3Key, the ghostship crypto company that City partnered with late last year, turns out to be run by a group of German promoters who are accused of being part of a massive pyramid scheme.
Last November, Man City announced a new crypto partner – 3Key – only to suspend the deal within days when it became clear that there was no verifiable information about the company. City subsequently refused to discuss the partnership or to reveal what due diligence they did on 3Key, leaving some serious unanswered questions. Questions like: Just who was 3Key? How did Man City come to sign up with a company about which nothing was known? And, above all, was 3Key a legitimate but flawed business – or an actual fraud?
The answer, I can reveal, is that it may be the latter. Yes, almost unbelievably, Man City partnered with a gang of alleged crooks.
An ever-changing crypto scam
In May 2022, a group of cryptocurrency investors filed a criminal complaint with the state attorney’s office in Zagreb, Croatia, alleging that a series of cryptocurrency investment firms, of which 3Key was the latest, were fraudulent enterprises and part of an interconnected set of pyramid schemes.
The investor group, which consists of over 400 victims from around the world, is seeking the prosecution of the architects of the fraud and the return of £45m – their share of what they say was a fraud worth over £1.1bn.
According to this group, 3Key was just the latest incarnation of a rolling crypto fraud that extended over a number of years. Investors, they say, were encouraged to put money into schemes that promised significant return and then, when these collapsed, they were promised stakes in replacement schemes.
This is a type of what’s called an “exit scam”, where in principle it seems possible to get your money back but, in practice, procedural issues always frustrate you. Often victims are told they need to put in additional funds before they can unlock their original investment.
This was apparently the model for 3Key’s precursors, which seem to have included alleged crypto frauds called Jubilee Ace, AQUA coin, Jenco and Globalytics Tech Research. At each stage, the same core group of German promoters appear to have been involved, hawking the coins via real world and online seminars.
Fake identities
What complicates matters is that the schemes are often notionally run by different senior executives who, though they sometimes make public appearances at events, are suspected by some victims of being hired actors. One incarnation, for example, had an improbably young man giving a keynote address at a public event and claiming to be the CEO. Victims were unable to find anyone matching his claimed identity or that of another man rumoured to be the owner of the company.
Another scheme, Globalytics Tech Research, purported to be a UK based company. And, though a company of that name does exist, the identity of sole director and shareholder appears to be a false one, shielding whoever is behind it.
This is all an uncanny echo of 3Key, whose press release for its Man City tie-up named four staff, none of whom seemed to exist. When Man City put me in touch with the company to get to the bottom of the situation, 3Key would not provide a phone number, instead preferring to communicate by email, with someone identifying himself as “Oliver Chen” giving brief, unhelpful responses. I was not able to verify if Chen existed or if any of his claims about the business were accurate.
However, the victims believe that one common feature of the scams is the presence of three German nationals, who I won’t name here, who are named in the complaint as prime movers in the schemes.
The end of 3Key
In late November, just a week after Manchester City’s dalliance with 3Key came to an end, I was invited to one of their online pitch meetings. Two of the three German promoters where there, though they positioned themselves as working for the scheme’s leader, a man called Max Tan. (The litigants believe he may also have been an actor.) Some invitees to the presentation were former Jubilee Ace victims who’d been told that the best way to access their funds was to sign up to 3Key.
The hour-long presentation walked viewers through the supposed back-end tech that would enable 3Key to make good on its promised 150% annual returns. The presenters even performed what they claimed was a live transaction to demonstrate that there really was something under the hood – a system they called “Leverage Yield Risk Analytics (Lyra).” The litigants believe there was no real business, however, and that, like the other incarnations, 3Key was little more than a Ponzi scheme.
The climax of the presentation was the playing of a sizzle video of the company’s partnership with Man City at the wrap up. Naturally, no mention was made of the fact City had already disavowed them.
Further presentations were announced, a Telegram room was opened and 3Key put out a very punchy statement blaming Man City for all the negative publicity before everything suddenly went dead around Christmas.
The litigants believe that the volume of publicity that the stillborn partnership with City attracted may have made it impossible to move forward under the 3Key brand. In addition, in November, a group of people connected to the Jubilee Ace scheme were arrested in Japan on suspicion of violating financial services regulations by soliciting over £400m from investors. And, in a twist, a former promoter of the scheme filed a criminal complaint against the firm in Singapore, alleging fraud. His reasons for doing so are not yet clear. Elsewhere, other people connected with Jubilee Ace have been linked to even older crypto scams, making the ownership and ultimate mastermind of the frauds uncertain.
What next?
The failure of 3Key is a relief to the victims of the previous alleged scams, who don’t want anyone else to suffer as they have, but it doesn’t provide justice or restitution.
Which brings us to the court case. Originally the victims had hoped to recover their losses through negotiation, but months of talks broke down at the end of April and the victims’ lawyers, Belgrade-based Defend MeGlobal, turned instead to seeking recourse through the criminal courts. They allege those running 3Key and related companies engaged in fraud, market abuse and money laundering. It will now be for Croatian authorities to investigate the claims and, the victims hope, issue criminal charges.
Alexsandar Miljakovic, one of the lawyers for the victims, said, “This case is a typical example of the misuse of the internet and cryptocurrencies to obtain unlawful material gain happening on a global scale. The traditionally organised justice system has difficulties and is slow to deal with cases where victims and perpetrators fall under different jurisdictions. The technology and expertise of the police and the prosecution cannot keep up with the exponential technological growth and variety of cybercrime.”
With luck, perhaps 3Key’s victims will get some justice.
Where this leaves Man City, however, is another matter. To have failed to conduct due diligence on an early-stage company which later collapses is one thing. To have failed to do so on a business that turns out to be connected to an elaborate, long-running alleged fraud is quite another.
From the very beginning, 3Key didn’t smell right. The question is how could City not have noticed when literally just 15 minutes of googling would’ve been enough to establish that 3Key were not who they claimed to be. City, for their part, were willing to provide only an email address to me and a letter purporting to be from “Oliver Chen.” They didn’t have, or wouldn’t give me, 3Key’s address, company registration details or even their telephone number. If you were a junior estate agent who rented a flat to someone on this basis, you would get fired. If City actually accepted money from 3Key without having verified their identity, then this could be a breach of money laundering regulations.
In essence, it appears that it is only by luck that Man City failed to become party to a massive fraud, which could’ve severely harmed their own fans.
With the volume of crypto partnerships increasing rapidly, it’s surely time for the Premier League and EFL to formulate a proper policy on these high-risk unregulated financial products. It’s no longer acceptable for the game to rely on screening by clubs who are desperate to increase their commercial revenue at almost any cost.
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I contacted both Man City and Jenco to ask for a comment on this story, but did not hear back from them.
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Martin Calladine
If you enjoyed this piece, please buy my latest book: No Questions Asked: How football joined the crypto con. That way, I’ll have the money to write more things you might like. Oh, and please spread the word, too. Thanks a lot.
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