Trouble in ICO paradise
Back in July, we highlighted a little blockchain startup called Tezos, which had raised $230m worth of cryptocurrency in an initial coin offering. If you recall, it had big ideas about persuading “a small nation-state” to accept their Tezos token as its official state currency.
Now a dispute has reportedly bubbled up between Arthur and Kathleen Breitman, the startup’s founders, and Johann Gevers, the president of the Swiss foundation set up to take the project forward. Here’s Reuters:
Under Swiss law, the foundation is supposed to be independent. It holds all of the funds raised, which have mushroomed to more than $400 million in value because the contributions were made in two cryptocurrencies – bitcoin and ether – that have appreciated sharply. But the Breitmans, who still control the Tezos source code through a Delaware company, are seeking to oust the head of the foundation.
It’s worth reading that piece in its entirety — as well as the WSJ’s report — but in the meantime we’ll point you towards one anecdote that highlights the regulatory arbitrage everyone knows is going on, even if they hide behind disclaimers to pretend that ICOs are not in fact securities.
Tezos told its investors that their investments were actually a “non-refundable donation”, rather than, y’know, an investment that might be governed by and subject to the various rules and laws associated with investments. The terms and conditions consistently and painstakingly refer to “contributions”, but apparently the message didn’t reach its main venture capital backer, Tim Draper:
Draper told Reuters that cryptocurrencies are commodities like pork bellies, and characterized acquiring Tezzies as a purchase rather than a donation. Asked this month how much he donated during the Tezos fundraiser, he replied via email, “You mean how much I bought? A lot.”