White Venture Capitalist Knows Everything For Everyone, Calls Chinese Clueless After ICO Ban

Written by Moguldom Staff

One of many bubblehead problems with the Silicon Valley establishment is they think their fat wallets entitle them to know what’s best for everyone, everywhere.

On Monday, the People’s Bank of China banned initial coin offerings, sending the value of the bicoin digital currency tumbling down more than 12 percent — the most since July.

Billionaire venture capitalist Tim Draper tweeted that China is clueless about the importance of new technology.

This is not the first time a white venture capitalist has taken issue with a foreign government’s ruling that conflicted with his own vested interests.

Bitcoin Price Falls Off Cliff After Ruling

 

“The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds, though it didn’t specify how the money would be paid back to investors.

It also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings.

Chinese ICO ban
Image: Brad Jonas for Pando

“This is somewhat in step with, maybe not to the same extent, what we’re starting to see in other jurisdictions — the short story is we all know regulations are coming,” said Jehan Chu, managing partner at Kenetic Capital Ltd. in Hong Kong, which invests in and advises on token sales. “China, due to its size and as one of the most speculative IPO markets, needed to take a firmer action.”

Draper unsurprisingly has a vested interest in seeing ICOs become more popular.

He backed the largest ICO ever, raising $150 million in ICO money with startup Bancor, as reported by Coindesk.

In addition to investing in blockchain-related companies, Draper has reportedly made more than $50 million in bitcoin based on today’s price.

This is not the first time a white venture capitalist has taken issue with a foreign government’s ruling that conflicted with his own vested interests.

When the government of India blocked Facebook from coming into the country with a free form of internet called Free Basics/Internet.org, Facebook board member and venture capitalist Marc Andreessen tweeted:

“Denying world’s poorest free partial Internet connectivity when today they have none, for ideological reasons, strikes me as morally wrong,” — Marc Andreessen (@pmarca) February 10, 2016.

A critic of Free Basics tweeted back, “Hey, you guys are from the third world. You don’t know what’s good for you. We’ll think & decide on your behalf.”

Andreessen responded with: “Anti-colonialism has been economically catastrophic for the Indian people for decades. Why stop now?”

Andreessen subsequently withdrew the tweet and apologized for it.

One of many bubblehead problems with the Silicon Valley establishment is they think the fatness of their wallets entitles them to know what’s best for everyone, everywhere.

Are the Chinese “clueless” for wanting greater protections before endorsing the new technology? Are Indians stupid for wanting every Indian to have access to a truly free internet, not just the apps and websites Facebook sees fit for their platform?

American investors with a vested commercial interest in cryptocurrencies may have an inclination to bash China for being ICO-averse. The U.S. Securities and Exchange Commission (SEC) may not be too far behind. The SEC ruled in July that some of the “coins” for sale are actually securities—and are subject to the agency’s regulation.

“The writing is on the wall for many recent ICOs: The SEC is coming,” attorney Brian Klein said, according to the New York Times.

If it walks like a duck

“Anyone who is surprised by this SEC investigation into ICOs either hasn’t been paying attention or has been entranced by greed which has made them oblivious to how the financial industry works. The name alone sounds like IPO – if it walks like a duck and sounds like a duck, it’s a duck” said Brad Garlinghouse, CEO of digital currency company Ripple.

Bitcoin, which crossed the $5,000 mark on Friday for a new all-time high, fell sharply Monday following the announcement of China’s ICO ban. At one point, the price dipped below $4,400 in value, representing a drop of around 12 percent since the Friday evening high, Fortune reported.

By early Monday evening, bitcoin had rallied somewhat to US$4543.17.

The American Financial Industry Regulatory Authority (FINRA) on Aug. 31 warned against getting caught up in the excitement of being “a part of the virtual currency and blockchain startup markets.” Here’s what FINRA said in an investor alert on ICOs:

An ICO involves the creation and distribution of virtual coins or tokens by a company to raise capital. ICOs differ from initial public offerings (IPOs) of stocks. ICOs typically confer no ownership rights in the company and, unlike bonds, ICOs do not involve investors lending money to the issuer.

Depending on the circumstances of each ICO, the virtual coins or tokens offered and sold to investors may be securities. If so, the offer and sale of these tokens are subject to the federal securities laws, according to a recent Investor Bulletin issued by the Securities and Exchange Commission (SEC).

“Investing in an ICO may seem like an exciting way to be a part of the virtual currency and blockchain startup markets, but buyers should use caution when considering these complex investments,” said Gerri Walsh, FINRA’s Senior Vice President for Investor Education. “ICOs involve new technologies and products that are highly technical and can be used by con artists as an opportunity to dupe investors.”

Before investing in an ICO, FINRA said buyers should consider the following:

Is the ICO a securities offering? If it is, then the offer and sale of the coins or tokens must be registered with the SEC or meet an exemption from registration.
Are the individuals selling the investment registered financial professionals? If the tokens offered in an ICO are securities, then any investment professional offering to sell the tokens must maintain certain licenses and registrations under state and federal securities laws and FINRA rules.
What rights and benefits come with your ICO purchase? The rights and benefits of ICO tokens will vary depending on the offering. Thoroughly read and understand the terms and conditions of an ICO, as well as any white paper and the business plans offered by the company issuing tokens.
How can you get your money back? Information provided to investors about ICOs should clearly state how you can get your money back. Ask the company if you can cash in tokens for a refund, whether you are permitted to resell your tokens in a secondary market and what, if any, restrictions apply to any resale.
What does the company do and what is it offering? To date, most ICOs are being offered by startup businesses that have not rolled out a final product or platform to the market. This means that the information available to you at the time of an ICO may be incomplete, subject to change and difficult to verify.
Are there protections in place to guard against hacking and other cybersecurity threats? Be sure to inquire about steps these companies have taken to protect their platforms and products from possible protocol breakdowns, hacking, malware and fraud.

If investors have concerns about ICOs, or suspect a scam related to ICOs or virtual currencies, they should contact the SEC, file a complaint using FINRA’s online Complaint Center or send a tip to FINRA’s Office of the Whistleblower.

 

 

 

Sign up for the Moguldom newsletter — the most compelling business news you need to know about reversing inequality in tech, delivered straight to your inbox.

View Comments