False statements in the white paper of the project party, how investors can protect their rights and interests
From the perspective of the development process of the concept, the "paper book" originated from a specific report on a specific issue by a government department. Usually, such a report is printed without any decoration, and the cover is black and white, so it is called a white paper. Later, some social organizations also referred to their reports on their understanding and cognition of reality or a certain aspect of the future as white papers. White papers in the blockchain industry usually also fall into this category, such as the "District Blockchain White Paper", such white papers often only focus on technology and its applications, and do not involve fundraising.
In addition to the above-mentioned types of white papers, there is another type of white papers for fundraising purposes in the blockchain industry. In addition to explaining technology and its applications, this type of white paper also involves fundraising details. This is similar to the prospectus in securities issuance. Books are very similar.
However, there are also obvious differences between fundraising white papers and prospectuses:
On the one hand, the prospectus of traditional enterprises usually appears in the fundraising process after the company has made certain performance, while the white paper of the blockchain industry is more used for fundraising in the project planning and preparation process;
On the other hand, according to the requirements of relevant securities laws and regulations, the issuer of the prospectus usually has the obligation to make a truthful statement. For example, Article 17 of the "Interim Regulations on the Administration of Stock Issuance and Trading" stipulates: All promoters or directors and lead underwriters shall Sign the prospectus to ensure that there are no false, seriously misleading statements or major omissions in the prospectus, and guarantee to bear joint and several liability for it. As far as the white paper of the blockchain industry is concerned, there are no regulations in this regard.
Due to the existence of the above differences, when the white paper was released, many facts were in the expected state, not yet implemented, and the authenticity could not be verified, and the law has not clearly stipulated the legal liability of the white paper publisher for making false statements, so the fundraising white paper is prone to false statements ( The content itself is false or frequently modified after release) and caused disputes. We will briefly analyze the legal issues involved in these disputes here.
o1 First of all, we believe that in terms of legal nature, white papers are usually an invitation to make an offer in contract law.
The first paragraph of Article 15 of the "Contract Law" stipulates: "An invitation to make an offer is an expression of intention to hope that others will make an offer to oneself. The price list, auction announcement, tender announcement, prospectus, commercial advertisement, etc. sent are the invitation to make an offer."
The legislative interpretation of the National People’s Congress stated: “An invitation to make an offer is in the preparation stage of a contract and has no legal binding force.” At the same time, the interpretation also stated that “the prospectus is an invitation to make an offer, but it is not a general invitation to make an offer. It is a document with legal significance.” It can be seen that the view that "an invitation to treat is not legally binding" is not absolute. Usually, after an invitation to treat is issued, new offers and acceptances will be generated, and the meaning contained in the invitation to treat will be covered. At this time, it is considered that the invitation to treat is not legally binding. Binding has its rationale.
Pang Lipeng, the chain law team, believes that in some cases, after the offer invitation is issued, the parties directly “without signing a written contract” (project investment in the blockchain industry, especially individual investors, do not have a written agreement) At this time, the invitation to offer is an important reference for understanding and explaining the true expression of intention between the parties, and its legal binding force should not be denied. Therefore, some scholars believe that: "An invitation to make an offer to offer transaction conditions or guarantee transaction conditions can constitute a legal act" (see: Sui Pengsheng, "On the Effectiveness and Acceptance Rules of the Invitation to Offer", published in "Politics and Law Forum", No. 1, 2004 , p. 87.)
o2 Second, false statements in the white paper may constitute negligence in contracting and civil fraud.
Liu Lang, the chain law team, believes that although there may not be a written contract between the investor and the fundraiser that released the white paper, after the investor pays the investment, he and the fundraiser "establish a de facto investment contract relationship."
At the same time, Article 42 of the "Contract Law" stipulates that if a party deliberately conceals important facts related to the conclusion of a contract or provides false information or has other acts that violate the principle of good faith in the process of concluding a contract, causing losses to the other party, it shall be liable Liability for damages, which is called "liability for negligence in contract".
On the other hand, based on the principle of good faith in the civil law, anyone has the obligation not to infringe upon the legitimate rights and interests of others through fraud. Anyone who violates this obligation constitutes a civil infringement and shall bear the tort liability. In practice, it is generally believed that liability for contractual negligence and tort liability are independent of each other, and there are differences between the two.
For example, judging from existing jurisprudence, adjudicators generally believe that liability for contractual negligence only protects reliance interests, not inherent interests, while tort liability protects both inherent interests and reliance interests. Therefore, in a lawsuit involving white paper fraud, the specific choice of the basis for the right of claim needs to be judged according to the actual situation.
o3 Finally, those who use the white paper to fabricate facts, conceal the truth, and defraud others of money may also constitute a crime of fraud.
As mentioned earlier, false statements in the white paper may constitute civil fraud, and “the boundary between the crime of fraud and civil fraud can only be the boundary between the crime of fraud and civil fraud that does not constitute a crime of fraud” (see, Zhang Mingkai, "Criminal Law (Fourth Edition)"), p. 896).
Civil fraud can constitute a criminal offense if the constituent elements are met.
For example, the previous Hero Chain project claimed in the white paper to develop a blockchain virtual digital currency project with the gambling industry as a gimmick, issue the virtual digital currency Hero Coin HEC, and lure a large number of digital currency holders to invest. The Public Security Bureau opened a case for investigation on the grounds of fraud. According to reports, 21 suspects involved in the case have been taken into criminal detention measures. 15 people have arrived, and 9 of them have been arrested by the procuratorate. See the previous article of the chain method: ICO warning record｜The end of the "hero chain".
In addition to the general crime of fraud, defrauding money through white papers may also constitute other fraud crimes, such as fund-raising fraud and organizing and leading pyramid schemes. The reason why the crime of organizing and leading pyramid selling activities is classified as a crime of fraud is because some scholars believe that because organizing and leading pyramid selling activities is only a means of fraud, and the behavior itself is still a fraud, the more reasonable crime of organizing and leading pyramid selling activities should be pyramid schemes. Fraud crime (see: Chen Xingliang, "Organizing and Leading the Crime of Multilevel Marketing Activities: Nature and Boundaries", contained in "Politics and Law Forum" No. 2, 2016, p. 111).
Guo Yatao, the chain law team, believes that even if there is no false statement in the white paper, fundraising through the release of the white paper may still be suspected of crime, because the financing behavior of token issuance is suspected of disrupting the national financial order. As stated in the "Announcement on Preventing the Risks of Token Issuance and Financing" jointly issued by the People's Bank of China, the China Securities Regulatory Commission and other institutions: Token issuance and financing are "essentially an act of illegal public financing without approval, and are suspected of illegally selling tokens." Bonds, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities. See the previous article of Chain Law: Chain Law Research｜Why do we say "nothing is allowed"!
What needs to be emphasized is that how investors protect their own rights and interests should be analyzed from the specific content involved in the white paper, because some white papers will involve fundraising, currency issuance, and payment of consideration. specific details, while others do not. How investors should respond should be analyzed on a case-by-case basis to determine specific legal solutions. In addition, because the violation of the white paper statement by the project party may not only involve civil liability, but may also involve criminal liability. From this situation, investors can take various measures.
