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Scam =/= terrible investment idea. Tezos and Filecoin, for example, are not scams. They are serious projects that are attempting to bring something useful to th

Scam =/= terrible investment idea. Tezos and Filecoin, for example, are not scams. They are serious projects that are attempting to bring something useful to the market. That said, they raised wayyy too much money, and may end up being terrible investments that don't return any profit, but that applies to many startups as well. PlexCoin offered guaranteed 1300% returns or your money back. That is a pure scam.

beager 9y ago
Just because something is a good idea doesn't mean that it wasn't conceived or promoted specifically to scam people out of their money. Not speaking to Filecoin or Tezos specifically, but if something is a really good idea, why not take VC money or bootstrap it?
- berberous 9y ago
  Many reasons. Here's a couple I can think of off the top of my head: 1) VC money comes with strings, and founders don't like to have the sword of Damocles hanging over their heads. (Although I think those founders are misguided, as I think most companies benefit from oversight). 2) ICO money is cheaper and plentiful. If it's available, why not take it? This is especially problematic when you have multiple companies pursuing the same idea. Take using the blockchain to create a data storage market. Filecoin raised $200mm+. Imagine they instead raised $3mm from VCs, and another competitor with less qualms raised $200mm. They would now have to compete with someone wayyyy better capitalized than they are. In the tech world, one company often wins the market. Being second could kill your company. Is Uber scamming middle east sovereign wealth funds because they are letting them invest on crazy terms, when they could just as easily start turning a profit or go public? I think a company has a duty to: (1) disclose things honestly, (2) warn people of the risks, and (3) consider the danger of raising too much public money on the success of their venture. Beyond that, if investors wants to dump cheap money on them, why is it a 'scam' to accept?
  - jsloss 9y ago
    Totally agree. The liquidity that ICO's bring to founding teams is a huge plus. It's going to better incentivize smart people to work on big, interesting projects. And get paid well to do so.
    - vkou 9y ago
      Wouldn't it also incentivize talent-less frauds to work on big-sounding projects? Given the huge problems with current ICOs (Outright scams, or simply terrible investments), it seems that being smart or talented are not the qualities ICO 'investors' are looking for. I think the zeitgeist is that they just want quick pump & dumps.
      - jsloss 9y ago
        For now, you might be right. But parallels could be drawn to the first dot com boom, junior mining markets etc. So much of new innovation is funded by speculation and stories. Even the current public market interest in the blockchain space, regulated as is is, is mostly driven by a good story and a hope for the future. This is how things work, and given a longer time horizon, the market will sort it out.
JackFr 9y ago
> Scam =/= terrible investment idea. Any ICO marketed as an investment is likely illegal in the United States. Not necessarily a prima facie scam, but in violation of the Securities and Exchange Act.
- berberous 9y ago
  Yes, I agree that many ICOs are being illegally marketed. Not all, however. 1) Filecoin and other ICOs are using Cooley's SAFT instrument in order to comply with US securities laws, and as a result, have limited marketing to accredited investors. 2) Lots of ICOs are banning US investors.
- JumpCrisscross 9y ago
  > Securities and Exchange Act These are two separate acts: the Securities Act of 1933 [1] and the Securities Exchange Act of 1934 [2]. (Pedantic, pardon me.) [1] https://www.sec.gov/about/laws/sa33.pdf https://www.sec.gov/about/laws/sa33.pdf [2] https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_1934 https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_193...
clay_to_n 9y ago
Maybe I'm wrong here, but doesn't investing in normal startups require being an accredited investor? I see ICO's as marketing investment opportunities to unaccredited investors. I thought unacreddited investors in the U.S. are legally allowed to invest in public stock, and approved securities (like bonds, precious metals, etc) and only a handful of other things. The notion of accredited investors legal requirement to invest in tech startups is that tech startups are inherently very risky, and the average person shouldn't be allowed to put their life savings behind something so risky. By this logic, it strikes me as very odd that ICO's are legal for U.S. citizens to invest in, and my guess is it's because the SEC hasn't come around to regulating them yet. Does that sound correct, or is there reason to believe the SEC (in the long-term) will be okay with unaccredited investors investing in ICO's of tech companies? Are there other things with a similar risk profile that unaccredited investors can invest in?
tehlike 9y ago
I like how you mention Tezos and filecoin not being scams.

