
Ask HN: My company plans an ICO despite my opposition as CTO, any advice? - anononpurpose
I&#x27;m really sorry for creating a new account to stay anonymous. Feel free to ban this one if it is considered misbehavior.<p>Having that said, you can read the full story on my first comment below.
======
anononpurpose
I'm in my late 20s. It's been almost 4 years since we founded our startup
company. We pitched for a year and eventually gathered enough investment to
give it a go. The initial plan was to release our app in the local market
(middle east) and aim for more users. At the end of first year, with the
approval of the board, we decided to delay marketing spending for more
development to polish existing features as well as to add more ones. We
revoked one feature (not ads) which would provide early cash flow as it turned
out to be too ambitious and rash.

We pivoted and decided to go global with our proven to be fun features
highlighted. It went smooth and retention rates grew tremendously until
finally the day for series A arrived. The lead investor (the one with the most
equity) already hinted that he would be willing to invest, some others
followed as well. They are all angels btw.

Mails exchanged, meetings happened, places were visited and it turned out what
we can gather is not enough to handle marketing costs for aimed growth. We
contacted people from crowd equity funding companies. Apparently, none of them
is currently accepting applicants from our country.

During our last meeting, the board discussed the idea of an initial coin
offering. Some of our investors are crypto enthusiasts and many of them think
it is a good idea to fund a project publicly with tokens. The thing is, our
product doesn't resemble anything like a currency, not even a commodity in my
opinion. It sounds unnaturally arbitrary to have tokens inside our app, or a
token with our app's branding on top. Moreover, as someone who is the most
technically proficient person in the board, I can easily deduce that all the
proposals about hows and whys of the ICO resembles an obfuscated fraud. I
couldn't believe what I heard that day and it seems I am the only one who
thinks that way.

I plan to spend my all remaining days until the next meeting to prepare the
hugest report ever written, hoping it will prove that it is the worst idea we
ever discussed. As my voting rights being limited, I have no idea what to do
if my report doesn't stop its happening. I still need to work for a year to
permanently gain rights on my own equity. If I quit now, I'll lose everything
except the lessons learned during these 4 years.

My question is, what would you do?

~~~
blueadept111
Here's an opposing view, from someone a little older and maybe a little wiser.
In the big scheme of things, you're not that important. Your company is also
not that important, and whether or not your company chooses to adopt this coin
is not that important. If it's a "fraud" by your definition, then many, many
other coins (and companies, for that matter) are also fraudulent, and it's not
a very important fraud, so don't worry so much about saving the world from it.
If you have any interest in working on blockchain technology, go with the
flow. Leverage what skills and advantages you have in your life, don't burn
bridges, and especially try to keep from burning your bridges because of ego
issues. Remember, you're not that important. But you are important enough to
do what you enjoy, important enough to have people in your life and career who
look out for you, and important enough that every single day you learn
something or work on something that progresses your ambition in some way.
Maybe this coin offering can be a part of that and maybe not, but the answer
is more likely to be found within your own psychology than the details of this
particular technological/business crossroads.

~~~
actsasbuffoon
Or maybe they actually see something that other people are failing to see.

I was in a position like that a few years ago. A manager a few levels above me
had done a severely flawed study, and proposed completely restructuring our
company's revenue model based on the results. He pitched it to us before going
to the executive team. I pointed out that his numbers were too small to
achieve statistical significance, and he was inconsistent in how he calculated
the key metric in the study.

Another engineer in the room indicated that they were also concerned that he
was proposing a massive change to our company based on very shaky evidence.
Other people mostly sat quiet, too scared to make the manager angry.

And indeed, he got pretty pissed. He pretty much told me to shut up, and I let
it go. I really wish I hadn't, because the results were even worse than I'd
imagined.

He took it to the executives who loved it, and promptly restructured the
company. We lost 2/3 of our revenue almost overnight. Investors were furious,
and many of them sued us. Most of the executives were forced out, and the
company was sold off for a tiny fraction of its previous value to one of our
competitors.

The acquisition didn't go well. A lot of my co-workers lost their jobs in the
process. I was fine because I saw the writing on the wall, and I started
interviewing almost as soon as that disastrous meeting adjourned. I was long
gone by the time the hammer fell.

