Blockchain files a complaint against a cryptocurrency exchange, launching ICO next week

Blockchain files a complaint against a cryptocurrency exchange, launching ICO next week

Blockchain, a cryptocurrency company,

announced on their official Twitter that they have filed a complaint against Blockchaindotio, a cryptocurrency exchange, for using their name and promoting false information to users. According to the blog report, Blockchaindotio is a cryptocurrency launched by Paymuim, a company which focuses on providing services for Bitcoin. However, it is stated that the company which was popular for running Instawallet is rebranding itself since they lost their customers funds to a hack.

In the year of 2013, Paymuim claimed that Instawallet was compromised due to a hack and that the customers’ coins were stolen from the platform. The platform also stated that they have filed a complaint with the police. This falls in the same timeframe as that of Mt. Gox hack, the biggest cryptocurrency hack in the space.

However, the announcement of the hack eventually resulted in many stating that the platform was running a scam and are falsely claiming that they were hacked. This is because the platform failed to show any evidence related to the police report despite the community asking for it several times. Reportedly, the company has not completely paid off the claims made by their customers.

Blockchain claims that the platform is rebranding itself in order to conceal the allegations of scam. The blog further stated the company is falsely claiming that they have registered with the Securities and Exchange Commission [SEC] for their Initial Coin Offering [ICO]. The ICO is going to be launched in next week on 27th September 2018. This would result in the investors being unable to trade the token publicly. Moreover, the report also stated that there is no evidence regarding the ICO being regulated by the French ACPR.

Blockchain stated that they are particularly concerned about the company has rebranded to a name which is similar to theirs and that it has already led to a lot of confusion in the market. They stated that the similarities which both the companies share include the domain name, the color of the portal, logo, and the tagline. Blockchain further stated that there have been several people questing them about the ICO.

Blockchain said:

“Blockchain is not doing an ICO. When we inspected blockchain.io’s social media and Telegram channels, we discovered that many more people had assumed that blockchain.io was Blockchain.”

They further added:

“To protect our users and maintain the trust we’ve worked so hard to build, we’ve had to take action. Today we filed a complaint in US federal court. We’ll file more complaints in other courts if we need to and we will continue to fight false and misleading statements that endanger the crypto community.”

Article Produced By
Priya

Priya is a full-time member of the reporting team at AMBCrypto. She is a finance major with one year of writing experience. She has not held any value in Bitcoin or other currencies.

https://ambcrypto.com/blockchain-files-a-complaint-against-a-cryptocurrency-exchange-launching-ico-next-week/

SEC Director Vows ‘More Substantial’ Enforcement Against Illegal ICOs

SEC Director Vows ‘More Substantial’ Enforcement Against Illegal ICOs


U.S. Securities and Exchange Commission (SEC)
 
co-director of enforcement Stephanie Avakian mentioned in a Sept. 20 speech that the regulatory agency is most likely going to recommend “more substantial remedies” against those who fail to follow proper initial coin offering (ICO) registration requirements in the future

According to a transcript of the speech posted on the SEC’s website, Avakian articulated the specific set of principals that guide the agency’s decision-making when it comes to regulation, and then delved into how the SEC was tackling in “misconduct” in the ICO and virtual asset space.

Balancing The Risks and Rewards of ICOs

In the speech, Avarkian mentioned that the “novelty of ICOs” and the possible “utility of the underlying blockchain” makes these types of offerings exciting for certain investors. However, she noted  the market “exuberance” for ICOs can mask the reality that they are “often high-risk investments,” since they could lack viable products, have flawed business models, or just simply be “outright frauds.” According to Avarkian, the SEC has tried to be cognizant about how to deal with ICOs registration cases that are not fraudulent. The agency wants to affirm valid ways to raise money while still making sure investors can enjoy the legal protections already in place.

She noted that the agency has issued a number of public statements to inform investors about concerning activity in the ICO space, particularity highlighting one last November that discussed the rise in ICO promotion by celebrities and other public figures. Avarkian said the “anecdotal evidence” in the wake of the announcement pointed to a “dramatic decline” in the amount of celebrity-endorsed ICOs. Overall, Avarkian said any issues related to ICOs and cryptoassets must be in the crosshairs of the Division of Enforcement, and pointed out that current work related to the space and other cyber-related issues was already “paying dividends.”

Staying Active On The Cryptocurrency Front

The recent speech by Stephanie Avakian seemingly caps off what has been a busy week for the SEC when it comes to virtual currency. The regulatory agency also said on Thursday that they are starting a formal review process for the bitcoin ETF proposed by VanEck and SolidX. The proposed ETF has made headlines since it would hold actual vitcoin in lieu of virtual currency futures contracts, and would maintain “comprehensive insurance” to safeguard investors against loss or theft of the bitcoin.

Just a couple of days before, SEC Commissioner Hester Peirce, often referred to as “CryptoMom,” asserted that the government should not hold back new products from coming out in the cryptocurrency market due to the perceived weaknesses associated with bitcoin.

Article Produced By
ICO News

https://www.ccn.com/sec-director-vows-more-substantial-enforcement-against-illegal-icos/

China’s Central Bank Warns Investors of ICO, Crypto Risks

China's Central Bank Warns Investors of ICO, Crypto Risks

China’s central bank, the People’s Bank of China (PBoC),

has today, September 18, issued a new public notice “reminding” investors of the risks associated with Initial Coin Offerings (ICOs) and crypto trading. The notice, released from the bank’s headquarters in Shanghai, reiterates the severe line that has been adopted by the country’s Office for Special Remediation of Internet Financial Risks, which first introduced a blanket ban on ICOs in September 2017. Today’s notice censures the “unauthorized” and “illegal” ICO financing model for posing a “serious disruption” to the “economic, financial and

social order”:

“[ICOs are] suspected of illegally selling tokens, illegally issuing securities, illegal criminal activities, financial fraud, pyramid schemes and other illegal and criminal activities.”

