
Investor Bulletin, July 25: Initial Coin Offerings - AdamFernandez
https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_coinofferings
======
TheAceOfHearts
I don't have anything to add to this discussion, but I just wanna say that I'm
impressed by the bulletin's clarity. I'm used to reading government
information that's difficult to parse and dive into. It's easy to fall into a
belief that government agencies don't really know what they're doing, and it's
just a bunch of monkeys banging at typewriters, but seeing clearly written
posts discussing current and relevant events helps to silence those beliefs.

I'm seriously wondering, though... Have there really been that many ICOs? As
an outsider the general impression I get (which I recognize might be
completely inaccurate) from most coins is that they're "get rich quick"
schemes.

A while back I was trying to read up on Ethereum, and despite their nice
landing page and superficial info.... Once I tried digging in further into the
actual code and actually running any stuff, it was a horribly confusing mess
that made me hesitant to put my trust in them. All their docs and wikis seemed
full of outdated links and information.

~~~
ttul
$1.7B has been raised so far this year... it's a big deal.

~~~
omarchowdhury
There are single Silicon Valley startups that have raised that much though.

~~~
the_stc
In 7 months?

~~~
kbody
Also with pretty much no due diligence, rarely any prototypes and a majority
of infeasible promises.

------
bpicolo
> Ask whether the blockchain is open and public, whether the code has been
> published, and whether there has been an independent cybersecurity audit.

That's an entirely prescient statement that suggests the SEC has done a
serious bit of homework and has put careful thought into the subject.

~~~
Animats
Not prescient, real. There have been ICOs where the blockchain wasn't running
yet. That's just a "send us your money" scam.

~~~
itsnotlupus
Annoyingly enough, that's not sufficient to make those ICOs scam.

The easiest counterexample would be Ethereum itself, who had a teenager as its
public face, and raised large amounts of funds on top of mostly just a
whitepaper, yet turned out to actually deliver all the crazy stuff they
promised.

~~~
dgfgfdagasdfgfa
> deliver all the crazy stuff they promised.

I dunno; I'm still trying to figure out whether it's a great idea or the worst
idea. I don't want to have to do a code review on my investments; at large
enough scale, lawyers are way cheaper than losing money.

~~~
dsr_
Lawyers perform code review on contracts. Sadly, they don't have debuggers or
reference compilers, just written language definitions and consultable output
collections.

~~~
dgfgfdagasdfgfa
> Sadly, they don't have debuggers or reference compilers, just written
> language definitions and consultable output collections.

Why on earth would you want this? That's tantamount to replacing the court
system itself, and I definitely prefer juries and judges to compilers and
debuggers.

~~~
sbierwagen
Whoosh

------
anton_tarasenko
The SEC uses quite a mild language here. Issuers often avoid mentioning even
what they sell: revenue flow, profit, or just hashes. White papers has no
traces of legal entities involved, dispute resolution jurisdiction, financial
statements.

A proper prospectus:

\-
[https://www.sec.gov/Archives/edgar/data/1447599/000119312515...](https://www.sec.gov/Archives/edgar/data/1447599/000119312515222454/d875679ds1a.htm)

And how ICO white papers look like:

\-
[https://detectortoken.com/docs/DetectorToken_White_Paper.pdf](https://detectortoken.com/docs/DetectorToken_White_Paper.pdf)

\- [https://magos.io/bluepaper.pdf](https://magos.io/bluepaper.pdf)

~~~
aaron-lebo
The cryptocurrency community is hilariously bad (well, it would be funny if
people weren't getting fleeced) about putting blog posts through Latex and
acting like they've written a "paper".

The people who have written dozens of real papers that end up in a dustbin
somewhere are jealous. The funny thing is most of these docs would be more
accessible as blog posts, but those don't provide the same faux-academic thing
con men need.

Not sure if they're actually that amateur or it's more cynical and they know
it's the way you do business - probably both.