I feel really shitty about being bullied into silence. I saved my own ass, but
dozens of people lost their jobs. I could have fought harder for them. Yeah, I
probably would have made things worse for myself, and I might have even gotten
fired. I still feel like I did the wrong thing.

~~~
stevewilhelm
I would recommend pointing out errors one on one, not in a meeting of a
manager's direct reports.

In this one on one, I would feign having trouble understanding the model and
ask the manager to walk you through it in more detail so you can understand
it. During the review, ask some pointed questions that will lead the manager
towards the error.

In many cases while explaining the model in detail, the manager will discover
the error on their own.

This approach allows the manager to save face. Many times, the manager will be
very relieved and many times they will realize you knew there was an error all
along.

~~~
hugs
I like this approach. It sounds like a play right out of "How to Win Friends
and Influence People". But... This also needs a good chunk of maturity and
trust in both the employee and manager. Doesn't mean don't try it, but also
don't be surprised if it doesn't work.

~~~
sasas
It plays out exactly as described in "Crucial Conversations: Tools for Talking
When Stakes Are High"[1]. Recommended.

[1] [https://www.amazon.com/Crucial-Conversations-Talking-
Stakes-...](https://www.amazon.com/Crucial-Conversations-Talking-Stakes-
Second/dp/1469266822)

------
gumby
#1, if you think the company is going to go ahead with something fraudulent,
leave. This has nothing to do with your CTO role -- applies to any job at any
company.

#2: is it fraudulent? Some people think all ICOs are fraudulent, some
reasonable people may disagree. If you think all ICOs are fraudulent, see #1
above. Or if you think they are legit but this one has fraud in it, ditto. But
(not knowing the situation) you may be overreacting.

#3: Sticking tokens into the app may simply be a dumb business decision, but
not actual fraud. It's OK for you to disagree with a business decision, but if
you don't agree with the direction, at the end of the day too bad. "CTO" can
mean a lot of things but it's rarely an executional job -- most often it's
"chief talking officer". So your opinion counts, but shouldn't be decisive. If
you decide "well, OK it's not fraud, just bogus" you have to stop complaining
about it OR leave.

Finally...lots of good ideas look weird from a technical basis. I thought
YouTube was weird: why sort content by media type -- shouldn't a video about X
be part of a web page about X? I thought the Apple II was weird: who wants a
home computer you didn't design and build yourself? Clearly I was wrong!

But if actual bad behaviour is the plan, do leave, even if you think they will
get away with it.

~~~
AlexCoventry
Fraud is not the only issue. OP needs to assess what his liability will be if
the SEC concludes that the token is an unregistered security and demands that
the company return all funds to investors.

~~~
wslh
Companies doing responsible ICOs should seek legal advice and this is part of
the cost.

Disclaimer: my company does ICO campaigns, assesment, development, and
security audits, but we add external lawyers to the loop.

~~~
scoot
/disclaimer/disclosure/

When you disclose somthing, that's a disclosure.

~~~
wslh
Thank you! My fault. The edit option for the comment expired.

------
alrs
Being a corporate officer means getting-the-fuck-out-of-Dodge the moment
things get questionable.

Check out "STRICT LIABILITY FOR CORPORATE EXECUTIVES" on page 3:
[http://www.nortonrosefulbright.com/files/20160801-criminal-a...](http://www.nortonrosefulbright.com/files/20160801-criminal-
and-civil-liability-for-corporations-officers-and-directors-142383.pdf)

~~~
metafunctor
OP is in the middle east, so the linked document is probably not relevant.

However, similar laws do exist in many countries.

~~~
busterarm
It will affect them if they plan on traveling to the United States...ever.

------
__abc
I and fellow colleagues had to do this once. As a founder I gave up 7 years of
building that company due to some really unethical moves by the CEO.

At the end of the day, as a c-suite officer, I would have been liable by being
complicit.

Once I stated my objection, I and my fellow c-suite colleagues went to the
board with our objection, and CEO decided to continue executing the unethical
behavior, I and a few of my c-suite colleagues all bailed. That sucked hard.

PS. That signal from us leaving ended up preventing the securities fraud that
was about to happen.

