Why Regulatory Compliant ICO?

Like many, Alex and I first came up with the idea for FloraChain back in late 2017, the cryptocurrency market was red hot, projects were raising tens of millions of dollars with nothing more than a few fancy graphs, pictures and words on a pdf document. Some of these projects looked to be blatant scams or projects that would have an extremely tough time executing but still raising millions of dollars.
We already had working software and the thought was let’s write a really solid whitepaper, put together a team of like minded industry professionals to help propel the business and launch our ICO! Then mid January came along, there were a number of high profile projects that either failed to deliver, ran away with the money or had massive misuse of funds buying lambos, Mclarens, etc. Combined with increased regulatory scrutiny, countries “banning” crypto and hacks, the crypto market lost 70+% of it’s value and the space changed.
Now, we were still ahead of the curve because we already had the platform when people were just looking for a MVP. But people started talking about Telegram and how many people you had in your channel as a gauge of how successful you are or will be. People also started to look at whether you were well rated on ICO Bench and whether you had someone from “page one” as your advisor.

Let’s start with Telegram. It was first being used by techies discussing projects and developments with high IP value. It was secure, you could control who could access and view the information, worked great. In the ICO space, Telegram has quickly evolved into the lazy person’s FAQ page. Every single question being asked in the channel has been asked at least a 100 times. They usually range from: Where can I buy? When are you listing on an exchange? When will I get my tokens? Did I miss the airdrop? What is the web address? And of course, when is the token going to the moon?
Projects started doing bounty programs giving away tokens for people to join their Telegram channel, you don’t have to say or do anything, you just have to +1 to the number of people in the channel. I’d question anyone that says that +1 is truly bringing value to their project. (FYI: There are services that can add people to your Telegram channel, they cost far less than giving everyone 2000 tokens and they can stagger joiners so you don’t look like you ballooned from 1 to 50,000 in 3 days.)

Next up, ICO Bench, this is one of those topics of contention. I think the original concept of ICO Bench was right, peer reviewed, everything transparent but then greed set in. Sure it CAN be free to list on ICO Bench, though the queue might be a year long and you may get terrible reviews because you didn’t pay. The so called top advisors were asking for ludicrous amounts of money to basically guarantee a good rating. As an insider shared with me, having someone from the first page prevents you from getting a bad review from any of the other raters because they are afraid of retaliatory bad reviews by the top advisors or “made men” on projects that they are associated with. But it’s not all bad, there are some good people on there. I had a great hour long conversation (free) with Simon Cocking where he shared a lot of ideas on things I needed to do to drive public interest but there are some guys on there that might end up in jail within the next year.

We were lucky and landed a couple of speaking gigs early on in our development, I guess people liked what they were hearing because I started getting invited to speak (no fees) at other shows around the world. The decision for going with a regulatory compliant ICO came after I had spoken at a number of these shows. Surprisingly, the question that I got the most was “How do I do due diligence?” That question scared me. It showed me how clueless these potential investors were when it came to investing. I do not mean this in a derogatory way, they just have not been exposed to investing in the past and blockchain/crypto opened this door to them. I’m not talking about a detailed business plan analysis, I’m talking about the very basic due diligence just to verify that the so called founders of the project EXIST!

Business plan analysis is a key area of investing. Take the number of projects that want to put medical records on blockchain so that no matter where you are in the world, hospitals have a secure way of accessing them and know how to treat you. Sounds great on paper until you think about execution. Hospitals have a tough enough time digitizing their own hospital records and putting them into their own computers. So by buying into this project, not only do you think hospitals will miraculously be able to digitize their patient records which they have not been able to do well in the last 25 years, you also think hospitals around the world are going to suddenly all agree to use this third party platform to store and share said data. Still sound as promising? As Irwin Stein, a very experienced corporate and securities lawyer says, “No small investor can adequately investigate and evaluate any ICO. They have no way of knowing if a single word in a white paper is true.” That is both a very true and very scary statement.
FloraChain is real and expanding, we are shortening the supply chain, we will be able to provide verifiable data to customs offices to speed up the clearance process, paying growers and farmers more whilst giving better pricing to retailers regardless of size and we have brought on amazing people to help us make it happen. But given what I know about majority of these retail investors in the crypto space, it would be very hypocritical if I took money from them. So we decided to go the regulatory compliant route, in process with filing our Reg D 506c with the SEC which is not as expensive as one might think but also limits us to accredited investors only.
The short version of what classifies as an accredited investor is income of 200k single or 300k married for the last two years and expect the same or more going forward OR you have a net worth of a million bucks excluding primary residence. That probably eliminates 99% of the people in 99.99% of various projects’ Telegram channels. But someone making that kind of money probably has some business acumen to spot the blatant scams and non executable plans.

By filing with the SEC, it gives a small layer of protection for investors because they can at least trust that the project and it’s founders are not brave or dumb enough to lie in their filing with the SEC. Lying to the SEC is probably not one of the things you want to have on your to do list if you want to have a healthy and comfortable future. However, it is important to understand that filing with the SEC does NOT mean the SEC has approved of the project or given any sort of endorsement that the project will succeed. All it means is some company sent the SEC some documents claiming them to be true, who the stakeholders are and that they actually exist and their business plan is not to sell ice to the eskimos, that’s it. It irks me to see certain projects announce “We have been APPROVED by the SEC, our Reg D has gone through!” It doesn’t mean that and by stating that, it probably puts the project afoul of some law out there.

An interesting project coming up is WealthChain, led by entrepreneur and blockchain tech evangelist, Phillip Nunn. WealthChain will give members access to a list of curated and verified digital asset investments. He’s rich, he’s not going to onboard a project simply for a few % of an ICO’s fund raise, his reputation is worth much more than that. But what projects get to participate? Is there a fee for projects? Can FloraChain be a part of it? *hint*

WealthChain looks very interesting and definitely something to keep an eye on. But I would also be extremely interested in taking that concept a step further where the average Joe also has a safer environment to invest in. Doesn’t mean guaranteed, but at least you won’t be investing in these guys. (BTW: That’s Ryan Gosling)

A number of people have come to me saying that this is just traditional fund raising and it eliminates the ability for the average Joe to get into the next Google or Amazon and goes against the entire nature of how blockchain came about. To them I say until someone comes along with a way that regulator like and allows for non-accredited investors to safely invest their money, what we are doing here is protecting them and not excluding them.
