SEC Commissioner's “safe harbor” proposal for ICOs will only enable scammers | Hacker News Reader

SEC Commissioner's “safe harbor” proposal for ICOs will only enable scammers

davidgerard.co.uk

40 pointsdavidgerard35 comments

Not many ICOs led to efficient product development, but most of them were also not scams. Most teams that ICOed had a profile similar to early stage tech startups. The outcome was usually what you’d expect if you gave a bunch of inexperienced seed stage companies series B-sized piles of cash. They didn’t have the urgency developed by running on a shoestring in an earlier stage of the company and they didn’t have the direction of having actual users, so they generally have been puttering along and taking their sweet time on the tech.

That being said, most ICOs were not put together by scammers, and many of them have made an honest effort to produced technically advance systems that are often not useful in the real world.

The fact that this author needs to insist that every single ICO was totally fake and has stock photography portraits of fake developers shows that he has an axe to grind and casts doubt on the article.

To quote from an academic study and the commentary from a world-class economist from the article titled "Initial Coin Scams" it reads "There are now nearly 1,600 cryptocurrencies, and the number continues to rise. It is time to start recognizing their issuers' utopian rhetoric for what it is: self-serving nonsense meant to separate credulous investors from their hard-earned savings. [..] 81% of ICOs are scams created by con artists, charlatans, and swindlers looking to take your money and run." [1]

[1]: https://www.project-syndicate.org/commentary/ico-cryptocurre...

About the author David Gerard - The Book "Attack of the 50 Foot Blockchain" [2] is an unmatched gem in a sea of 24-hour non-sense crytpo promotion. Ironically another voice of reason is "pseudonymous" Trolly McTrollface [3]

[2]: https://davidgerard.co.uk/blockchain/table-of-contents/

[3]: https://bitsblocks.github.io/bitcoin-maximalist

Name one single ico that produced a useful product.

MakerDAO.

A useful product. It’s a stablecoin. Your wallet is full of them already.

...a stablecoin not tied to any major fiat currency with over $600MM of value locked in the contract. That's an extremely successful product by any definition.

value locked inside is not a metric of success. By that metric Bank of America is thousands of times more successful, with 1.081 trillion dollars locked in.

Does Bank of America have a stablecoin not tied to any major fiat currency with over $600MM of value locked in the contract? (Hint: no, no they do not.)

You will just move the goalposts forever, your mind is closed.

Name one then, don't argue about his mindset, answer the question with facts

MakerDAO https://makerdao.com/

Ethereum https://ethereum.org/

Cosmos https://cosmos.network/

Augur http://www.augur.net/

Binance Coin https://www.binance.com/

Basic Attention Token https://basicattentiontoken.org/

Most of these are primarily investment vehicles.

The only one that I'd consider an exception is BAT, and I'm still not convinced that it isn't a complex fraud scheme against web advertisers.

For a while it was a complex fraud scheme against web authors, until they were busted on their "seek forgiveness" business plan. https://davidgerard.co.uk/blockchain/2019/01/13/brave-web-br...

Bruh, I named one above.

That's purely an investment vehicle, not a useful product.

People are using it. By definition it is useful.

I remember ca 2015-2018 receiving invites from blockchain/coin peddlers on nearly daily basis on LinkedIn. This was then followed with an email pitch for an ICO or some other bull. I researched those companies where I could make a connection between ownership of the company, its shareholders and their location.

If they happened to be in Europe I would thank them for their message and billed them at 100,-- for 1 hrs of administrative effort dealing with their unsolicited message[1]. I attached the smtp headers of the message in the appendix of the invoice and informed them that what they're doing is illegal under the upcoming GDPR. All EU based entities paid except 2, which I sued and won. Despite also reporting every incident to Mailchimp, MC did nothing to shut any of them down. I earned around ~400-500/month until I got bored (and exhausted) and also too busy with other things. Also I stopped getting such messages after GDPR came into effect.

