ICO Submission to the Australian Treasury – Why ICO should stand for “Illegal Coin Offering”
By Aleksandar Svetski, CEO of Amber Labs
This article is an extension to a submission the authors have made to the Australian Treasury during their information-gathering process.
We believe it’s critical for people to better understand what really happened during this mania, the skewed incentives that resulted and the ramifications of this blind excess. The ultimate aim is to help ensure something this deranged does not happen in a space with so much promise.
Please also note: Rory and myself are both 100% for free markets, choice and people’s right to do what they want — so this is not some request for socialist compensation.
This is an exposé.
The goal is to wake people up, and hopefully encourage some accountability in the space. Anyone considering an ICO should read this, and realise that what you’re thinking about is likely the wrong way to go about it. Anyone who’s done an ICO should take serious note. You’ve likely done the wrong thing, and whether your malevolence was intentional, or due to your incompetence, you should also be held accountable — whether legally, financially or reputationally.
The world needs some more skin in the game. Let’s hope this is a start.
Feedback is much appreciated, as is sharing this article broadly. It is applicable not only in Australia, but worldwide.
In all of our collective experience, having been involved the Bitcoin and the cryptocurrency space, the capital markets, early-stage technology startups, and seed-stage fundraising, we believe to the best of our knowledge that the ICO fundraising model is at best misleading with borderline deceptive conduct, and at worst; blatantly fraudulent.
Why this is the truth is not entirely black and white, but in order to make the case, we will demonstrate how ICO’s have largely failed almost all participants, and further how those ICOs have been merely used as a Rube Goldberg machine to circumvent securities law and investor rights.
We first need to make the legal distinction that a participant funding an ICO is an “investor” and that the rational majority are only “investing” for the potential to profit. Thus, similar rights should apply as to all securities in terms of investor rights, equity, transparency, and information sharing between “fundraiser” and “investor”.
We must then also acknowledge that many of these ICOs willfully engaged in unethical marketing practices in order to entice “investors” and “speculators”, and not to actively seek potential “users”, achieving this by utilising popular cryptocurrency “influencers” to attract big-dollar “investments” from technically uninformed Australians.
Many “investors” were ironically unaware that they were even being marketed to, and that these “influencers” were paid for their services, as yet no marketing standards have been enforced in this space. The #AD laws regarding advertising standards to be upheld by influencers has been liberally disregarded in the cryptocurrency market to its detriment and the detriment of “investors”.
This deceptive behaviour has facilitated many uninformed “investors” to make extremely large, uninformed, “investments” into projects that will likely never eventuate. And, even if they eventuate the “utility tokens” may still be next to worthless due to being largely pointless. Most “investors” in Australian ICOs have lost their shirt, their pants, and their dignity, all for a zero-per-cent equity gift to fundraise a project that doesn’t actually need its own native “utility token”.
In this unethical fundraising model, the “investors” wear all the risk of an asymmetric “investment” and the “fundraiser” is exposed to almost none. The “investors” for taking this risk are given absolutely no rights, no transparency, no equity, and no legal recourse. On the other hand, the “fundraiser” is given access to extremely lucrative capital raising with little to no recourse, no need to give up any equity, no need to be profitable, or efficient, no need for transparency with “investors”, and absolutely no need to even deliver a successful project.
To read more, please click on the link below…