beager 9y ago

Just because something is a good idea doesn't mean that it wasn't conceived or promoted specifically to scam people out of their money. Not speaking to Filecoin or Tezos specifically, but if something is a really good idea, why not take VC money or bootstrap it?

berberous 9y ago
Many reasons. Here's a couple I can think of off the top of my head: 1) VC money comes with strings, and founders don't like to have the sword of Damocles hanging over their heads. (Although I think those founders are misguided, as I think most companies benefit from oversight). 2) ICO money is cheaper and plentiful. If it's available, why not take it? This is especially problematic when you have multiple companies pursuing the same idea. Take using the blockchain to create a data storage market. Filecoin raised $200mm+. Imagine they instead raised $3mm from VCs, and another competitor with less qualms raised $200mm. They would now have to compete with someone wayyyy better capitalized than they are. In the tech world, one company often wins the market. Being second could kill your company. Is Uber scamming middle east sovereign wealth funds because they are letting them invest on crazy terms, when they could just as easily start turning a profit or go public? I think a company has a duty to: (1) disclose things honestly, (2) warn people of the risks, and (3) consider the danger of raising too much public money on the success of their venture. Beyond that, if investors wants to dump cheap money on them, why is it a 'scam' to accept?
- jsloss 9y ago
  Totally agree. The liquidity that ICO's bring to founding teams is a huge plus. It's going to better incentivize smart people to work on big, interesting projects. And get paid well to do so.
  - vkou 9y ago
    Wouldn't it also incentivize talent-less frauds to work on big-sounding projects? Given the huge problems with current ICOs (Outright scams, or simply terrible investments), it seems that being smart or talented are not the qualities ICO 'investors' are looking for. I think the zeitgeist is that they just want quick pump & dumps.
    - jsloss 9y ago
      For now, you might be right. But parallels could be drawn to the first dot com boom, junior mining markets etc. So much of new innovation is funded by speculation and stories. Even the current public market interest in the blockchain space, regulated as is is, is mostly driven by a good story and a hope for the future. This is how things work, and given a longer time horizon, the market will sort it out.

JackFr 9y ago

> Scam =/= terrible investment idea. Any ICO marketed as an investment is likely illegal in the United States. Not necessarily a prima facie scam, but in violation of the Securities and Exchange Act.

berberous 9y ago
Yes, I agree that many ICOs are being illegally marketed. Not all, however. 1) Filecoin and other ICOs are using Cooley's SAFT instrument in order to comply with US securities laws, and as a result, have limited marketing to accredited investors. 2) Lots of ICOs are banning US investors.
JumpCrisscross 9y ago
> Securities and Exchange Act These are two separate acts: the Securities Act of 1933 [1] and the Securities Exchange Act of 1934 [2]. (Pedantic, pardon me.) [1] https://www.sec.gov/about/laws/sa33.pdf https://www.sec.gov/about/laws/sa33.pdf [2] https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_1934 https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_193...

clay_to_n 9y ago

Maybe I'm wrong here, but doesn't investing in normal startups require being an accredited investor? I see ICO's as marketing investment opportunities to unaccredited investors. I thought unacreddited investors in the U.S. are legally allowed to invest in public stock, and approved securities (like bonds, precious metals, etc) and only a handful of other things. The notion of accredited investors legal requirement to invest in tech startups is that tech startups are inherently very risky, and the average person shouldn't be allowed to put their life savings behind something so risky. By this logic, it strikes me as very odd that ICO's are legal for U.S. citizens to invest in, and my guess is it's because the SEC hasn't come around to regulating them yet. Does that sound correct, or is there reason to believe the SEC (in the long-term) will be okay with unaccredited investors investing in ICO's of tech companies? Are there other things with a similar risk profile that unaccredited investors can invest in?

tehlike 9y ago

I like how you mention Tezos and filecoin not being scams.