The PBoC has today hailed the successes of the country’s stringent restrictions that have targeted ICOs and a broad spectrum of crypto-related activities to date,

claiming that:

“[T]he global share of domestic virtual currency transactions has dropped from the initial 90% to less than 5%, effectively avoiding the virtual currency bubble caused by skyrocketing global virtual currency prices in the second half of last year in China’s financial market. The impact has been highly recognized by the community.”

Nonetheless, the bank recognizes that several challenges remain, notably the prevalence of offshore exchanges that are used by investors to circumvent the mainland ban. The PBoC notes that the Office for Special Remediation of Internet Financial Risks has now adopted a series of targeted measures, including blocking up to 124 IP address suspected of providing a gateway to domestic crypto traders.  

It further points to redoubled efforts to “clean-up” payment channels and strengthen monitoring and inspection mechanisms, noting that around 3,000 accounts have already been closed as a result of increased oversight. Lastly the notice outlines recent measures undertaken to counter the circulation of crypto “hype” materials. As previously reported, on August 25 the PBoC had already issued a fresh risk alert against “illegal” ICOs, warning that blockchain and the idea of “financial innovation” are being used to lure investors as a “gimmick” that conceals essentially fraudulent Ponzi schemes.

This summer has seen an onslaught of toughened anti-crypto measures from Beijing, which have included a ban on commercial venues from hosting crypto-related events in certain districts. Alongside ‘offline’ measures, China’s tech titans – Chinese ‘Google’ Baidu, Alipay’s Alibaba and WeChat-developer Tencent – have all tightened their monitoring and acted to ban accounts suspected of engaging in or propagating crypto and even blockchain related activities.

Article Produced By
Marie Huillet

Marie Huillet is an independent filmmaker, with a background in journalism and publishing. Nomadic by nature, she’s lived in five different countries this decade. She’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives.

https://cointelegraph.com/news/not-high-performance-tradeshift-ceo-prudent-on-blockchain-supply-chain-potential

Federal Judge Applies Long-Established Securities Law to ICOs

Federal Judge Applies Long-Established Securities Law to ICOs

Federal Judge Applies Long-Established Securities Law to ICOs

Does a decades-old securities law apply to an initial coin offering (ICO)? In a case that represents the first time securities laws have been applied to cryptocurrencies, a district judge says it may. On September 11, 2018, in a district courthouse in Brooklyn, New York, Judge Raymond Dearie ruled that two ICOs were securities, based on established laws that govern the financial instruments. His decision does not imply that all ICOs are securities, but that simply calling a token a “currency” does not preclude it from being classified as a security.  

Turning back a few pages, in October 2017, businessman Maksim Zaslavskiy was accused of misleading investors in two separate ICOs. He raised about $300,000 in a cryptocurrency called REcoin, which he claimed was backed by real estate, and a cryptocurrency called Diamond, which he claimed was backed by diamonds. In truth, no real estate nor diamonds backed either of the coins, and Zaslavskiy was charged in a criminal complaint with conspiracy and two counts of securities fraud — charges that carry up to five years in jail and a fine. Zaslavskiy moved to have the charges dismissed. He argued that his ICOs were not securities, but “the exchange of one currency for another,” and that securities laws are too “unconstitutionally vague” to be applied to his case. 

Cornell law professor Robert Hockett calls the insistence that the laws are vague a “Hail Mary.” “It is a fallback argument,” he told Bitcoin Magazine. “At first the defendant says the law is clear in that it clearly does not apply, but then he effectively says, ‘I have no way of knowing what I can do because the law is unclear.’” Judge Dearie found the laws clear enough. He pointed out that laws are meant to be interpreted flexibly. He then went on to determine that the two ICOs in question were “investment contracts” by applying the Securities Exchange Act of 1934, one of the most important pieces of legislation governing securities, and the Howey Test, a checklist regulators use to determine if an asset is a security.

Specifically, the Howey Test determines that a transaction represents an investment contract if "a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party." According to case documents, Judge Dearie found that REcoin and Diamond investors “undoubtedly expected to receive profits in their investments.” In his arguments, Judge Dearie also referenced the DAO Report, an investigative report issued by the U.S. Securities and Exchange Commission (SEC) in July 2017 claiming that tokens sold on an Ethereum-based investment fund were securities, and public statements made by SEC Chairman Jay Clayton on cryptocurrencies and ICOs in December 2017. At that time, Clayton noted that “simply calling something a ‘currency’ or a currency-based product does not mean that it is not a security.”

“Combined with statements the SEC chairman made previously, yesterday’s decision lends further credence to what many of us believe, which is that offered coins will count as investment contracts and hence securities,” said Hockett. “The SEC has made noises that ICOs were securities, but up until now, there has been no official legal ruling declaring they were.” The case still has to go to trial and, ultimately, it will be up to a jury to decide whether the ICO in question was a security. Still, Hockett said: “I really doubt an appellate court will overturn the district court’s ruling.”  

ICOs have been a major source of controversy in the crypto space. So far, about $20 billion has been raised in ICOs, most of that in the last two years. In a talk at MIT in April 2018, Gary Gensler, former chairman of the Commodity and Futures Trading Commission (CFTC), another regulatory body that has weighed in on ICOs, noted “significant noncompliance” with securities laws in the cryptocurrency space. “Many initial coin offerings, probably well over a thousand, many crypto exchanges, probably 100 to 200, are basically operating outside of U.S. law,” he said.

Article Produced By
Amy Castor

Final Draft of ICO Legislation Could Signify Next Step for Philippines Fintech Sector

Final Draft of ICO Legislation Could Signify Next Step for Philippines Fintech Sector

The Philippine Securities and Exchange Commission (SEC)

is due to unveil the hotly anticipated draft regulation for cryptocurrencies in the next few days, if the information provided by The Manilla Times is correct. If the regulation reflects the previous enthusiastic efforts to implement cryptocurrency in the Philippines, it stands to play a seminal role in defining the country’s status as a major player in the fintech sector. The SEC chairman, Ephyro Luis Amatong, has previously emphasised the need to regulate cryptocurrency exchanges as traditional trading platforms.