~~~
otoburb
>> _I and my fellow c-suite colleagues went to the board with our objection,
and CEO decided to continue executing the unethical behavior, I and a few of
my c-suite colleagues all bailed. That sucked hard._

Your board should have taken action against the CEO if the behaviour or
decision was indeed unethical. Allowing the CEO to proceed means the deck was
stacked against the rest of you. Sounds like those of you that resigned in
protest made the right decision.

------
eldavido
My .02 on this:

You've already lost. The decision has been made, they're moving ahead, and
it's clear (a) you can't change their minds and (b) you aren't onboard with
it.

You should treat this as a learning experience about decision-making and
corporate politics.

Put aside the technical issues and take some time to consider the people
issues. Who is the decision-maker? What is his/her motivations? How are
decisions made in your organization - top-down, consensus, debate, face-to-
face, etc? What role did you _think_ you should have in making this decision,
and how did that differ from the role you actually had? How do you feel about
all of this?

Maybe you felt this was your decision to make, or should've been given more
weight/input on the decision. This is a relationship problem. You don't have
the role you want with the others.

Another view might be, you were consulted but ultimately you weren't the top
decision-maker in the org, the decision didn't go your way, and you need to
either (A) get onboard with it or (b) leave.

It's very reasonable to want out at times like this. Don't do anything rash,
but if you can't get onboard with this decision and really do object to it,
leaving this organization might be your best bet.

It's important to realize, when you aren't the head person, there are some
things that aren't going to go your way. You can argue and fight and debate,
but ultimately, a decision has to be made, and it might not be the one you
want, but you have to either tow the line, or leave, doubly so as an
executive. As bad as this situation is, it's way worse to have a bunch of
people who can't agree, and decisions not getting made, than MADE decisions
that don't go your way.

If you truly have ethical or legal issues, you should get out. You're young
and will move on to something else quickly. But I think this stuff (ICOs and
coins in general) is grayer than you might think. There's a lot of gray
between 100% upright business practices and fraud, and you're somewhere in the
middle.

~~~
rmah
Given the OP's description of the situation, I strongly agree with eldavido.
Both his assessment that the time to convince them to step back is past, how
to think about the current situation, and how to handle subsequent events
seems spot on to me.

------
pbnjay
I would collect a list of every ICO fraud story in the press, and just ask if
your board wants to be added to the list (whether officially or in the social
zeitgeist).

I would also ask the board how many examples they can find of companies who
did an ICO, and were later successful.

Also, I'd be looking for a new job... Even if they listen now, it doesn't
sound like good leadership.

Edit to add: Your equity is only worth something if the ICO works. If there's
no ICO and you still can't find investors, your equity is also worth nothing.
I wouldn't even consider it...

------
gwbas1c
If you don't believe in the technology that you're developing; run. A company
should never develop technology against the better judgement of its CTO.

That being said: Using things like blockchain to represent stock ownership;
and using crowdfunding, are great ideas. They just don't replace the fact that
your company needs a viable business plan, paying customers, and actual
investment.

Things like an ICO are like the old story from the 1990s about a lumber
company changing its name to "lumbar.com" because there were plenty of fools
trying to invest in anything related to the internet.

So, even though this is new technology, how is it relevant for your business?
Crowdfunding is great for funding artists, and great for swindling unsavy
suckers. Blockchain technology is still too primitive to represent ownership
for a run-of-the-mill company; even for a run-of-the-mill "tech" company. Why?
Because the tech of blockchain will be too much of a distraction from building
your real business.

Anyway, when I read your details, I see a startup that's not going anywhere,
and is considering an ICO out of desperation. It's probably time to assess if
your company is viable or not.

If you're going to leave, don't try to be too diplomatic. Be frank with your
board, "I am leaving because I do not believe that our company is viable. An
ICO is a distraction from finding a viable business model and savvy investors.
Blockchain / ICO will be a useful technology in the future, but at this time
it's too immature and will be a distraction from building our business and
product. I recommend that you concentrate on the shortcomings of the business
and its product."

------
tokencomments
I'm surprised there isn't a single person here advising you to stay and figure
out something that the token can be used for in your app. This is exactly the
type of software and product design decision that a CTO should be doing, and
you might even be proud of the result if you come up with a good idea, not to
mention the potential financial benefits. Maybe it's a little flaky, but it's
not fraud if you tell everyone what the token is and what it's used for
beforehand.

------
Obi_Juan_Kenobi
Most ICOs are deeply unethical in the sense that they exist only to circumvent
traditional funding regulations, and not because they actually utilize cypto-
tokens for their business. If you feel that this describes the plan, I would
absolutely back out. It may not currently be illegal, but chances are it will
be. It certainly does not reflect well on the business.

