13.7 million.
Sometime during late December, the hard cap was knocked down substantially further, to $15 million, at which time the fundraising was declared a “success,” as having met the new hard cap declared by a blog entry on the Keplertek website — even if Topuria’s figures were shy of the amount by $1.3 million.
Mysterious Money Matters
Topuria was never completely transparent with sales figures, and the nature of how the fundraising process was conducted prevented anyone other than himself from knowing exactly what was going on. Instead of collecting ETH in a single, ICO designated address (as most ICOs do), he provided individual ETH addresses for each investor through the Kepler website. Blockchain forensics conducted on a dozen or so Kepler ICO-related deposit addresses provided by investors revealed that most ETH paid for KEP tokens went more-or-less directly to 4 different exchanges, including HitBTC, Luno, Binance, and CEX.
Short of having the deposit address given to every individual investor, there is no way of knowing how much money the public portion of the ICO actually raised. It was also impossible to verify that funds had indeed been contributed by private investors at all, and the legitimacy of all fundraising figures was pretty much completely reliant on the word of Keplertek CEO, Giorgi Topuria.
During the 7 month fundraising period for Keplertek, the price of ETH had declined substantially, falling over 80% from June to December 2018. Regardless, this wouldn’t be a problem if Topuria had done the responsible thing and cash out the collected proceeds to fiat currency or a stablecoin, like Tether (USDT), thereby preserving the value of the raised funds. It was, after all, considered highly unwise and/or irresponsible for an ICO to speculate with investor funds, however great the temptation may be.
The Bounty Hunter Fiasco
The extensive social media bounty campaign for the Keplertek ICO included poster advertisements on Facebook, Telegram, Twitter, YouTube, and Bitcointalk, and ran for 5 months, from January to May 2018. 7 months later, having not received payment for their work in promoting the ICOs, bounty participants began to bombard the Keplertek Bitcointalk ANN thread and official Telegram group with questions about when bounty payments would be made, forcing Topuria into action. In February 2019, bounty hunters finally got their answer, even if it wasn’t the one they were hoping for: the total amount of tokens allocated to the bounty participants would be reduced by 95%. One of the Kepler community managers posted this statement on Bitcointalk:
“Attention Keplertek Community: Recently there were a lot of confusion regarding the bounty token allocation for bounty hunters, our CEO Giorgi Topuria is now in our Official Telegram Group Chat to address some of the concerns and to quote some of his words ” Again, I will take this matter under my control and will make sure that every single bounty participant gets fairly rewarded “in that note we are confident that we will get past this hurdle and together we will march forward towards success and glory. Thanks.”
The reduction of tokens and delay in their distribution was blamed on several things: problems with the bounty manager, large amounts of fraud among the campaign participants, the fact that only $1.5 million was raised during the ICO and the rest was raised privately by Topuria himself, and finally, the previously undisclosed contingency that the bounty allocation of tokens was to be based on total tokens sold and not the total amount of all tokens. This seemed nonsensical to the bounty hunters as well as observers on the sidelines: the project was declared as having reached its hard cap, meaning the maximum number of tokens available for sale had been sold. Therefore, why would the bounty allocation be reduced? Things just weren’t adding up.
The Insider Trading Scandal
In April, the announcement of the first exchange to host KEP was made. It wasn’t a major exchange, but it was an exchange nonetheless, which was seemingly a good sign. On April 21st, Topuria made the following announcement to his investors in the official Telegram group:
“Hi everyone and Happy Easter West! Great News! Tomorrow on Monday 4 pm (GMT +4) we will make an announcement regarding the listing and the tokens will be tradable from the same moment on the exchange!
We wanted to make the announcement on Friday, but because some people haven’t claimed their tokens and we had some technical issues with bounty token distribution, we had to postpone it on Monday (we will do our best Bounty tokens to be distributed before the listing even if we will have to do it one by one).
So we have a final listing date!”
The next day, the name of the exchange was provided (Coinsbit), and investors were devastated: not only had trading of KEP actually begun 5 days earlier, but its price had been crushed to about $0.005, or 1/10th of its full price during the ICO. Over 1.25 million tokens had already been sold, some of them for prices well below what any investor had paid. The exchange listing had been leaked ahead of schedule.
What had occurred was unthinkable. Less than 24 hours earlier, Topuria had said that “tokens will be tradeable from the same moment” as the name of the exchange was provided, but this was clearly not the case. Individuals from the Keplertek team – or their associates – got wind of the listing ahead of time, depositing and selling their tokens a full 5 days before the name of the exchange was announced to investors. Instead of owning up to some sort of mistake or error, Topuria began blaming investors for spreading FUD and scaring off “private investors” who were all set to buy tokens from Coinsbit.
When serious questions were asked in the project’s social media groups pertaining to what had happened with Coinsbit, the total amount of funds actually raised, the status of the platform development, and when the KEP token would eventually be listed on a major exchange as promised, communication channels were shut down, and hundreds of people were banned or blocked. Topuria provided frequent updates to calm his critics, reassuring them that progress on the main Keplertek platform was underway, that new deals were being made with businesses that wanted to work with them, and that a major exchange listing for KEP was on the horizon.
Unfortunately for investors and followers of the project, no new version of the platform was ever released, and it remains an embarrassingly low-functioning shell of a product that resembles an early, buggy version of Facebook. It also soon came to light that Topuria had never cashed out the ICO funds. He blamed a “crypto winter” as the reason why the cryptocurrency raised during the ICO could not be converted into fiat (even though prices had begun to pick back up by April), and thus the reason why they had no funds for proper development of the project.