The draft comes in the wake of several Philippine lawmakers calling for the creation of a properly structured and above-board regulatory environment for Initial Coin Offerings (ICO) as the country opens up to the new technology. In spite of several successful DApps being developed in the country and the start of a promising upward trend for the Filipino fintech industry, officials are aware of the need to create a competent legislative framework to both protect their citizens from scams and for the sector to develop profitably.

In stark contrast to the majority of other central banks worldwide, the Philippines central bank — Bangko Sentral ng Pilipinas (BSP) — has been extremely proactive in ushering in both the implementation and regulation of cryptocurrencies. The central bank has developed a partnership with the SEC in order to establish “cooperative oversight.” SEC Chairman Amatong

explains their cooperation:

“We already discussed the matter with the BSP, since the BSP is also interested and we are also interested […] The discussion […] [involves] joint cooperative oversight over [cryptocurrency exchanges] engaged in trading.”

Back in 2016, the BSP deputy director Melchor Plabasan made clear his positive outlook on the potential of cryptocurrencies in a televised interview,

stating that:

“If you want something that is fast, near real-time and convenient, then there’s the benefit of using virtual currencies like Bitcoin.”

Final draft builds on months-long efforts to create effective legislation

As previously reported by Cointelegraph, this upcoming draft is the just the latest installment of the SEC’s attempt to regulate the cryptocurrency sector. In November 2017, the SEC announced that it would move to legalize digital currencies by classifying them as securities, using the example of new regulation in the United States, Malaysia and Hong Kong. The SEC chairman and then-commissioner Emilio Aquino shed light on the developments in a news conference:

The direction is for us to consider this so-called virtual currencies offerings as possible securities, in which case we will apply the Securities Regulation Code. The heightened frenzy and increasing popularity surrounding Initial Coin Offerings has pushed authorities to lay down new rules to protect consumers.” In August 2018, the SEC released their draft rules for public feedback. According to the official statement released by the local SEC, any company registered in the Philippines seeking to run an ICO must submit an initial request to the commision, establishing whether their token qualifies as a security. Companies must submit their assessment requests no less than 90 days before they plan to launch their sale period. The SEC will then review the request within 20 days and provide its findings in a written report.

The report also said that if ICOs were only to be distributed among 20 people or less, then registration with the SEC may not be compulsory. The proposed legislative framework seeks to set out clear rules to avoid the creation of fraudulent ICO projects. The SEC has been proposing to regulate crypto assets since late 2017. In April, the Philippines also floated the notion of defining cloud mining contracts as securities, given that the investors of the data centers operate the process via “investment contracts.” The SEC specified that they invited banks and investment houses, along with the investing public, to submit feedback on the proposed rules and set a deadline of Aug. 31.

Crime and punishment: The government cracks down on scams

Like most countries in which cryptocurrency is a burgeoning platform, the Philippines has been victim to a number of scams, as naive investors seek quick returns on offers that are too good to be true while regulators scramble to keep up. In May, an email circulated using the name of President Rodrigo Duterte, along with high-profile members of the Senate, encouraging them to part with their hard-earned pesos in order to invest in cryptocurrency, with the promise of high returns. The presidential spokesman for the Philippines was forced to step in and make a statement denouncing the email scam after President Duterte’s brother’s name was used in conjunction with the scandal. In his official statement,

Roque said:

“For your information, now that the President’s brother [is being dragged into that cryptocurrency scam], the President has asked me at least three times to announce and inform the public not to entertain any person peddling their alleged influence with the President, including his relatives.”

In another scandal, the Philippine’s SEC issued a warning to investors about Onecash Trading, another digital currency provider promising attractive returns of over 200 percent to investors in

only eight weeks:

"Facebook Account Onecash Trading is inviting the public to sign up to their website through a sponsored link and deposit an amount of P1,000 [$20] as an enrollment fee. Upon activation thereof, a member may opt to become a Trader with a promise receiving 25 percent return of investment every Thursday for eight consecutive weeks without doing anything, or to be a Builder wherein a member shall be receiving P 50.00 [$1] per direct and indirect invites, up to the 10th level."

The SEC stated that all investment schemes that make use of either fiat money or cryptocurrencies are deemed securities and are subsequently required to comply with existing regulations in the Philippines. The statement also came with a warning: Those who fall foul of the law could end up serving 21 years in prison as well as paying up to $100,000 in fines.

Cryptocurrencies are a relatively recent phenomenon for most countries. Their sudden skyrocketing into the very center of both public consciousness and the world of finance has often caught governments and issuers by surprise. As a result of this, governments are often on the back foot when it comes to legislation, leaving the door wide open for scammers. An example of this is the January hack of Coincheck in Japan, which led to the theft of $532 million worth of NEM. Anger at the hack was compounded by the fact that Coincheck was not registered with Japan’s Financial Services Agency and was therefore not subject to the same level of scrutiny as other exchanges in the country. The exchange froze all transactions and issued an apology. The Coincheck security compromise is indicative of wider issues in the crypto world, with over $1.2 billion worth of cryptocurrency stolen worldwide in 2017 alone. However, investors and regulators alike are learning from their mistakes. With the Philippine government taking steps to crack down on cyber crime, the wild west environment that has allowed startups and scammers to flourish in equal measure is soon to draw to a close.

The current legislation put in place by the Philippine government to deter cyber criminals has been deemed too tepid for some. Opposition politician Senator Leila de Lima is pushing a bill through the senate that seeks to impose drastically stricter punishments for crimes relating to cryptocurrencies. In her authority as a former justice secretary, de Lima used the April 4 arrest of two individuals for an alleged P900 million ($17.2 million) Bitcoin scam to emphasize the need for Senate Bill No.

