AnonyMint's Guide to Illegal Unregistered ICOs and Investment Services (Options, etc)

Quote from: rpietila on October 17, 2015, 08:49:03 AM

Quote from: TPTB_need_war on October 17, 2015, 03:16:05 AM

AltcoinUK, I am not going to set a threshold as high as $112,000 for the donation bounty on that one anonymity invention, even though I think it is a very significant feature. I am just stating what my earning opportunity cost had been inflation-adjusted from 2001. So hopefully the market will understand I am not going to give that feature away for $10,000.

The way it works is that you first decide what level of control you want to retain, and whether it is
- by charter
- by preferred shares, or
- by majority/required supermajority of shares.

Then you write the charter. Then you sell the shares up to the number you want. Then we have a 24/7 market where they are traded. If your project is perceived good, people will buy up the shares, and you can sell more if you have more monetary needs.

Selling equity (ICO) in a coin I would create is another option, but there are three problems facing this choice:

1. I would be preselling what is mostly (but not entirely) vaporware. Only the white papers and a small amount of code are completed thus far. My white papers are I believe are very strong (we are in the process in this thread of proving whether my anonymity paper is the only known solution to the Holy Grail of anonymous rings + hidden values), but I don't want to release them publicly until either I release a coin I created with them, or I receive some donations to release the white papers for another project or publicly.

2. Whether I presold coins in my project or equity via the Crypto Kingdom system of tokens as I understand it, then even though these tokens are not coins in my project (although perhaps they could be convertible to them), I am still selling securities to an investment I control (the 'control' is what makes it an investment security under USA law) thus implicitly responsible to manage ongoing to make the investment successful. Thus I would fall under USA SEC securities laws (and such laws in other jurisdictions where I sell such shares) and thus in the USA I would either have to sell only to qualified investors (those with verified liquid net worth of $1 million or regularly annual income > $200,000) or I would have to register with the SEC for registration A status where I could accept up to 5000 investors.

http://thismatter.com/money/stocks/exempt-securities.htm
http://www.sec.gov/oiea/investor-alerts-bulletins/ib_privateplacements.html
http://www.lextechnologiae.com/2011/06/26/why-bitcoin-isnt-a-security-under-federal-securities-law/

3. Would any one (including myself!) trust that my health will be stable. Note I am composing a post about my recent epiphany on diagnosing and treating my chronic illness (in short "inflammation cascade" due to glutathione deficiency originally triggered by imbalances brought on by numerous severe gut infections) and will link to it today.

Make sure you read carefully the third link above. My interpretation is the only way I can legally sell coins in a project (to USA investors under USA securities law and other such laws apply in other jurisdictions where I might sell these coins) is to do a Kickstarter-like campaign wherein I only receive the escrowed funds when the promised product is delivered and in which I am not the manager of the project ongoing after I have been paid for my services of creating the product. In other words, I can be a hired contractor, but I can't be the controlling group of the coin.

So my choices for doing any ICO (at any time whether now or later) are two:

A. Do a Kickstarter-like crowdfunded escrow (denominated in fiat or BTC) and be paid when the coin is completed. And then the coin must run on auto-pilot, i.e. can't be controlled by me after it is launched and I am paid. Since there will be no "Controlling Entity" then the coins transferred to the Kickstarter participants are just products (in some virtual, autonomous, multi-player game which some may use as a currency but nevertheless not depending on me to manage it) thus not investments in investment securities as defined by the SEC. If I intended to retain managerial control after completing the funded projects, I would have to register the crowdfunding under the Jobs Act and restrictions would be placed on the trading for the coins for 1 year. Kickstarter can't be used as the crowdfunding service because Kickstarter doesn't allow selling products which are "financial incentives" so they will not likely allow selling tokens of a (currency) product that is created.

B. Find a controlling group that is anonymous and illegally sell coins to US investors without complying with the SEC securities law. Mircea Popescu has taunted the SEC (I AnonyMint mentioned being banned from rpietila's cryptocrypt.org in that linked post) saying he is not under their jurisdiction when he sold investments to US investors. I assert once the G20 get coordinated on enforcing each other's laws, he is going to potentially be one of the casualties. Afaik selling securities to USA investors whether you are a US resident, citizen, or foreigner, you are still subject to the SEC requirements. Mircea Popescu's critical error in logic is that although Bitcoin is not a "Controlled Enterprise", his options investing service is. Roll Eyes

Gavin Andresen agreed with my stance. So for all of you who are invested in coins originally offered in ICO and lead by developers who were affiliated with the group not registered with the SEC and that sold the coins to USA investors, your coin is illegal and may be attacked by the SEC someday.

Usual disclaimers apply that I am not an attorney nor a legal adviser. Every reader should consult their own.

P.S. here was myself as AnonyMint in early 2014 arguing for anonymity as a core feature for crypto currency and starting to think about decentralized exchanges with decentralized automated options. And here was yet another one of those examples where people claim AnonyMint was attacking others or putting them down, where in fact what I was stating was perfectly agreeable logic but the readers couldn't grasp the clear logic and were attacking me for their intellectual handicap. I got so exasperated, I deleted my posts in that thread.