28 Mar Massachusetts watchdog shuts down five ICOs
Massachusetts’ top securities regulator ordered five state-based companies undertaking ICOs to stop selling what it calls “unregulated securities.”
Mattervest Inc, Pink Ribbon ICO, Across Platforms Inc, Sparkco Inc and 18 Moons Inc were each conducting initial coin offerings before William Galvin, the Secretary of the State Securities Division issued his orders. “An offering done to avoid registration with regulators should be seen as a red flag, and you should contact my office before investing,” Galvin said.
More US regulators could follow suit
In addition to the US Securities Exchange Commission investigating some companies and talking about regulations to come in the near future, several other states, including New Jersey, Tennessee and Texas have also recently clamped down on ICOs or questionable cryptocurrency operations.
Couple that with new restrictions on cryptocurrency and ICO advertising on Facebook, Google and Twitter and you have a recipe for uncertainty, along with the threat of more limitations to the wild growth of ICOs in the past two years.
That’s not necessarily a bad thing when you look at the fact that more than 10% of funds from global ICOs are stolen or missing and more than 46% of ICOs raising funds in 2017, to the tune of $104 million, have already failed.
These ICOs won’t hunt
Looking at these five ICOs, none of them had a strong business plan and each had many ICO weaknesses that should be flags for investors. The following links will take readers directly to the cease-and-desist orders issued by the Massachusetts Securities Division.
18 Moons describes itself on its website as “A blockchain enabled platform for crowdsourcing multimedia content for kids.” The company planned to design, develop and distribute augmented reality content to preschool children through a partner network it claims will reach 120 million households under its Planet Kids, mobile app. It claims to already have 1.5 million active monthly users and planned to issue $10 million in Planet Kids coins.
Across Platforms Inc dba ClickableTV
Across Platforms is a media and analytics social television firm founded in 2010. The Clickable TV ICO had a hard cap of $25 million and planned to issue 100 million Clickable TV (CTV) tokens. The company planned to “turn commercials on certain mediums into clickable ads where the viewer can purchase products using Clickable TV tokens.” The company has canceled its ICO and shuttered its ICO website.
The website is down with a message saying “Mattervest has ceased operations” before it really got started. Mattervest was described as helping investors to “Discover the hottest trending blockchain companies and ICOs with advanced filtering and monitoring, and interactive whitepaper discussions.” The company had hoped to allow investors to pool their funds to invest in other ICOs and was actively promoting itself on Twitter.
Daniel Cash created Pink Ribbon Inc, which claimed to be “a publicly traded company on the blockchain that supports women and families facing financial burdens from cancer.” The company Facebook page said it would create 26 million pink ribbon coins, of which 8 million would be held by Cash and 8 million coins donated to families in need. Clearly this ICO and the resulting “business” could not be sustainable.
Sparkco Inc dba Librium
Prior to its ICO, Sparkco ran a business providing freelance worker services to businesses. It planned to use the 400 million Librium ICO tokens (EQL) to raise $18 million to expand operations by pre-selling future services. This business would have faced a huge challenge competing with other established global players such as Fiverr, Freelance.com and other similar service providers.
A regulatory reality check
Regardless of the merits of these ICOs, their nonexistent or weak business plans, the biggest take away from this story is the need to answer the legal and regulatory questions in advance of launching an ICO.
In the US, this regulatory reality check is going to put a damper on many planned ICOs until the regulatory infrastructure catches up to cryptocurrency.
Author: Jeff Domansky, Managing Editor