1694 to be passed:

"I hope that this occurrence will push my esteemed colleagues in the Senate to take my proposed bill seriously and help pass it into law soon. Knowing that virtual currency resembles money, and that the possibilities in using it are endless, higher penalty for its use on illegal activities is necessary.”

De Lima provided a list of illicit activities that could use cryptocurrencies:

"Where unscrupulous individuals entice unsuspecting people to purchase fake Bitcoins, sending a virtual currency as payment for child pornography or a public officer agreeing to perform an act in consideration of payment in Bitcoins [direct bribery].”

De Lima’s bill would determine the severity of the criminal activity by the equivalent value of the funds raised through illegal activity. Depending on the amount illicitly raised and the circumstances in which the funds were raised, individuals could face lengthy prison sentences or even the death penalty.

Cryptocurrency and blockchain could help unite the Philippines fragmented payments sector

In a bid to keep the country at the forefront of the ever-expanding crypto frontier, the Philippine government has created the Cagayan Economic Zone Authority (CEZA). With countries like Malta and Switzerland already ahead of the curve in welcoming both blockchain and cryptocurrencies, the CEZA is the country’s response to the ‘Crypto Valley’ of Switzerland’s Zug canton. The Philippine government permitted 10 blockchain and cryptocurrency companies to operate in the zone, with the aim of promoting economic growth and generating jobs for its citizens. In spite of appearances, the zone isn’t just a tax haven free-for-all. Companies are required to contribute no less than $1 million over a two-year period, which, in turn, is topped up by up hundreds of thousands of dollars in fees. CEZA deputy administrator for planning and business development Raymundo T. Roquero explained what businesses must do to be able to operate

in the zone:

“When they apply, they will pay an application fee of $100,000 (P5.35 million) [and a] license fee of $100,000. Then you go into probity checks, then application programming integration (API), which costs an additional $100,000.”

In a ceremony granting licenses to operate in the zone in April, Roquero commented on some of the applications that had

been successful:

“These are offshore companies, and they have committed investments of $1 million (P534.6 million) each. GMQ intends to build [its] infrastructure in Sta. Ana, Cagayan […] and will have an incubation period of two years, so they are already allowed to operate here in Manila.”

Crypto activity in the Philippines, however, is not confined to the CEZA alone. The U.S.-based company ConsenSys has launched Project i2i — short for “island-to-island,” a payment network built on Ethereum that aims to connect the 400 rural community banks across the Philippines. Although there are evidently banks to serve the country’s many rural communities, they are neither connected to any wider electronic networks nor international money transfer systems, meaning that thousands of people are without a means of making quick and reliable payments.

The project uses a web API in order to allow banks to connect to a blockchain backend. This allows users to both carry out transactions and to make use of smart contracts on permissioned blockchain via ConsenSys’ Kaleido platform. Transactions signed through this system will allow for the pledging of digital tokens corresponding to an amount of Philippine pesos in an off-chain account, as well as redeeming and transferring tokens among other platform users.

Success stories help the government to keep an open mind about cryptocurrencies

In spite of a stumbling start to the outright acceptance of cryptocurrencies, the Philippine government is clearly waking up to the many advantages that the technology can bring. This change has not gone unnoticed by some of the industry players. In an interview with Nikkei, FintechAlliance chairman

Lito Villanueva said:

“With these startups come huge investments in their portfolio. Surely, each country would want to take a piece of the action. Taking blockchain and fintech players in with enabling regulations and potential investment incentives would surely make the game more exciting.”

Some of the nation’s startups have already brought in considerable investment. Perhaps the Philippines’ most well-known fintech startup success story, Coins.ph, raised $5 million in a Series A funding round, securing investment from Naspers and Quona Capital. Other Philippine crypto pioneers include Bloom Solutions and Satoshi Citadel Industries. Aiai Garcia, global business development lead for Consensys in Asia-Pacific commented on how the Philippines central bank’s openness toward cryptocurrencies had benefited the industry

within the country:

“Today, the Philippines has one of the most advanced blockchain payments apps in the world [Coins.ph], which provides 1.5 million Filipinos alternative access to their finances and other value-added services. [Philippine] regulators were also among the first to announce the regulation of Bitcoin as security."

It appears that the government is aware that the opportunities for fintech companies can bring benefits for itself. Department of Finance spokesperson

Paola Alvarez said:

‘’Secretary [Carlos] Dominguez is really pushing for the application of financial technology. He wants to harness fintech to improve business, for example, payment of taxes online."

As both cryptocurrency and blockchain technology gain footing across the globe, the potential benefits for the underdeveloped Philippine fintech industry are hard to deny. The disparate and fragmented nature of the island’s financial system could be revolutionized thanks to initiatives such as i2i, along with the nation’s many payment apps that have sprung up in recent years. With eager anticipation from high-profile government figures, the ICO regulations seem set to take the next step in defining the role of cryptocurrency in the nation’s future.

Article Produced By
Henry Linver

Henry Linver is a freelance journalist. He’s interested in how blockchain has the potential to radically change the world we live in and the transformative power of crypto.

https://cointelegraph.com/news/from-kazakhstan-to-uzbekistan-how-cryptocurrencies-are-regulated-in-central-asia

U.S. Judge Rules That ICOs are Covered by Securities Laws

U.S. Judge Rules That ICOs are Covered by Securities Laws


A U.S. District Judge in Brooklyn has delivered a landmark judgement
 
with far-reaching implications for the initial coin offering (ICO) market. Judge Raymond Dearie of the U.S. District Court Eastern District of New York today ruled that U.S. securities laws cover ICO token sales.The ruling came in a case against a fraudulent ICO promoter Maksim Zaslavskiy, whom prosecutors are looking to bring up on fraud charges for defrauding investors of more than $300,000 from a scam ICO called REcoin.