~~~
CryptoPunk
>>Most ICOs are deeply unethical in the sense that they exist only to
circumvent traditional funding regulations

Care to explain what makes this unethical? What if you think these regulations
are unethical?

~~~
ThrustVectoring
Then work to reform the regulations. There's a perfectly consistent position
in thinking that the circumvention of unethical rules is itself unethical.

~~~
CryptoPunk
What if there is a law against homosexual intercourse? Should people be
expected to refrain from participating in it until they can convince enough
people in their country to change the law?

If you need to start adding a bunch of qualifications to this principle of
illegality being unethical, meaning that if you can't apply it consistently,
then it's probably not well founded.

------
paulsutter
Life is too short to waste on other people’s shifty ideas. The investors have
a portfolio, so they think a 1 in 10 chance of a quick 100x is a great idea.
But you’re the one who has to build it and live it every day.

Decide where you draw the line, and tell them. Don’t try too hard to fight the
idea or persuade them, just make your case calmly and if their decision is
over your line, walk away. And wish them well as you walk away, no reason to
burn bridges.

------
danieka
If this is fraudulent or not is of course very, very important. But from
reading your comment I feel there are some weird trust dynamics at play here.
My view is that for a company to work you need to have people working in the
same direction with a large amount of trust. That means that if you are a
specialist in your are I will trust your judgement. I need not understand how
you came to that decision. If I do not trust you to make decisions in your
area or if you are not aligned with the goals of the company I would find
someone else for your role. That's how I think trust should work.

That also means that if my judgement in my area of expertise is not trusted I
will quickly start looking for something else to do. "If you don't trust me to
do what I'm good at I'll go somewhere else or do something else".

If I were in your shoes I would not feel trusted anymore and look for
something else. You also mentioned that all your shares are vested. I'm more
used to schemes where you shares vest over time e.g. you receive 33% of your
shares per year worked so you will own all your shares after three years. If
this is how your vesting works consequences for leaving should not be that
bad.

However if none of the shares have vested you should thread carefully. Having
been part of a similar situation with vested shares and leaving I know there
are compromises to be made. All parts have a lot to earn from an amicable deal
that let's you and the company part ways without any bad blood.

------
downandout
ICOs are only fraudulent if you make them so. We don't know if you're based in
the US either, which matters quite a bit since even the most well-intentioned
ICOs constitute the sale of unregistered securities under US law. If you are,
and since they're going ahead with it anyway, you might take a look at the
SAFT Project [1], which is a legal framework for ICOs in the US created by the
Cooley law firm.

In short, leave if you believe they are doing something illegal, and then sue
them for creating a situation where you had no choice but to leave your job.
But not all ICOs are, by default, illegal.

[1] [https://saftproject.com/](https://saftproject.com/)

------
dmitrygr
Ah, the age-old question on the morality of taking money from suckers.
Basically, as always, two options:

1\. be moral, walk away, maybe talk, get no money

2\. stay, make lots of money, wipe tears away with hundred dollar bills

------
saluki
Sounds like they are going to go with an ICO, it sounds like they think that
is the only choice, so it's most likely happening with or without you.

I'm not sure I would rock the boat since you still care about your equity.

I would spend your time trying to make the app better, let someone else handle
the ICO to bring in funding to get you to your vesting mark.

If you don't feel the ICO is a good idea or is potentially fraud, just don't
participate in setting it up, keep your name out of it. I'm sure they will use
a service or outside experts to handle it.

