So, is Investment Apartheid Over?

Should we doubt this messy ICO rush as a new norm?

Hello! I am a ̶s̶e̶c̶o̶n̶d̶-̶r̶a̶t̶e̶ unaccredited investor. Within my communication circle, people have mixed feelings about this suddenly and “guzzlerly” funded new crypto capital market:

It’s unbelievable but definitely not just the Matrix glitch — the thing looks too systematic for a temporary lapse of reason.

We all know the average quality of projects and funded teams is insufficient, so the cause of confusion is the absence of a clear factor or actor that drives the unwary demand.

“Greed and coincidence” is too simple and hollow an answer. It doesn’t provide any additional resolution to the odd, grainy picture. Conspiracy-flavoured ideas about “whales” and their meticulous pumping strategies are weak because nothing in this world can accurately manage itself over a few steps ahead. Everything gets swallowed by chaos, be you a double pendulum or senior Mason.

The most common, reasonable and balanced answer so far is to not give an answer and vaguely label the ICO phenomenon as unhealthy and temporary, sort of a “once regulators step in, we’ll see…” remark. But what if this ICO craze is neither unhealthy nor temporary? Let’s look at things with that premise and try to rebut the seemingly reasonable common view.


Speaking of regulations, it takes some extra consciousness to even notice the present segregation. The majority of investors are effectively banned from the entire class of assets with the highest return (and the accompanying risk, of course). To a various extent, that is true for most countries whose financial markets are worth mentioning, not only for the US where there’s plenty of debate over why an accredited investor equals “wealthy” and whether the minimum wealth threshold needs to be increased, decreased or abolished completely.

Our great grandfathers saw such discriminating regulation in power, so by now it has become unnoticed.

Of course, the ban has always been pictured as a part of the “public protection” narrative. Just to add some background to the scene, let me remind you of other threats we are being protected from — narcotics and terrorism. Even to a layman such as myself, who is armed with common sense and open eyes only, these issues look, swim and quack like flimflam.


The reality depicted by contemporaries of Washington Irving and over to Theodore Dreiser does not seem to consider the drug addicts issue in high regard. Since opium was in place and the DEA wasn’t, my humble unprofessional assumption is that if walls are lifted, drug dealers will be wiped out along with corresponding government agencies. I have a similar suspicion that terrorism could not survive if decoupled from practices of taxpayer-funded wiretapping, surveillance, and full-time paranoia consultants.

The high, latent demand of ordinary investors for risky and profitable early stage investment offers is unsatisfied. What’s worse, that helps the Securities and Exchange Commission to divide people’s wealth deeper and deeper.

Just as any other artificial terminator line, segregation of investors into the accredited and unaccredited classes creates at least two money sucking machines: some SEC’s giblets and the particular Wall Street stratum. Blockchain-based crowdfunding shrugs off both, so the ICO craze is the real-life illustration of what happens when the Sophisticated Investor Farce is taken down. By the way, since April 2017 when crypto capitalization started to multiply, the JOBS Act’s laborious, lingering, pathetic attempts look especially anecdotal.

We were all caught unprepared. A few years ago, fellow bitcoiners and I had been anticipating Bitcoin to start pink-slipping retail banks and payment systems, which never happened. But now, the first victims seem to be reappointed: some VCs and investment bankers might soon fall under the pressure of Bitcoin’s children and grandchildren such as Ethereum, AntShares or UBIQ.

To view the recent crypto-pseudo-IPO volée as the declaration of war on incumbent VCs and IBs is a misapprehension, it rather looks like the end of the long cold war against individual “unaccredited” investors.

The fall of the Berlin wall had its nasty moments. The new breed of freedom was hard to install and use. Some people still liked it the way things were before, some preferred the new times, the active minority enjoyed the unpleasant present and made fortunes exploiting the transition irregularities.

The point of this post, however, is not to compare consequent epochs. It is about using a historical analogy to set a useful and practical-minded attitude in the new capital market landscape.


There are many similarities to what happened when the iron curtain was removed in the late eighties and this current effective (self-proclaimed) lift of the ban on startup investments for the general public.

Poor Product Quality Compensated by Abnormal Demand

In the Communist bloc territories in 1989–1992, after decades of the severe shortage of basic goods, consumers were happy to buy and drink technical-purpose alcohol produced in the West. In the ICO environment, many investment products are consumable, but most are inferior. And the abnormal demand we see is the cause of most discussions including this one.

