“I found it pretty wild that Mr Popescu is an advisor for other companies about to launch an ICO. He just did one last for a company called AirFox and investors have already lost $11 million in less than a month” a commercial lawyer in London told FinanceFeeds. ICOs are exactly as we have maintained since their launch – a platform for serial fraud and substantial loss with no recourse.
A meeting between an auditor and a financial technology innovator in which the auditor has been called in to conduct due diligence, in which the innovator says that he wishes to establish a company that makes nothing, and is funded by a type of currency which doesn’t exist and has no official issuer, would likely end within less than a second, with the seasoned and experienced PwC or Accenture executive saying a firm goodbye before asking his client to close the door firmly on the way out.
And rightly so.
FinanceFeeds has made its position very clear with regard to the hysteria that currently surrounds Initial Coin Offerings (ICOs) which are currently pervading every aspect of technological and financial media globally, and can be written off as a buzzword-infused non-entity of hipsters attempting to make a name for themselves on social media channels, as clearly any professional with a modicum of experience in financial technology development or the components of electronic financial markets will absolutely steer well clear.
As the semi-literate rogues that have done tremendous damage to the reputation of the State of Israel as a good quality business environment by spending the past decade ripping off unsuspecting individuals around the world with binary options ruses that were conducted via affiliate networks and boiler-room type hard sales techniques, causing billions to be handed over on the false pretense that an investment in financial markets was being made now turn their unpleasant hands to the ICO and cryptocurrency crowdfunding investment world (which will soon become an underworld), it is very clear that ICO does indeed represent the next largest fraudulent internet-based activity.
Last week, Israel Securities Authority chairman Professor Shmuel Hauser highlighted exactly this at government level.
Crime gangs and violent fraudsters may well be the main perpetrators of ICO activity and the massive noise that surrounds it, however there are some more intellectual elements to be wary of too.
Once again, the public can rely on British and American authorities, arguably the most upstanding in the world, to get this right, and American officials consider that because these types of fund-raising operatives are not regulated by financial authorities such as the Securities Exchange Commission (SEC), funds that are lost due to fraudulent initiatives may never be recovered. For this reason, the SEC considers ICO to be a vehicle for fraudulent activity.
This week, a very well known figure in the electronic trading industry once again rose his profile as a result of his ICO which raised $14.2 million to found Lampix, which is a startup technology firm that intends to build the ‘lamp of the future’.
George Popescu, who is banned from acting as a director of any company in the United Kingdom for 12 years, manages to sit on the advisory boards for many crypto currency and ICO related ventures, all of which are still in their infancy stages, and of course one of the main risks with ICO is that if something doesn’t come to fruition, then the ‘money’ is lost, and there is no recourse, which means that it is very hard to prove that there was ever any intention to take an idea to fruition past the raising of capital stage.
Unlike the low class binary options crooks, Mr Popescu is highly educated, and is a fellow at MIT, which is one of the best universities in the world, having some of the greatest leaders of industry and national politicians from across the globe as members of its alumni.
It’s an inauspicious beginning for someone financing the “lamp of the future” using an unregulated and controversial strategy. Even so, when its ICO concluded on August 19, Lampix declared its gambit a success after raising $14.2 million through the sale of its digital tokens, which are known as PIX.
By mid-November, the market value of those digital tokens, which exist on the Ethereum blockchain, had dropped by 50%, causing Lampix investors to suffer losses of $7 million. Unlike shareholders in publicly traded companies, token buyers have few investor protections. It’s not clear they are even considered to be actual investors at all.
Buried in the fine print of Lampix’s 85-page “white paper” – a convenient way to avoid the label of prospectus – is a disclaimer. “Buyers should not participate in the [PIX] Token Distribution or purchase [PIX] Tokens for investment purposes. [PIX] Tokens are not designed for investment purposes and should not be considered as a type of investment.”
This effectively means that anyone wanting to come up with an idea, which has had absolutely no R&D and is really at paper stage, can simply offer investors a completely fabricated token which is covered by a disclaimer, and not issued by anyone, ever, hence you pay in, you get a note which doesn’t exist, for a part of an item that doesn’t exist in a business that doesn’t exist, held in a currency (Ethereum) that doesn’t exist.
The SEC’s quite correct dim view of this, produced on July 29 this year, is that “Fraudsters often use innovations and new technologies to perpetrate fraudulent investment schemes. Fraudsters may entice investors by touting an ICO investment ‘opportunity’ as a way to get into this cutting-edge space, promising or guaranteeing high investment returns. Investors should always be suspicious of jargon-laden pitches, hard sells, and promises of outsized returns. Also, it is relatively easy for anyone to use blockchain technology to create an ICO that looks impressive, even though it might actually be a scam.”
On September 29, moreover, the SEC brought an enforcement action against REcoin Group, charging Los Angeles businessman Maksim Zaslavskiy and two companies he controls with defrauding investors “in a pair of so-called initial coin offerings (ICOs) purportedly backed by investments in real estate and diamonds,” an SEC press release said.
British authorities pre-empted this, looking at the previous record of Mr Popescu’s enterprises. On August 4, the Insolvency Service announced that Mr Popescu had been banned from acting as a company director for 12 years. It said he had sold his firm, Boston Prime, without disclosing the sale and that ‘adjustments’ of $3.33million (about £2.5million) to clients’ trading accounts were disputed.
Meanwhile payments totalling $6.2million were made without explanation, much of the cash going to a company connected with Mr Popescu himself.
Yet according to the FCA register, Mr Popescu is still fully authorised as an investment boss without a stain on his character.
Mr Popescu has been recently operating a peer to peer lending firm in New York called Backed, which was operated from a co-working space at 212 Broadway in Midtown, and offered startups a chance to borrow from crowdfunded loan providers to advance their business at a time during which venture capital equity investors were staying shy of startups.
Earlier in 2016, Mr. Popescu founded a website which reports daily news, analysis and data for peer to peer (P2P) and marketplace lending executives.
Under the name Lending Times, Mr. Popescu adds a journalistic aspect to his existing interests in venture capital provision to startups, his activities having including an affiliation with no financial interest until earlier this year with LunaCap Ventures, which is a venture-debt investment company, as well as his firm Backed, which is an online marketplace aiming at lending capital to responsible young borrowers.
These interests may appear as good credentials alongside his illustrious history as a very well regarded academic, however being banned from operating a company in one of the world’s most important commercial jurisdictions for 12 years is a blot on Mr Popescu’s copybook that could prevent institutions accepting him as a board member across the corporate spectrum, yet the ICO world. which exists outside the normal, structured business environment, is a ripe environment that he is succeeding in.
Absolutely no bona fide financial technology firm, innovation investor or electronic trading company would elect a person who is banned from operating, and no accountancy firm would sign off any incorporation certificate with someone of such business character as a key person, but in the crypto currency and ICO world, there is no such thing as officialdom.
And for that reason, it will never, ever be a commercial mainstay.
FinanceFeeds spoke to a senior executive at an institutional financial services provider in Australia yesterday, who explained “When the ICO house of cards begins to tumble and nobody gets their money back, Bitcoin will hit the floor.”
A commercial lawyer that we spoke to in London yesterday told us “I found it pretty wild that Mr Popescu is an advisor for other companies about to launch an ICO. He just did one last for a company called AirFox and investors have already lost $11 million in less than a month.”
It is absolutely tenuous as to what ICOs have to do with our industry at all. They bear zero resemblance to electronic trading in any shape or form.