REcoin ICO Scam

In Sept. 2017, CCN reported that the SEC charged Zaslavskiy and two of his companies with defrauding investors through a number of ICO scams including REcoin. REcoin was marketed to investors as being backed by real estate and diamond assets which in actual fact did not exist. In a pioneering ruling, Judge Dearie refused to dismiss the case against Zaslavskiy, whose lawyers earlier pled for dismissal on the basis that the ICOs in question were currencies and not securities, placing them outside the jurisdiction of the SEC Act.

An excerpt from today’s hearing file reads:

“He [Zaslavskiy] argues that the securities laws are  unconstitutionality vague as applied. The Government, meanwhile, asserts that the investments made in REcoin and Diamond were “investment contracts,” and thus “securities,” […] and that these laws are not unconstitutionally vague.”

Judge Dearie’s ruling on this matter was that an ICO is indeed a security for the purposes of federal criminal law, which is what prosecutors have argued since last year.

Implications of Dearie’s Ruling

The SEC claims the REcoin ICO scammed investors out of $300,000. Dearie has become the first judge to deliver a ruling that places ICOs firmly within the jurisdiction of securities regulators, and this could potentially have important implications for the ICO market by creating a precedent for future cases. While the CFTC has had some successes tackling fraudulent crypto offerings within its space, the SEC — which has long said that it has jurisdiction over most ICOs — had not yet established this authority in court.

An excerpt from Judge Dearie’s ruling reads:

“Zaslavskiy’s contrary characterizations are plainly insufficient to by pass regulatory and criminal enforcement of the securities laws. Because the indictment is sufficient under the Constitution and the Federal Rules of Criminal Procedure, and because the law under which Zaslavskiy is charged is not unconstitutionally vague as applied, Zaslavskiy’s motion is denied. The case will proceed to trial.”

While the ruling comes as a boost for prosecutors, the it is by no means a final word on the matter. In his comments, Judge Dearie noted that the ultimate decision rests with a jury and that Zaslavskiy’s lawyers can in fact still present the argument contesting the jurisdiction of securities laws to the jury.

Article Produced By
ICO News

https://www.ccn.com/u-s-judge-rules-that-icos-are-covered-by-securities-laws/

ICOs are holding over $730M in treasuries, and doing nothing with it

ICOs are holding over $730M in treasuries, and doing nothing with it

What is going to happen to all that cash?

 

If you thought that all those initial coin offerings (ICOs) that raised millions of dollars in cryptocurrency are busy spending that money on development in pursuit of delivering on their promises, you’d be wrong.Cryptocurrency insights firm Diar has revealed that companies which undertook an ICO before the last quarter of 2017 are sitting on huge cash reserves that could potentially fuel the startup for the next few years.

The total amount of Ethereum held in treasury by blockchain startups currently amounts to 3,744,651 ETH (or roughly $733,614,577 as of September 9). For context, this accounts for 3.7 percent of the total Ethereum supply. Over the last five months these ICOs have only liquidated 20 percent (907,024 ETH) of all total funds raised. Prior to the liquidation, the total amount of funds held in treasury was 4,651,675 ETH (or roughly $1,758,333,150 at this time).

Interestingly, the study also found that at least 12 blockchain-based businesses have a market capitalization that is smaller than the amount of Ethereum they currently hold in treasury. These are the 12 that actually are liquidating their reserves. On average, these companies have liquidated 62 percent of all Ethereum raised through an ICO.

One thing to point out here

is that the US dollar value of ETH has fluctuated dramatically since most of these companies’ fundraising efforts. Indeed, Ethereum has dropped from $378 on April 1 to $195 on September 9. With all this latent cash laying around, it is entirely likely that it could be used to support these companies and extend marketing efforts over the coming years.

There’s nothing wrong with that per se, but the issue is that this could potential obscure the poor performance of these companies in terms of adoption and product delivery. After all, these companies are under no legal obligation to deliver on their promises or pay back investors in the case of insolvency.

Article Produced By

Matthew Beedham

https://thenextweb.com/hardfork/2018/09/11/icos-mountains-treasury-diar/

The future of ICOs

The future of ICOs

Looking at the ICO space now,

it’s clear that there’s a lot of problems but potentially a lot of promise. A comparison that is often used is that the current state of the ICO market and cryptocurrencies as a whole is akin to internet companies in the dotcom boom and crash in 2000 — a lot of noise, many companies will fail, but there could be major firms that survive and become big.

If ICOs do survive, it could pose a challenge to traditional funding methods such as initial public offerings, venture capital or corporate debt.“Philosophically, the value of an asset should be greater when there is more utility, which is a strong incentive for issuers to tokenize real-world assets.”

But beyond that, the whole idea of “tokenizing” a product via an ICO could also lend itself to traditional assets such as stocks, bonds or even currencies like the U.S. dollar. Robert Leshner is the CEO of Compound, a start-up that lets users earn money on their cryptocurrencies. He believes that real-world assets will eventually be tokenized which could boost security, the ability to move them globally, and create new business models.

“Real world assets, from government currencies like the U.S. dollar, to corporate bonds, to equity, can all be upgraded with these properties. Philosophically, the value of an asset should be greater when there is more utility, which is a strong incentive for issuers to tokenize real-world assets,” Leshner told CNBC.

He proposes two ways to do this. The first involves freezing an asset in the traditional financial system and creating an equal amount of tokens on a blockchain, with the ability to unwind the process if needed. A central bank, financial institution, or custodian is trusted with the administration, similar to how exchange-traded funds are created and destroyed. The second option is creating tokens that mimic the value of an asset.

“Tokenized assets will behave like safer, speedier, more useful versions of themselves, which investors will prefer. Once we head in that direction, there will be no going back,” Leshner said. There are however a number of stumbling blocks to such a movement, the main one being regulation. Authorities across the world have barely begun looking at cryptocurrencies and ICOs, let alone the tokenization of traditional assets. But advocates believe it is just a matter of time, likening the development of blockchain and tokenization to the way content was changed by the internet. “Tokenization is to ownership as digitization was to content,” Muirhead told CNBC.