It will bring in funding to get you to your vesting date which sounds
important to you.

You're in your 20s so this isn't your last rodeo, ride this one out, see what
happens, use your knowledge and experience toward the next one.

Good luck riding it out.

------
pwaai
I would rephrase the question as the following:

My company plans on partaking in a legally grey area with a real potential for
liability down the road, do I want my name associated and put my neck out for
something I don't believe in?

I think you know the answer already.

------
dboreham
Run!

But first go get a good lawyer.

I'm guessing there is a playbook for "fundamental disagreement among
execs/founders in a startup" and a chapter in said playbook for "CEO doing
questionably ethical stuff".

------
thrillgore
You're on the right path, drafting a well rationed argument as to why its not
a good idea. If they decide to move forward, you should quit.

I'd seek good legal council regardless of what happens.

------
rajacombinator
I think ethics are somewhat overrated in this situation. But more importantly
it sounds like your app/whatever is dead in the water. If it’s not good enough
to convince people to invest more - and investing just to burn money on
marketing sounds like a terrible idea - then it’s not going to survive. I mean
let’s be honest if you have rich Middle Eastern contacts and they won’t put
money in, it’s a dog. Just cut loose and don’t waste more time on it.

------
sudouser
"No matter how much you try, you can’t stop people from sticking beans up
their nose."

[https://www.uie.com/brainsparks/2011/07/08/beans-and-
noses/](https://www.uie.com/brainsparks/2011/07/08/beans-and-noses/)