Irresponsible Business and Deliberate Exploitation of Regulation Vacuum

Back then, many roguish businessmen from prosperous parts of the world were selling trains of expired food, low-quality electronics, and counterfeit “branded” clothes to miserable ex-communists. They were not breaking the word of law, but they certainly realized the wrongdoing by the standards of their home countries. The same is true for many active multi-project supporters and ICO entrepreneurs now. Let me note here that the history of the nineties should have taught those ready to compromise themselves that the backfire is quite probable and painful. It should be expected from the side of wild consumers in the first place. When properly applied, the law stands in between the two parties and protects both buyers and sellers from each other, not one way only.

No Professional Elite at Play

In the early years of post-communist transformation, global trade was represented in Eastern Europe and Russia by sleek rascals with a questionable reputation at home in the West. Now, the ICO landscape lacks prominent and reputable people from the incumbent professional investment community as well. Moreover, the more third-rate, ex-Wall-Streeters you see on a project’s team page, the more red flags you notice elsewhere on that ICO due diligence list. Blatant scams targeted to low-end idiots have someone (or a ghost of someone) with a London City past as a must.

Maintenance of Morality — A Job for a Few Selfless Heroes

Now and then, exactly the opposite can be said about people standing on nonprofit, scientific and humanitarian grounds. Swarms of various religion and meditation “gurus” aside, it was people who arranged scientific collaboration who allowed many good citizens living in post-communist ruins to not totally lose faith in humankind. Now in crypto-space, only figures like Andreas Antonopoulos inspire unconditional respect. Of course, ICOs are only a subset of the broader crypto/blockchain movement, but the noise it produces hardly allows outside observers to hear anything else today.

Local (Inner Circle) Celebrities are Mostly Dangerous Clowns

Those who satisfied the demand on the post-communist territories locally distributed inferior goods to their compatriots (consumed it as well, by the way), wore clownish but locally differentiating business suits, enjoyed life, and killed each other on a daily basis. Today, by normal [old] standards there are no gentlemen in the ICO space either.

Disbalance in Supply Distribution by the Nation States

The structure of trade back then did not correspond with normal global stats. Business communities of few nations — seemingly irrelevant to a particular industry segment — took the lead and supplied at disproportional volumes. Today, we can see many ICOs originated in Russia. For example, during the pre-ICO-boom years not many blockchain innovations were born there.


Of course, most ICO investors can’t tell alpha from beta. Their portfolios will be stuffed with trash assets and will bleed. But maybe, they existentially need to pay back for the investments freedom they finally have a chance to acquire and possess? Maybe, there are more people capable of evaluating the quality of potential investments than government agencies made us believe there are?

The ripples the investment apartheid generated through the socio-economic landscape have gotten reinforced over many generations. This has deepened the systematic economic segregation.

Entire classes of people are severely discriminated based on their income. That’s not fair and maybe even unconstitutional. So, should we accept the risks of new capital market reality to at least try to become free? Probably, yes.


What are the practical implications of the entire situation for a fundraiser?

Despite the pathos of p2p market in the blockchain world, if you want to ICO your project and be competitive, you’re going to volunteer for some help of a go-between. There are plenty of “token sale launch” agencies and they won’t try to rip you off as investment bankers normally do. There’s also no SEC on your tail [yet]. But there are other difficulties and risks. Below are a few observations readers might find useful.

At the moment, token initial sales support is a seller’s market, so it is an ICO “underwriter” who chooses whether to take your project on board or not. Ironically, this refers to all providers, starting from fully legal respectable Swiss brokers to scum-hubs from less regulated countries. The tide of new projects isn’t going to reverse anytime soon, so you have no choice but to compete at this stage just as you did before with IPO underwriters.

It is your reputation at risk, not ICO launching platforms who might not even care about their own one. Beware of timeservers and placemen on this market-in-transition.

Make sure you apply to the best underwriters only. To be able to do so, get your website and white paper to the most advanced level you can before you apply. Try to design your coin idea in-house using the moderate help of an independent unbiased consultant. Take your time. Prepare yourself thoroughly. Don’t hurry, looks like the wall has fallen forever.


ICO launchers tend to recommend the coin/token setup for you which is more convenient and familiar to them, not the most appropriate for your business. They are also likely to advise you in the blockchain platform which will minimize their efforts and maximize the proceeds (and their commission).

A coin model imposed with mostly fundraising purposes in mind may become a burden later considering it is much harder to change the already emitted and distributed crypto token than a corporate stock structure.


This is the new technology wave, after all. Many rusty tools are remade from scratch. Not only have the equity issuance and handling mechanisms become infinitely better, many sideline services are also presented at a completely new level. Today, you can staff and manage your startups with so much more efficiency. The beginning of this century has become an age of the big fix. Not much principally new stuff was invented, but we seem to have fixed the most important part — communication. Transportation, energy, money and governance are on their way.

Thus, despite all the negativity I have brought to the surface above, the sum of the equation is definitely positive.

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