Article Produced By
Arjun Kharpal

Arjun Kharpal is a technology correspondent for CNBC in London. He moved into the role after being a news assistant at the company for two years, and a reporter for a year following that. Arjun's heads up CNBC's "Tech Transformers" special report, interviewing guests or offering analysis on "Squawk Box Europe" and "Street Signs", as well as writing a plethora of stories online. He writes extensively on the technology industry covering the latest trends and topics all the way from the most innovative start-ups up to the biggest companies in the world including Apple and Google.

Arjun talks to the most important industry players including company chief executives, investors, and entrepreneurs. Arjun has previously written for The Times, The Telegraph, The Guardian and The Mirror in London. He holds a BA in English Literature from the University of York and an MA in Newspaper Journalism from City University, London.

https://www.cnbc.com/2018/07/13/initial-coin-offering-ico-what-are-they-how-do-they-work.html

European Parliament Members, Blockchain Experts Meet to Discuss ICO Regulation

European Parliament Members, Blockchain Experts Meet to Discuss ICO Regulation

Members of the European Parliament

along with blockchain experts met Tuesday, September 4, to discuss possible regulations for Initial Coin Offerings (ICO). At the recent EU event entitled “Regulating ICOs — Is the Crowdfunding Proposal what we were looking for?” the attendees examined the potential complications currently arising in the ICO industry. Ashley Fox, a British Member of the European Parliament, pinpointed three main issues to consider at the meeting: challenges faced by ICOs in raising capital, the existing regulatory approaches on the matter, and the future perspectives of the industry.

In his testimony, Peter Kerstens, chairman of the the European Commission's Taskforce on Fintech, pointed at the “dramatic increase” of ICOs’ volumes in 2018, despite the increasing number of reports on fraudulent ICO projects. According to Kerstens, the growing figures mean that ICOs are “very interesting and promising vehicle instruments” for raising capital. Kerstens stressed the fact that while the ICO industry faces mainly similar problems with other traditional funding activities, it is still different in terms of the amount of money that can be raised. As a major benefit, Kerstens stressed that while it is “extremely hard to raise millions of euros for a startup,” it is “not that hard” for an ICO project.

Addressing the issue of the main differences between ICOs and crowdfunding, Kerstens stressed the fact that ICO tokens are not “intermediated,” which means there is no third party between issuers and investors, posing the main subject of concern. According to Kerstens, most of the aspects of ICOs “cannot be covered by crowdfunding proposals” due to the multiple differences between the industries as well as the uncertain status of ICOs as financial instruments, among other reasons.

Turning to the question of ICO regulation, Aeternity’s global communications expert Julio Alejandro has provided a “very original contribution,” claiming that there is no way to stop an ICO project from creation except by banning crypto exchanges. Alejandro claimed that “you can complain, you can cry, you can believe,” but “the only way that you can actually stop an ICO from creation is stopping an exchange,”

adding:

“Whenever you want to stop the diffusion and relocation of information, how are you gonna stop it? Are you gonna ban USBs, the computers? What exact are you gonna ban? You’re banning knowledge.”

Alejandro then stressed the benefits of the ICO industry that are highly valued by the crypto community, such as an ICO’s anonymity, borderless character, mutual transparency, and ability to operate without an intermediary. Alejandro further stated that if any centralized organization “tries to regulate ICOs in some sense,” the industry would become “obsolete” from its technical perspective.

On September 7, economic and financial affairs ministers from the EU’s 28 member states are set to hold a meeting on the challenges posed by digital assets and the possibility of tightening regulations. The event, scheduled to take place in Vienna, Austria, will discuss the main issues around crypto, such as tax evasion, terrorist financing, and money laundering.

Article Produced By
Helen Partz

Helen is passionate about learning languages, cultures and the Internet. She has years of experience working at international online advertising projects. Growing interested in Bitcoin and cryptocurrencies in late 2017, she joined Cointelegraph as a writer.

https://cointelegraph.com/news/european-parliament-members-blockchain-experts-meet-to-discuss-ico-regulation

The baroness, the ICO fiasco, and enter Steve Wozniak

The baroness, the ICO fiasco, and enter Steve Wozniak

Baroness Michelle Mone

Baroness Michelle Mone

Earlier this year, we brought you news that Scottish lingerie entrepreneur-turned Conservative peer Michelle Mone and her businessman boyfriend Doug Barrowman were launching an initial coin offering (ICO). The plan was to raise money for a token-based crowdfunding venture, EQUI Capital. But the project has ended in a fiasco that exposes the total absence of oversight in the ICO market, and in particular the lack of protection for those at the bottom of the crypto, er, FUDchain: “bounty-hunters” — essentially online marketers who promote ICOs on social media and across the internet, supposedly in return for digital tokens.

EQUI told us in February they hoped to raise up to $80m. Even if they raised less than that, the token offering would be “going live” no matter what, Barrowman said. Lady Mone of Mayfair, OBE, calling herself “one of the biggest experts in Cryptocurrency and Blockchain”, told Business Insider that she and Barrowman were staking their “incredible reputations” on the ICO and that there was “no way [they were] going to do anything untowards (sic) to let these people down”.

The reassurance might have been welcome, because initial coin offerings are effectively an unregulated way for companies to raise money from the public, bypassing securities laws designed to protect investors through the use of so-called cryptocurrencies. Regulators may yet step in, with those in the US indicating the rules still apply to what are securities in all but name. For now the ICO boom has prompted a flourishing in the number of businesses offering tokens, with more than $6.8bn raised so far this year alone, according to icodata.io, which tracks the market.