There were no new announcements of exchange listings to come, and very little sign that any progress was actually being made toward realizing Keplertek’s grand goals as outlined on their original roadmap. In addition, team members, brand ambassadors and community managers were fired right and left without explanation. The Telegram chat was silenced, put in read-only mode, and Topuria blamed trolls and saboteurs for the reason for having to do so, as well as for the project’s current dismal state.
By July, things had become pretty heated between a vocal group of investors and Keplertek CEO Topuria, with both sides accusing each other of wrongdoing and being responsible for the collapse of the value of the KEP token. Below is an excerpt from the Kepler unofficial Telegram group that had been started by investors banned from the official group (their names have been removed), shortly after the Keplertek CEO joined in:
Investor #1: “Hi, it is crazy that you are try to blame *** for this massive fail. I just couldn’t believe it. I was with Kepler pretty much from the day one and *** was the biggest supporter and the most helping person on the chat. The question is what was done in last year, why distribution of purchased tokens is not finished, why the tokens for the photo contests and quizzes hasn’t been paid, why they choose the shittiest exchange ever without any promo for the traders, why they unlocked the tokens like 5 days before we know and many more and now we gonna blame *** for that??? That is crazy…”
Giorgi (Topuria, CEO): “Well David acts crazy as he is just a Hater, it’s doesn’t make sense for me too. Token distribution has failed because our Bounty manager has never provided the bounty list, afterwards we had some new complications…”
Investor #2: “I know people who got ripped off invested in Keplertek not worked for G or Keplertek Obviously we got scammed which part is not clear to anyone? This not panic these are facts… hey G you seem to still making sure you don’t look like con artist hey!”
Investor #1: “But I’m not talking about bounty at all, I’m talking about tokens that we pay for and they never arrived. I give you my money and you don’t give me my tokens. It is simple as that!!!”
Investor #2: “I mean what the fuck has this brilliant minded rich business fuck has to show for Keplertek over last year, nothing zero nil! Which is what KEP token is next to!”
Giorgi: “Dude if you think you got ripped off just born your tokens and leave 😉 Btw don’t try to pull my C*** out, it’s too deep already :p ”
Investor #2: “What is Kepler up to, is nothing besides ripping off more people, this guy needs to be stopped period, don’t believe his lies…. let’s not forget who was it that made the exchange listing announcement 6 days later after he had sold all his KEP tokens at a premium price and drive the KEP price next to 0 now!…. to many lies and false promises to believe a single word he is saying…”
Giorgi: “And for those who are throwing false accusations, I am not going to reply to any of those ***. The only relationship between us will be through lawyers…”
Investor #3: “Good hopefully mine will take your scamming arse down and get funds back for myself and everyone else from kep and all the other fucked up projects you’ve done or are thinking of doing you really are a piece of work. No one is to blame except you and if u kindly post your lawyers email I will get mine to touch base you make me [repeated vomit emojis]…”
Giorgi: “Good luck 😉 :p ”
The Aftermath, and Big Takeaways
After months of being dragged along, slowly taking notes of oddities but never fully suspecting the worst, the worst had indeed materialized. It was a slow burn from the beginning. Taken individually, each piece of evidence was not enough to suspect Keplertek of being a scam, but when combined together the warning signs were obvious, if only recognized in hindsight. Among them were:
- an advisor of questionable motivations
- shifting ICO structure and hard cap
- lack of commitment to timelines, including ICO length and road map goals
- a series of seemingly never-ending bonus and “fire” sales
- lack of transparency in fundraising
- changing terms and dates for token distributions to investors and bounty hunters
- lying to investors about exchange launch dates
- cutting off communication with investors
- blaming investors for shortcomings and problems
- ultimately failing to produce any product of value
And still, there were more signs not covered in this article that would cast suspicion on the project, but again not necessarily alarming in and of themselves.
Even though the price of the KEP token has sank some 20x since its price on April 22nd, down to a mere handful of satoshis, Giorgi Topuria still occasionally offers what appear to be glimmers of hope, inviting investors to check out progress being made in the office via video chat, and tweeting updates on Kepler as well. All that glimmers is not gold, however, as it is likely that Topuria is trying to save any ounce of his reputation that he can for the sake of promoting future projects, of which he is a part of many. In addition to Kepler Technologies, his LinkedIn profile along with his page on ICObench list him as part of the following blockchain-related endeavors:
- SBScapitals (Managing Partner)
- Ligercoin (Advisor)
- io (Head of Strategic Planning)
- Decoin (Advisor)
Given the outcome (thus far) of Keplertek, it is hard to assert that Topuria is qualified for any of these positions. While these projects may not necessarily encounter the spectacular degree of failure that Keplertek has, it can’t help but be assumed that there are probably more worthwhile investment opportunities out there with which he is not associated.
Were there actually private investors? Was the idea for Keplertek born with good intentions? Will Topuria’s vision ever come to fruition? Or, was the whole thing a giant scam from the get go? For the sake of those who happened to get caught up in this mess, we certainly hope KEP makes a stunning turnaround and proves itself to be a legitimate breakthrough in the AI/robotics development industry. For now, unfortunately, it just looks like anything else is more likely to happen.
For another investigative article on Giorgi Topuria, Reuben Godfrey and Keplertek, click here.
If you were an investor in Keplertek and would like to connect with other investors, there is a Keplertek Unofficial Telegram group which anyone can join.
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