Hopefully NewsBTC, Crowdfund Insider, TC, Bloomberg, Coindesk, Fintech Weekly, HuffPost and other respected news sources can add this to their in-depth ICO reporting: an analysis of the company, owners and subsidiaries.
The amount of ICOs / TGEs (Token Generating Events) is staggering and the willingness to answer "tough" questions during the ICO really varies from excellent to below zero.
My conclusion so far: our initial investigations are not going deep enough! Compare an ICO with a "traditional" IPO and we, the investors backing ICOs, are not paying attention to basic business rules. Heard of the Cayman Islands? Panama Papers? Please take a deep breath and read this super cynical blog post about Alibaba's HQ on the Cayman Islands. Hilarious!
So? Why should you care if you are only playing around with a few hundred dollars worth of tokens?
I come across ICOs where the structure of companies and subsidiaries involved in the ICO made it impossible to trace your investment. Did a bit of homework, liked the proposition, exactly knew the risk (no rights or guarantees whatsoever) and traded some ETH for tokens. After which it struck me: I was actually buying the tokens from a foundation based on the Cayman Islands but the platform terms referred to another entity in another tax heaven, hm. Questions on Slack (so far) stay unanswered.
Ok, I am not expecting something like Alibaba's chart with nearly 300 subsidiaries:
But this just doesn't feel trustworthy, right?
(1) I can participate in an ICO and transfer ETH to the ICOs token wallet
(2) The token wallet (let's assume managed by an entity on the Cayman Islands) trades the incoming ETH for fiat money during the ICO
(3) The fiat money is now off the blockchain and into a Cayman Island's bank account owned by who knows who
So maybe a next step to improve:
(a) the company and any subsidiaries owning and managing the wallet and other company assets are fully transparent, traceable & accountable OR
(b) a trusted 3rd party / Escrow will manage the wallet under transparent terms OR
(c) a trusted 3rd party / Escrow will manage all relevant information to help law enforcement in case of a scam (tough)
News sources reporting or analyzing ICOs/ TGEs can start with asking the company to provide organization charts and some proof of the company's involvement, owners and subsidiaries. If they are not willing to provide some form of transparency than this can be listed with a red X in the public report.
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