The EQUI ICO didn't go quite to plan, however. It isn't going live, and lots of people seem to be feeling pretty let down. (But as you will see, dear reader, we wouldn't want to say it failed, because EQUI are watching, and they're going to tell our editor, and we might get sued.) After launching a two-week pre-sale a on March 1, with a minimum required investment of $100,000, EQUI put out a press release on March 6 boasting that it had raised a nice, round $7m “in only a few days”.

Barrowman said in a statement at the time:

Trading has been frenetic, with investments ranging from the minimum hundred thousand dollar threshold up to a solid couple of million per investment.

Then, having still only apparently raised $7m on March 30, EQUI announced the “good news” that it would be extending the public ICO — minimum investment $100 — until June 30 (having originally planned to close it on April 12). By the end of June, the total amount raised still seems to have been stuck at $7m. At that point, EQUI decided to abandon the ICO idea altogether and to relaunch, on September 18, as “EQUI Global”. It is still promising to be the “ULTIMATE DISRUPTOR TO TRADITIONAL VENTURE CAPITAL INVESTING”, the logo looks the same, and the founders are pretty much the same — Mone, Barrowman plus one other “soon to be announced” (more on that below). But there is no initial coin offering.

The ICO World Of Business is a very strange place of doing business

EQUI explained, via email:

Our Founders are conventional business people with a track record of over 300 years in business between them. They have all found the ICO World Of Business a very strange place of doing business with some very alarming things going on. Therefore we will not be doing an ICO going forward and instead we will be focusing on our Token Blockchain technology.

We asked how it was possible for the founders to have a track record of “over 300 years in business” given that there were only two of them. That must have been a typo, we were told — actually that figure also includes the advisory board, of whom there are four members (apparently very sprightly-looking 90-year-olds):

Here's the breakdown of the $7m EQUI says it raised (emphasis ours):

Our short ICO raised a total of 843.33 ETH. In addition, a consortium of private investors who are known and work directly with members of the EQUI management team pledged $6 million USD. This was the $7 million that was earlier reported. A consortium of private investors who are known and work directly with members of the EQUI management team pledged $6 million USD.

It's unclear just how close the “consortium” of investors is to the EQUI management team. But the statement appears somewhat inconsistent with the earlier one about “investments ranging from the minimum hundred thousand dollar threshold up to a solid couple of million per investment”. On top of the $6m, EQUI's “short” four-month-long ICO raised ether, a popular cryptocurrency, worth about $250,000 at current rates. (At the ether rates back in March, when this $7m was first announced, the ether was worth about $700,000.)

When we suggested that according to their numbers, no money at all had been raised between the “frenetic trading” of early March and June 30, we were told that the pre-sale had in fact raised “between $6.5m and $7m”, and that the 843.33 ether had been raised in the public sale. Thus the $7m originally announced grew to… $7m. Rounding, huh. Barrowman told FT Alphaville when we spoke to him earlier this year that he had spent a “seven-figure” sum on the project since beginning in summer 2017, though it's wasn't exactly clear what that money referred to. Either way, the paltry $7m EQUI had raised — less than 10 per cent of its target —

then started to ebb further. Here's EQUI:

At the time of stopping our ICO, we at EQUI did something that very few ICOs or projects do when they change the project fundamentals. We offered full refunds to those that wanted to rethink their investment into the project. While fewer than 40 investors took us up on this offer, the consortium, brought in privately has pulled back their $6 million investment as they are waiting to reassess the project and changes that are actively being made. This is to ensure compliance with regulatory guidelines of the fundamentals of EQUItoken and its potential classification by the regulatory boards governing the EQUI project as a security.

A total of 57.8 ETH was returned to investors who requested a refund. This means that a total of 785.53 ETH was raised via the ICO. 

Some were refunded without their consent. When we asked about this, someone who wanted to be described only as an “insider” told us that first of all investors were told they would be refunded. But, as not all of them had wanted a refund, the “sophisticated investors” were allowed to stay on, while the others were refunded, the insider said. It is these sophisticated investors who will now be allowed to participate in the new EQUI venture which, as we've seen, focuses on “Token Blockchain Technology”, but is strictly not an ICO according to the company.

The reason for the change in tack after the wildly successful and not in any way failed ICO, our insider told us, is that — as has been reported in the crypto-press — an Apple co-founder called Steve Wozniak is to join the company, and will become EQUI's third co-founder. He didn't want to be part of an ICO, and “he’s come up with a different way of doing it”, we were told. Woz told CNBC in June that he wanted bitcoin to become the single global currency because “that is so pure thinking” (the whole video is worth a watch).

The most miserable cryptojob of them all

A dispute has broken out — reported first by Scottish politics site Wings over Scotland — over how much the “bounty-hunters” we mentioned before should be paid, given that the ICO no longer appears to be going ahead. It highlights another aspect of the ICO world. Unlike, say, the highly legalistic prospectuses produced for securities offerings in the traditional financial system, the legal status of the promotional documents associated with coin and token offerings remains untested.

In EQUI's original “White Paper” it was written, under “token distribution”, that “2 per cent will be available for Bounty Rewards”, with a pie chart to illustrate that as a proportion of the total supply: Given that the price of one of these tokens was $0.50 and there were to be 250m tokens, bounty-hunters say they were expecting to share a pool of $2.5m, and indeed this is what was said in EQUI's

Bitcointalk group for bounty-hunters:

A total of 2% ($2.5M) of the total token supply will be assigned to the Bounty Pool.

EQUI say they were not responsible for the post but we understand that it was reviewed by them before it was posted by the company managing the bounty programme, as is standard practice. In a later Bitcointalk post, we find similar wording: “A total of 2 per cent (5,000,000 EQUI) of the total token supply will be assigned to the Bounty Pool.” But EQUI seem to be a bit confused about what that 2 per cent meant.

They told us, via email:

The Bounty community only raised $2,000 between them all and should only be getting paid out $40.00 but as a gesture of goodwill we have decided to pay them out on the full amount raised after eu finds [sic — we think they mean refunds] which is over $10,000.

