An almost convincing Delaware-crypto-filing scam

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Ah, Delaware . . . along with decent beaches and the fading glamour of the DuPont dynasty, the state is known for being a cheap and cheerful venue for registering companies in relative privacy.

It isn’t so private that someone can register a company under false pretences without getting referred to federal prosecutors, however. A spokesperson for the Delaware Department of State said Tuesday that it has referred what appears to be a faked iShares filing to the state’s Department of Justice.

The fake filing in question looks like it’s related to — what else? — a crypto scam.

This all started late Monday afternoon when the following listing, which appeared to be from BlackRock Advisors, started making the rounds on social media:

It was for a company called the iShares XRP Trust. Now, it was easy enough to log on to Delaware’s corporate registry and confirm that this filing did really exist, and that BlackRock Advisors’ Daniel Schwieger was listed as the registered agent.

But a BlackRock representative told Alphaville (along with others) that the company had not filed for an iShares XRP Trust.

XRP, for those lucky readers who don’t know, is a token issued by Ripple Labs. In a strange decision earlier this year, a US District Judge ruled that XRP wasn’t an illegal unregistered security in its secondary-market trading, even though it was when it was issued, somehow. The judge then decided last month that the SEC can’t appeal that decision.

One might think that crypto-land would simply take these wins and see how things shook out with XRP. Think again!

In the simplest version of possible events here, somebody instead took matters into their own hands, and made a fake filing in Delaware to make it look like BlackRock was going to launch an investment vehicle for XRP. That would be a very strong institutional stamp of approval.

XRP’s price spiked in response. The jump lasted less than an hour, but the token gained as much as 12.4 per cent:

Now, crypto scams are a dime a dozen. But this one is interesting because it highlights how easy it is to register a company in Delaware. There are rules that require registered agents to vet the identities of clients who want to form a Delaware company, but it isn’t clear what controls there are if someone wants to fake having a registered agent. (We asked Delaware’s representative, but their only comment was about the DoJ referral.)

Delaware online document-uploading service that requires a name for the person submitting the request, but doesn’t seem to need much more information besides that, the name of the company and the name and address of the registered agent. It also processes documents in an hour for a $1000 fee. Here’s the form for a trust:

The iShares XRP filing is no longer accessible on the site, but again, Alphaville looked it up quite easily on Monday. (And there’s still a reference number listed if you search for the company: 2619091.)

The question now is how easy it will be to figure out who did it, assuming it was really a scam and not some other type of botched filing. Delaware may be rather secretive, but it is still in the United States, where digital privacy is mostly a myth.

A scammer could get away with it, of course. But it’s also possible that they’ve just committed a dumb crime for a 12-per-cent pump and now have the Justice Department on their case.