[1] 1 hr seemed a fair price since it was roughly the time I spent on recon work to find the CEO's behind these structures.

edit: some of my favorite "anti-coin-BS" warriors were @cybergibbons on Twitter (security researcher Andrew Tierney from PentestPartners) and Mathew D. Green (among others). They spent a tremendous amount of time trying to educate these kids about the problems in their assumptions. IOTA was on top of this list of BS-coins since they literally insisted that a hash-function does NOT need to be collision resistant (e.g. after their Kerl-function was exposed for this by the crypto-community).

> but most of them were also not scams [...] most ICOs were not put together by scammers, and many of them have made an honest effort to produced technically advance systems

As someone who's had the misfortune of finding myself at events offstage around many famous practitioners in this space... I cannot say I agree.

It's my experience that only a small minority appear to have remotely credible beliefs in their prospects. The best I could say is that many appear to be indifferent to the prospects of success for their headline venture, but extremely interested and invested in their success in collecting investments from unsophisticated buyers.

Many I've witnessed are outright contemptuous towards the victims that buy into their offerings. You can see this contempt reflected in the contractual terms of the ICO offerings which go out of their way to make sure that absolutely nothing of value is transferred with the sale of the token. You'd have to be either an idiot or simply ignorant of the terms to accept them in virtually every ICO.

FYI: I've put together some classic ICO myths in the "Awesome Initial Coin Offerings (ICO) Truths" page [1] with the subtitle "The Art of the Steal - The Scammers' Big Lies". [1]: https://github.com/openblockchains/awesome-ico-truths

Thanks for the link. That's a resource I'll find useful to share in the future.

:D I also got so annoyed that I started curating blogs and videos (as myth-busters) to help me bring the point across in discussions. My experience with this is sadly that changing anyone's mind who has already made it up is _really_ hard.

Here is my list:

Blockchains Are a Bad Idea (James Mickens) https://www.youtube.com/watch?v=15RTC22Z2xI

Hacking Blockchain (Konstantinos Karagiannis, Chief Technology Officer, Security Consulting, BT) https://www.youtube.com/watch?v=0gL6DsR6vGg

Myth Busting: Can a blockchain save healthcare? https://blog.andreacoravos.com/myth-busting-can-a-blockchain...

Blockchain Graveyard https://magoo.github.io/Blockchain-Graveyard/

Response to Blockchain & Blockcerts Critiques from Privacy Researcher https://community.blockcerts.org/t/response-to-blockchain-bl...

Blockcerts: Using blokchain for identity management is (mostly) ridiculous https://blog.xot.nl/2017/09/06/blockcerts-using-blokchain-fo...

Blockchains from a Distributed Computing Perspective https://cs.brown.edu/courses/csci2952-a/papers/perspective.p...

Do you need a Blockchain? https://eprint.iacr.org/2017/375.pdf

IOTA Tweets from cybergibbons: https://twitter.com/search?q=iota%20cybergibbons

I'm a big cryptocurrency supporter, and I even wrote a chapter about some possible benefits of tokens in my book[0], but I agree that ICOs are almost always pump-and-dump schemes or straight up scams. This is also acknowledged by many cryptocurrency supporters, and I can't really understand why the SEC would do this.

[0]: https://whycryptocurrencies.com/tokens.html

People are caught in a local maxima of thinking securities laws alone stop scams. Theranos, Madoff, Enron were all securities. There are 3 ways to stop scams. 1. Better enforcement of the laws we have (doesn't work in harsher parts of the world.) It's usually post-facto and rarely recovers funds from those harmed. 2. Yell at people to be smarter. Your speech isn't funded as well as the scammers, and your pitch isn't as compelling, you often bring awareness to the scam and thus victims for free. 3. Out-compete the scams for money by marketing to their would-be victims things that aren't scams. Maybe that's an index fund, maybe it's a business opportunity, that can scale, and work everywhere. The only scalable solution to the scamming problem is similar marketing tactics for honest projects. Starve the scams of resources.