~~~
Snackchez
The reason some ICOs release a white paper in LaTeX is that there is often a
lot of math to be written out. Take for example IOTA's white paper:
[https://iota.org/IOTA_Whitepaper.pdf](https://iota.org/IOTA_Whitepaper.pdf)

Often, it's easy to spot the ones that are doing the faux-academic thing.

~~~
tekromancr
IOTA's paper was what I was thinking about while reading OPs remark about
blogpost to LaTeX conversion.

I'm not sure if I'm dumb, or its dumb (trinary, whaa?) but I had a really hard
time getting through it without rolling my eyes a whole bunch. I still have 77
MegaIOTA, just in case someone ever figures out a use for it.

------
jjn2009
This seems pretty reasonable and is the same conclusion which the DAO
investigation came to. I think both ICO creators and participants will benefit
from this new information now that we have a clear line in the sand as to how
these things can operate. The risk won't decrease substantially in buying
these tokens, these projects can go bust just like a kickstarter project can
fail but at the very least people in the US will think twice about running
outright scams.

It has been recently suggested that the SEC may go after exchanges which hold
any ICO token regardless of how it was sold and advertised, I'm pretty sure
they don't want to go that far, this will only push exchanges into
decentralized systems which are difficult to shutdown. There has to be some
give and take on both sides here really.

------
andrew311
I wrote an in-depth analysis of this bulletin and its associated report on The
DAO:

[https://medium.com/@andrew311/thoughts-on-the-secs-
initial-c...](https://medium.com/@andrew311/thoughts-on-the-secs-initial-coin-
offering-bulletin-and-investigative-report-3e3197d08878)

In the post, I explore what constitutes a security by examining case law and
draw comparisons to other means of raising money for companies that are
typically outside the purview of securities (gift cards, Kickstarter).
Hopefully this helps provide perspective.

~~~
Animats
Not written by a lawyer. This really needs an analysis from a securities
lawyer.

The SEC concluded that the DAO was a security, but that they were not going to
take action on it. That's within their discretionary authority. They may
simply decided that they weren't going to go after this issue retroactively.
They've now published some guidance on the subject, so future issuers can't
claim there were no rules in that area.

Expect the SEC to go after somebody who does an initial coin offering and
converts the money to their own use, without generating any benefit for the
investors.

~~~
andrew311
Correct, the analysis comes with the disclaimer that I am not a lawyer, and it
is not legal advice. I am active in the space and have consulted leading
lawyers for my own activities, so I come with some knowledge, but obviously
this is a quickly evolving space.

For anyone buying tokens and considering SAFT offerings, this is a good read
from a securities lawyer, albeit an English one (not US):

[https://prestonbyrne.com/2017/08/04/thoughts-on-the-
saft/](https://prestonbyrne.com/2017/08/04/thoughts-on-the-saft/)

This is also a great post in terms of highlighting pitfalls and challenges:

[https://medium.com/@twobitidiot/losing-alpha-why-most-new-
cr...](https://medium.com/@twobitidiot/losing-alpha-why-most-new-crypto-funds-
are-a-sh-t-deal-98ea0013971a)

------
mthoms
Related thread: [https://www.sec.gov/news/press-
release/2017-131](https://www.sec.gov/news/press-release/2017-131)

------
deep_concern
It seems like Golem compute tokens would not be considered securities, but
what about obvious joke coins that are only a value store, like the FUCK
token?

~~~
mschuster91
Reminds me of Dogecoin.

~~~
WikipediasBad
Hey now, I own millions of dogecoin still from mining them in my college dorm
when the electricity was flat rate. :P

------
narrator
Has anybody actually gotten paid dividends on any icos yet?

~~~
Postscapes
TAAS and ICN both have paid dividends via burning or depositing holderd

------
spraak
Can a mod add "July 25, 2017" to the title? It's not that long ago, but I
thought this might be new.

~~~
sctb
OK, we've updated the headline to clarify.

------
SoMisanthrope
Sincerely hope that people are paying attention. The SEC is as omnipotent as
the IRS, in so much as they can make your life a living hell... in very short
order. Recommend that people register their securities or currencies with
them... besides, registration gives your product the scent of legitimacy,
right?

