Crypto Investor Sues Riveted Games After Tokens Don't Deliver Expected Profits

Gibraltar-based Tenzor, which invests in cryptocurrency startups, invested $300,000 in Riveted Games under the first SAFT to later receive 15 million CryptoBlades King tokens issued by Riveted, said the complaint. It invested $50,000 under the second SAFT to receive 2.5 million tokens, it said. Tenzor received 17.5 million issued tokens from the SAFT agreements for an effective purchase price of 2 cents, a discount from their open-market trading price of 62 cents, it said.

Riveted Games said the tokens would serve as the in-game currency in CryptoBlades that could be used as a utility token in the game or exchanged for fiat currency on the open market, the complaint said. The tokens’ value would grow as more players joined the game, an investment that was supposed to benefit Tenzor, it said. Under the agreements, CryptoBlades’ “successes or failures” would be shared with investors and holders of tokens sold by Riveted.

The defendant made “express and implied promises” to improve CryptoBlades, leading Tenzor to have “reasonable expectations of profit,” said the complaint. It cited a YouTube video in which CEO Philip Devine said CryptoBlades would “moon,” implying that the price of a token would experience a “significant and rapid increase,” it said. Devine said it was “absolutely the aim” to get the tokens listed on Binance and other large crypto trading exchanges and that the company was in talks with four “top ten” exchanges, it said.

Tenzor expected “profits to be derived” from its investment in Riveted Games based on marketing materials promoting the company's “proven game-development and blockchain team,” the complaint said. Tenzor’s anticipation of potential profits “hinged on Riveted Games’ managerial efforts,” it said.

At the time Tenzor invested in Riveted Games, the crypto market’s “bull run” caused token prices to soar, giving investors “little bargaining power” in negotiations with startups that were able to “attract millions” in fundraising, said the complaint. With the crypto market experiencing a “significant downturn” since then, “it has become evident that many startups fraudulently raised funds without any intention of actually developing a product,” it said.

Soon after signing the SAFT agreements with Tenzor, Riveted Games began using investment funds to develop other projects, the complaint said. After a year with no updates, “it became clear to Tenzor that Riveted Games had no intention of fulfilling any of the promises made in the SAFTs” or on a CryptoBlades product road map. “This was not a temporary pause by Riveted Games, but a planned termination of all promised activities as soon as the fundraising round concluded,” said the complaint.

Online posts labeling CryptoBlades a “scam” further supported Tenzor’s concerns over the future of the game, said the complaint. Players expressed frustration because promised new gameplay features had not been implemented, it said. When Tenzor queried Devine about a marketing plan and revenue model for CryptoBlades in February 2023, the CEO responded with marketing campaign references and 13 revenue models, it said. But Riveted Games “has failed to fulfill any of the promises” in its product road map, implement any of the marketing and revenue plans promised by Devine or “show any efforts in developing CryptoBlades,” it said.

Riveted executed a “rug pull,” said the complaint, describing a scheme in which a crypto developer solicits funds from investors and promises to develop and market a project, but after receiving the investment, they “abruptly abandon the project and fail to deliver the promised benefits while retaining the investors’ funds.”

Before Tenzor received any tokens, the King token was trading on public markets for around 40 cents, the complaint said. At the time the complaint was filed, a King token was worth about .0007 cent, “with no liquidity to support even this price,” making Tenzor’s investment “worthless,” it said. The CryptoBlades website at the time the complaint was filed was “offline,” it said. Though a “web archived and saved version” of the website from Sept. 21, 2022 is accessible, it “lacks all of the features promised” in the game’s roadmap, said the complaint.

Tenzor retained counsel and sent Riveted Games a letter expressing its concerns and offering to return its tokens from the first SAFT for a refund of the full purchase price of $300,000, the complaint said. Devine responded that a lawsuit would be a “waste of [Tenzor’s] resources,” and “threatened to counter-sue,” it said. Tenzor has not heard back from the defendant since then, it said. As of the filing of the complaint, the tokens Tenzor owns “hold no value and serve no purpose, as there is no market liquidity, and thus no buyers,” it said.

Tenzor’s claims include breach of implied covenant of good faith and fair dealing, unjust enrichment, fraudulent misrepresentation, conversion, fraud in the inducement, and violation of the Exchange Act. It seeks compensatory damages of at least $350,000, plus interest, punitive damages and reasonable attorneys’ fees and costs. Riveted Games didn't comment Tuesday.