As such, 2% of this amount was originally promised to the bounty pool, this is our legal contract with the Bounty agency. This constitutes a bounty pool of 15.71 ETH. We at EQUI are 100% transparent and will offer complete records and TXID’s to verify this. As it was EQUI’s decision to stop our ICO to show appreciation for Bounty hunters hard work and dedication to the project we will be increasing the reward for the bounty payout from 2% to 5%.

So in the first paragraph, they tell us that the bounty-hunters raised just $2,000 between them, and that they should therefore only be given $40 to divide between themselves (2 per cent of $2,000). That seems strange; bounty-hunters are not meant to be “raising” money per se. Rather, they are effectively online street teams — typically from low-income regions of the world — who are paid a certain amount of tokens for each task they perform, such as sharing promotional tweets and posts on social media, adding their logo to their online “signatures”, creating videos and writing puff pieces for the ICO they are toiling on behalf of.

But EQUI says all the money it raised except for $2,000 — again a nice round number, which is apparently an “estimate” — came from its own contacts, and that therefore the bounty-hunters should really only get a share of this tiny amount. Confusingly though, in the second paragraph above, EQUI seems to be saying it had a “legal contract” in which they promise that 2 per cent of the total raised after refunds — so the 785.33 ether — should go to the bounty-hunting pool. That would be 15.71 ether, currently worth just over $4,000. But as a “gesture of good will”, they've decided to increase that to just under 40 ether, or about $11,000.

Because of lax KYC checks in such schemes and therefore the possibility that people register more than once, it is difficult to know how many real people were involved in this bounty-hunting effort. EQUI say between 1,000 and 1,500 while AmaZix — the company that was originally managing the bounty programme but who stopped working with Equi back in May, citing “irreconcilable differences” — said there were 7,600 unique usernames in the bounty. Either way, $11,000 doesn't seem like a very big pool to share among them.

“Police can track you down”

We spoke to several of EQUI's bounty-hunters and were shown Telegram messages. When they complained about the amount there were getting paid or the way they were being treated, EQUI threatened them with lawyers if they “bad-mouthed” the company. One Telegram message sent to a group of bounty hunters said “police can track you down if you threaten & track and bad mouth our brand name”; another sent the same day said “you are all so stupid”. EQUI declined to comment on the messages. That a peer of the realm's business appears to have threatened criminal consequences for people encouraged to take part in its unregulated investment scheme is, if nothing else, a bad look.

One bounty-hunter, Maksim Koselev, a 29-year-old Russian warehouse worker, told us he had spent about 10 to 15 minutes per day, seven days a week, promoting EQUI online for the months during which the ICO was running, which included writing two promotional articles about the company in Russian. He's worked as a bounty-hunter for more than 100 ICOs, he said, and apart from the exit scams — where those raising money disappear with the funds they have raised — this is the worst experience he's ever had. He, and others, said bounty-hunters should have been paid 2 per cent of the $7m Equi raised, particularly given that EQUI is still planning to raise money from investors.

He told us:

We’ve been thrown out of the window with this… This is not the way you talk, even to bounty-hunters. They treat people like nothing.

Our experience of interacting with EQUI has also been a bit… strange. When we contacted the company via its website we were replied to by Baroness Mone's press officer, who offered us a “deal on an exclusive”. When we asked some questions about the bounty-hunters' complaints, we were told that “anything that is written that is defamatory to EQUI or our founders we will take severe action”. Not only did Equi copy in their lawyers, but all this came with a “UK parliament disclaimer” at the bottom, a nice reminder this was a member of the upper house of the British parliament we were dealing with.

EQUI's solicitor Paul Tweed — a celebrity media lawyer so renowned that the New York Times dedicated a whole story to him earlier this year, who has represented everyone from Sylvester Stallone to, er, Britney Spears — was copied in conspicuously to emails, as was Egg Media, a PR company “specialising in crisis management, corporate brand and individual reputation”. These are well-connected people who seem to know what they're doing and don't appear to be struggling for cash.

“We are watching your every move”

In an email on Monday, we were told:

All Bounty people have now been paid from their agreed contract from 2% to 5% as a gesture of goodwill.

To check the bounty participants had received the cash, we sent a message to the Telegram support group asking if members had received anything. We were told no one had yet been paid, as it turned out. EQUI later said it had paid the money to a third party, who will distribute this to bounty-hunters shortly. But straight after we'd sent the message to the group, things got creepier. EQUI Support got in touch on Telegram with the following:

We at Alphaville have a history of frustration over the baroness's media team's antics, but telling us that our every move was being watched kind of felt like another level. We look forward to learning how EQUI Global can be relaunched in a way which isn’t an ICO, given its business model was built around the tokens it hoped to sell. It seems that yet another Conservative parliamentarian has learned that dipping one's (cryp)toes into the murky waters of ICOs can be a rough experience.

Article Produced By
Jemima Kelly

Jemima Kelly joined FT Alphaville in April 2018. Before that she wrote about the foreign exchange market, cryptocurrencies, and fintech at Reuters. She also had stints there writing about the asset management industry and pensions. She covered the BP oil spill from Louisiana, and the Brexit reverberations from a muddy field in Glastonbury.

She got her start by sneaking into The Economist as a “corrector”, then moonlighting as a reporter, travelling to Myanmar to write about its literal and political landmines. She once perused every issue of The Sun between 1979 and 1990 for her history dissertation, “What a pair! Page Three and the Thatcher Years”. Before university she pursued a career in music. She still sings and writes songs. Jemima is interested in cryptoeconomics (sorry), technology, philanthropy, the ideas industry and pseudo-religions, index investing, and the media.

https://ftalphaville.ft.com/2018/09/03/1535947200000/The-baroness–the-ICO-fiasco–and-enter-Steve-Wozniak-/