> The only scalable solution to the scamming problem is similar marketing tactics for honest projects.

The only way for honest projects to use similar marketing tactics is for them to lie. It’s worthwhile to invest in a vanguard fund but it’s not a get rich _quick_ scheme and never can be.

Wow, this guy is biased! Brief selection of non-scammy ICOs:

MakerDAO https://makerdao.com/

Ethereum https://ethereum.org/

Cosmos https://cosmos.network/

Augur http://www.augur.net/

Binance Coin https://www.binance.com/

Basic Attention Token https://basicattentiontoken.org/

By non-scammy, I mean projects that 1) Raised money via ICO, 2) Delivered what they promised, and 3) [a huge bar!] are succeeding! Even if 99% are scams, the successes make up for the failures, which appears to be similar odds to normal startups.

I would absolutely say that ICOs are way too founder-friendly, but to say every single one of them is a pump-and-dump scam is ridiculous.

I would also say that VC funding is far too investor-friendly, and it makes me happy that the pendulum swung in the opposite direction for once. I think the market will find a better medium, which is what the SEC is proposing with their safe harbor.

This author seems extremely unhappy that Bitcoin is about to hit $10,000. The "never-crypto" people are losing their minds...

> Even if 99% are scams, the successes make up for the failures, which appears to be similar odds to normal startups.

Which is exactly why we have accredited investor rules in the first place, to make sure mom and pop don’t lose their shirts to the 99% of hot garbage out there. This proposal is meant to make circumventing those rules easier.

> This author seems extremely unhappy that Bitcoin is about to hit $10,000. The "never-crypto" people are losing their minds...

Uh, I’m not sure you’re old enough to recall 2017 but the author (and I) definitely remember 10K. It’s not anger, it’s disappointment lol

> Even if 99% are scams, the successes make up for the failures

If you think regulators will put up with any field that's 99% scams, you are deeply incorrect in your understanding of anything about the world of actual money.

I mean, seriously - you're going to go to the SEC and say "you should enable our fabulous investment field, it's only 99% crooks"? Not even Hester Peirce would give that one a pass.

Everything you listed there is to squeeze yet more of the increasingly rare actualdollars from the most degenerate of crypto day traders. It's a "use case" insofar as it addresses problems created by using crypto in the first place.

The impression I get from you is someone who has made a niche career out of bashing this technology, but it will continue on regardless. Blockchain is unstoppable by the SEC or any other government regulator because it is decentralized. The blockchain / cryptocurrency industry is building a parallel financial system - one that requires no government intervention for capital allocation, money transfer, ownership, debt, and so on. Every year it gets more powerful and easier to use. You don't have to use this parallel financial system, but as the use-cases expand some people choose to use it.

I'm very happy that neither regulators nor your whiny posts are capable of shutting down Bitcoin. It is an exciting experiment!

Horribly written article -- doesn't go into any detail about the proposal, uses anecdotal data, and author is extremely biased. Seems like the author has an axe to grind. The proposal from Peirce is novel and much superior to the current SAFT framework; The SEC proposal is definitely worth a read.

Anything in particular you disagree with or think is an unfair characterization? It all seemed right to me.

You don't think it's a bit biased...?

> "The field was literally composed of BS."

> "I think I’ve literally never seen an ICO white paper idea that wasn’t palpable nonsense."

That’s all fair because crypto is a solution in search of a problem space. When all you’ve got is a bicycle you’re going to try and ride that bad boy everywhere even if it’s not at all appropriate. Blockchain folks are enamored by the technology and have no concept of the problems they’re trying to solve with it so naturally fail.

This article doesn't even bother to explain the proposal

Summarised in the second paragraph. That's all it has for substance.

You wrote that tokens in the safe harbor will need less registration and disclosure, but no comment on what that registration or disclosure will entail, or why it is less than sufficient.

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