Artem Afian, a 34-year-old lawyer, has defended hackers and high-tech blockchain firms, sometimes for payment in virtual money like bitcoins. By converting them into dollars at exaggerated exchange rates, his royalties were impressive — up to 100,000 euros for one contract.
The past two years were especially lucrative for those who were paid in bitcoins, the price of which peaked at $20,000 in December 2017, 10 times the cost of what it was just four months before.
“It was a gold rush, a mania,” Afian said and took out a rectangular purple box with “Cryptomania” written on it. It’s a board game that he created.
“All my experience that I lived through with this quick and easy money — it’s in here,” Afian said. He created this board game for two reasons: to remember how it was and explain how it works.
Today the price for a bitcoin has dropped to $4,000 and the gold rush has subsided, but Afian believes cryptocurrencies and blockchain — the technology that’s used to encrypt them — are here to stay. And those who use them will certainly need lawyers.
Hacker legacy
Afian first received bitcoins when he accepted a job from a hacker.
Bitcoins seem to have appeared out of nowhere in 2008. And in 2013, Ukrainian law firms started receiving requests to accept them as payments. So did Afian’s law firm Juscutum. The persecuted hacker asked for legal help, but said that could only pay in bitcoins.
“What ‘bitcoin’ meant I didn’t know, but I knew well what meant not to be paid,” Afian said. He agreed first to receive the bitcoins and then quickly converted the virtual currency into hard currency.
“I try not to think about what I did,” he says, with regret that he converted money back then too quickly. In 2013, the lawyer sold one bitcoin for around $300, today — it would have been $4,000.
But even though Afian sold all of his bitcoins, he saw potential in cryptocurrencies. As a result, Juscutum started “cautiously” accepting bitcoins regularly.
“Because cryptocurrencies have a shady past of being a currency used to pay for prohibited goods like drugs” and weapons, to finance terrorism, and legalize criminal assets, Afian said. The black market has famously used cryptocurrencies for anonymous transactions.
Only later, in 2017, cryptocurrencies — and their core technology platform blockchain — became ubiquitous in the use of tech startups that “wanted to use them to revolutionize traditional industries” like banking. So hackers were replaced with tech entrepreneurs.
And with more cases, it became more challenging to work in the industry, for there was not a single country that has written any laws to regulate it.
Not anarchy
“Foremost, I need to convince clients to believe that it’s just an illusion that there are no laws,” Afian said. All human activities are regulated somehow even if there are no particular words in a legislature that signify these activities, the lawyer explained.
Many took the absence of special regulations as anarchy, according to him. “They were wrong.”
Afian explains why. “Cryptocurrency” or “blockchain” are not written in the official documents. But the same is with the word “smoothie” — a thick beverage made from pureed fruit, vegetables. “And yet, people sell smoothies. It’s just that they are defined and sold as non-alcoholic beverages,” he said.
So virtual money, cryptocurrencies, fall under other definitions described in laws, too. The role of a lawyer here, according to Afian, is to choose the “most suitable” definitions from the laws — to find a point of legal relations, and understand which rules one must follow so as not to violate the law.
In the United States, for example, it’s best to apply legislation of the stock exchange market, placing virtual money on the same footing as fiat money and securities.
Today countries try to catch up with the progress and to write laws for cryptocurrencies and blockchain. Afian’s Juscutum takes part in writing such laws in Ukraine and Kazakhstan. One such draft law has been submitted to the Ukrainian parliament and awaits the first reading for approval.
“We take it as a wonderful challenge,” he said. “It’s rare when lawyers can lay their hands on something that gives them the glory of pioneers.”
Lawyer Artem Afian talks with the Kyiv Post on Feb. 6, 2019, in his company’s Kyiv office. (Volodymyr Petrov)
Selling ‘promises’
Most of the tech firms asked Juscutum to organize an initial coin offering for them.
Often abbreviated as ICO, initial coin offerings have been used as an alternative way compared to traditional initial public offerings (IPOs) to raise capital. Only instead of shares, companies put on sale “tokens,” which can be bought only with a cryptocurrency.
And a token can be anything — a share in a company, a future discount, or just a “promise” to sell you something before it’s mass-marketed.
Easy to access online, coin offerings thrived in late 2017 and early 2018, according to Coin Telegraph. In total, companies raised over $11 billion in 2018 and $10 billion in 2017.
In Ukraine, there were 19 of them resulting in companies raising $160 million. The three most successful at it were artificial intelligence developer Neuromation ($71 million), e-commerce companies DMarket ($19 million) and Propy ($15.5 million).
Working with such startups, a law firm’s task was always the same — not to let their clients violate the law. Advice includes defining what a token means and performing compliance, choosing a jurisdiction and setting up a legal entity.
Although 75 percent of all the coin offerings worldwide have turned out to be scams, according to CoinDesk digital coins news site, Afian claims that his clients aren’t scammers. “None of them had any problems with the law,” he insisted.
Juscutum chooses clients carefully, he said, and has worked with just 10 companies on coin offerings.
Whether it’s a scam business or not, Afian thinks the ICO “gold rush” boom showed great demand in the post-Soviet countries because of the easily accessible investment tools.
“People do have money here. One just has to use technology to be closer to people so that they can invest in companies sitting at home or via phones,” he said.
Bigger fish
Defending those selling promises wasn’t the only service provided by the law firm. In fact, Juscutum is known in Ukraine as a pioneer in legal technology.
Spearheaded by Afian, Juscutum advised Bitfury. This U. S. tech company puts Ukraine’s governmental data on the blockchain, and Bitfury’s CEO Valery Vavilov called it the “biggest government blockchain agreement ever so far,” according to Reuters.
Another win: Juscutum with U.S. law firm Velton Zegelman organized the first ever cryptocurrency purchase of an apartment when an American paid $60,000 for a flat in Kyiv in 2017.
The historic deal was struck without the use of banks or real estate brokers. It was arranged through a smartphone application called Propy that runs on blockchain.
“Coin offerings are interesting but the role of lawyers is diminished there,” Afian said. “In these two cases we can wave a flag and say that all is thanks to us, the lawyers.”
The lawyer is glad that the hype around coin offerings is gradually settling in. They aren’t that numerous anymore: only 15 successfully held in February 2019, while just a year ago, during the same month, there were 100 of them, according to ICORating, an analytical agency.
“Crazy money isn’t there anymore,” Afian said. He said he knew the hype wouldn’t last. Now Juscutum continues to work with more “traditional” tech firms while keeping an eye on new trends like renewables, tech medicine and electronic government.
“The cryptomania has ended. It left some rich, others poor. As for me, it left me with experience, some extra money, and with a board game.”
The Kyiv Post’s technology coverage is sponsored by Ciklum and NIX Solutions. The content is independent of the donors.