------
zebnyc
Are you sure your company is not planning to use this as a utility token.
Several companies ICO with this promise. For example Binance (a crypto-
exchange) introduced BNB tokens. You can pay with Bitcoin but if you pay for
your trades with BNB tokens then your trades cost 50%.

~~~
AlexCoventry
I recently heard of a utility token being scrutinized by the SEC. You need to
make sure that the token's price is in line with the utility's economic value.
If investors drive the price up to a point where it doesn't make economic
sense to buy the token for its use value, the SEC's position is that the Howey
test applies.

Not a lawyer, not legal advice, etc. Just heard this on the grapevine, could
be false. (But I find it very plausible.)

------
anononpurpose
I left the thread alone, hoping to see some answers in a few hours, yet I had
no idea it would explode like this. Thank you everyone, your support has no
match around my proximity.

I read all 92 (and increasing) comments. There are some duplicate concerns,
questions, suggestions etc. I want to be as transparent as I can to leave a
useful record for people who will be in similar position as me. Below is my
attempt to do so.

* Many people commented or touched on the topic of my role as CTO. Things I did can be summarized as these: building the proof of concept (vanilla Java for Android) before the very first seed; constantly be in dialogue with investors and the other co-founder (CEO); gathering all the dev team including the designers; managing outsourced development; having code contribution on 10% of server side code (especially mission critical parts such as auth and soft real time systems); %50 code contribution on Android (Kotlin, Java, RN hybrid); %50 code contribution on iOS (Swift, RN hybrid) including migrations to latest Swift versions; deciding frameworks, platforms, SaaS components; literally scripting all the dev-ops; building small demos for investors to test ideas; hacking all day when the dev team is able to self organize. Despite all the hardships, I must admit it was the most amazing playground I could ever hope for on this age. I have a BS degree on Computer Engineering if anyone wonders.

* Some people expressed their concerns about my mental and physical health. I can say I failed almost on all of those. My cigarette consumption skyrocketed. I smoked weed almost on a weekly (sometimes daily) basis. Having no time to cook, I ordered take away food a lot (it hurts to eat outside financially). I stopped doing sports last year. Socially, everything is much more OK. I have a really supportive life partner who I never disappointed. I didn't lose a friend without my own consent. My family is worried but also proud with all their best wishes and support felt here.

* I understand some people's suspicions on me having a bias towards fraudulent ICOs. Let me explain our situation a little more, you can decide for yourself. First of all, we can still gather investment without the ICO, just not enough for a meaningful (or hasty) boost. It has its consequences though like hibernating for a while, losing the original dev team (they are already informed by me btw) for cheaper labor, figuring out how to deal with ancient local law etc. It will almost feel like a new startup. Some people may therefore think "the project is dead" and that is true if looked from the inside. The sad thing is we finally built the real thing which our users really love. Ad revenue interpolations shows hope.

I have some other reasons (technical and observable) to think that our attempt
would be fraudulent.

Firstly, there has never been such a plan, not even a bite-sized bit of it.
The ICO is definitely an idea emerged as a reaction, a reflex. The startup
scene here is visibly shifting towards blockchain tech, that is a fact. But
issuing a token in our app feels like watching Pinterest issue its own coin
for people to spend on pinning some content. In the end, all the brainstorm in
the meeting can be summarized as "placing a button to spend/receive the token
inside the app for some arbitrary reason which we can figure out later" in
terms of UX. It's a feature without a problem to solve.

The next thing is, all the other B2B solutions we can pivot to are quite
cheaper, easier to build and equally doable without a blockchain. No business
has ever demanded from us an immutable, distributed database with fail
recovery. We are repeatedly told that a dev-friendly API is more sell-able
than bleeding edge cool technology (lesson of my life).

About the shady stuff: If the value of our token drops after the initial
offering, the ones who are gonna get hurt by it are mainly the early adopters
who would all be selected from angels or ventures. We only plan for a private,
invite only ICO to benefit from network effects among some rich people. It is
even spoken out loud that, and I'm quoting, "all we need is some well designed
PDF with our successes (there are some after all) and vision highlighted, some
kind of white paper as the jargon tells". The excuse has been debated as the
token will be traded publicly despite the private distribution, and will
always be promoted within the app. So the existing user base will be harvested
to create the hype, investor money will be grabbed via private offering when
shown enough hype is there, the market will do the rest. Almost all gathered
liquidity will be converted to fiat to buy time to figure out a viable
business plan. If the bought time is not enough, the crypto world will be
blamed, all will be well. It really sounds like an IPO without the risk and
responsibilities coming after that.

* The million dollar reality is not all ICOs are against law. This is completely true and applies in our case. We have good legal advice and will definitely get away with all of our actions. Regardless of the future incidents, nobody is going to jail or even paying fines for anything. Nonetheless, as stated by some commenters, it still may create some issues outside if we (founders, investors, the board, dunno) plan to travel and do business abroad. I didn't know that, thank you so much for the intel.

* Some boring facts and misconceptions: There is no us vs them culture between the founders and the investors. There is actually only a little politics between people, and mainly because of age differences. What drives the pursue is mostly misinformation about blockchain news, lack of technical knowledge and shareholders' being able to carelessly act due to having the safety net of financial resources. It is pure luck or lack of it that I am the only one who is capable of navigating through the echo chamber in our board, where right now words like "crypto is the next big thing" is resonating among people who have no idea what even a software protocol mean.

* Completely off-topic, or maybe not, nonetheless I want to make games some day.

Thanks again everyone. It's been a pleasure to read you all.

~~~
xordon
> feels like watching Pinterest issue its own coin for people to spend on
> pinning some content.

I think this actually sounds interesting, if it cost a little to pin something
but it also means that content creators get a little bit of $$ just for
creating content that people pin. Of course nothing about this requires a
blockchain or a new coin, but it could be fun!

------
nartz
ICOs are not necessarily fraud - are they outlawed in your country? Do you
simply need to register them properly with any countries you decide to release
your app in?

------
anfilt
Run as fast you can. If they don't value what you say, and it may put you in a
legal world of hurt it's time to jettison.

------
cvaidya1986
Trust your gut

------
aceon48
Make sure you have some stock or coins and enjoy the nice pop and free money
you get....

~~~
anononpurpose
I have $30 of DOGE. :)

------
crispytx
Go on, take the money and run.

------
perseusprime11
Hopefully you are not working at Facebook. I think you should start looking
for other jobs. Last I saw, there are 72 different ICOs on coinstats. There is
not an inch progress from any adoption towards ICOs. Don’t get rippled!

------
DyslexicAtheist
watch the movie Office Space and do what Milton did.

