The World's Largest ICO Is Imploding After Just 3 Months

Tyler Durden's picture

Earlier this summer, Tezos smashed existing sales records in the white-hot IPO market after the company’s pitch to build a better blockchain for cryptocurrencies made it one of the buzziest ICOs in the world. As we noted at the time, the company capitalized on that buzz by courting VC firms and other institutional investors with a $50 million token pre-sale. After the company opened up selling to the broader public, demand soared as investors greedily bought up tokens in spite of glitches that threatened to derail the sale early on. By the end of its weeks-long token sale in July, Tezos had sold more than $230 million.

Now, Tezos is proving that authorities in the US and China were on to something when they decided to crack down on the ICO market, which has become a cesspool of fraud and abuse. To wit, the company's management revealed this week that progress on its vaunted product has stalled as it has struggled to recruit engineering talent, and an acrimonious dispute between several of the company’s leading figures has spilled out into the open.

As WSJ’s Paul Vigna reports, “a battle between the founders of the company and the head of the Swiss foundation they installed to give it more independence has put most trading of Tezos coins on ice, possibly until early next year.”

The shakeup started after Tezos founders Arthur and Kathleen Breitman reported the delays in a blog post published Wednesday. But even more alarming, the pair accused Johann Gevers, the head of a Swiss foundation which oversees their funds, of attempting to overpay himself using the massive pot of investor capital - despite the fact that the company will likely blow through its promised deadline of allocating tokens to buyers by December (the tokens have yet to be created).

In early September we became aware that the president of the Tezos Foundation, Johann Gevers, engaged in an attempt at self-dealing, misrepresenting to the council the value of a bonus he attempted to grant himself. We have been working with the Tezos foundation to resolve the matter and have advocated for his removal from the foundation council. We are confident in the council’s ability to handle this sensitive matter with care and diligence. In the meantime, Johann’s operational role in the foundation has been suspended, pending an investigation by the council’s auditor.

The news sent Tezos futures contracts trading on BitMex, an exchange known for its cryptocurrency futures products, tumbling more than 50% as traders unwound bets the project would be launched before the end of the year, as Bloomberg pointed out.

Tezos’s struggles underscore the biggest flaw in the ICO market: Investors keep throwing capital at companies hoping to luck into the next bitcoin, even though most companies don’t have a working product and many have relied on “white papers” fleshing out their ideas to market their tokens, a strategy that has been surprisingly (or perhaps unsurprisingly) successful. To wit, ICOs have raised more than $3 billion this year according to Bloomberg, far surpassing Pitchbook analysts’ expectations for $1.7 billion by the end of the year.

The ICO was run by the Tezos foundation, which is based in Zug, Switzerland. Most ICOs are built on top of Ethereum’s platform. However, the impact on ether tokens was fleeting, with ether seeing a slight dip before moving higher early Thursday.

Under Swiss law, the Tezos foundation is supposed to be independent of the company that owns the nascent Tezos software. Because of this, the foundation holds all of the funds raised, which have mushroomed to more than $400 million in value because the contributions were made in two cryptocurrencies – bitcoin and ether – which have appreciated sharply in the past few months. But the battle between the Breitmans and the Gevers is threatening to derail the whole project, according to Reuters.

Reuters is also reporting that the Breitmans, who first opened a corporation in Delaware to work on the Tezos code, failed to make certain regulatory disclosures made necessary by Arthur Breitmans’ employment at Morgan Stanley.

Reuters reviewed a copy of a “Tezos Business Plan” from early 2015, which listed Breitman as chief executive. The plan projected that if the company survived 15 years, it would be worth between $2 billion and $20 billion. The budget called for paying Breitman $212,180 in salary by year three. In August 2015, Breitman, who was still working at Morgan Stanley, set up a company in Delaware called Dynamic Ledger Solutions Inc, or DLS, to develop Tezos. He listed himself as chief executive.

The U.S. Financial Industry Regulatory Authority (FINRA) requires registered securities professionals to provide prior written notice to their employer to conduct outside business activities if there is “reasonable expectation of compensation.” According to FINRA records, Breitman was registered and did not report any “other business activities.” Morgan Stanley and FINRA declined to comment.

Reuters also revealed that Tezos exaggerated its progress in its early days, following a seed investment by noted VC and blockchain enthusiast Tim Draper.

In pitching the story to Reuters, John O’Brien, a principal of Strange Brew, had made claims about Tezos’ progress. He wrote: “The applications of Tezos, ranging from derivatives settlement to micro-insurance, are real and recognized by industry giants. Ernst & Young, Deloitte, LexiFi, etc. have adopted Tezos in their development environments and labs.”

On Oct. 3, a spokeswoman for the accounting firm Ernst & Young told Reuters: “The statement is not correct. EY has not adopted Tezos.” A spokesman for Deloitte said Tezos’ code is “one of many technologies we’re considering” with blockchain, but it’s “still early stage and we haven’t used the technology for a client project.”

With the SEC already having filed the first civil charges against a man who launched two ICOs that the agency claims were completely fraudulent. If Tezos were the subject of regulatory action - the company’s founders said they chose to base the project in Switzerland because it didn’t have “too much oversight” - or even if it were to collapse in a heap of broken promises, its collapse has the potential to crash the whole ICO market.


Kathleen Breitman

Then again, given the resilience of other cryptocurrencies, it’s difficult to discern whether Tezos might become the ICO equivalent of Mt. Gox, or whether it will ultimately be remembered as a blip.

At this point, only one thing is certain: Tezos investors who’d hoped to receive their coins by the end of the year are bound to be disappointed.

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koan's picture

Tezos (tease-O's) was always a scam IMO, take for instance their "refund" that never occurred, because they made to much money on it.

Deathrips's picture

America imploding because everyone needs to pledge allegiance to ISrael. Or no flood insurance for you.

 

OT Tylers get on this.

Dickenson texas wont pay flood insurance unless you agree to support and not boycott ISRAEL!!!!

Page 2 number 11. Link to official website of dickinson TX.

http://www.ci.dickinson.tx.us/DocumentCenter/View/2016

 

Sooo.......WTF!!

 

RIPS

 

IH8OBAMA's picture

What?  Crypto currency can go down?  But...but...tmosely said they are going to the moon!  The future of currency and all.

 

Hugh_Jorgan's picture

*** WOW! SHOCKER!!!!!!!! *****

mtl4's picture

Nice to see the H&R Blockchain still has no clothes........VC scammers like moths to a flame.

YUNOSELL's picture

PonziCoin is where it's at and will keep getting bigger and bigger, until it can't anymore

Creepy_Azz_Crackaah's picture

Not possible.  PonziCoins can only go up, Up, UP!!!  Becasue of math.  Rare math, I'm told.

Totally FAKE news!...

Keep buying.

tmosley's picture

But nobody ever said that.

Why do you feel the need to say such childish things?

BaBaBouy's picture

Soo . . . What Happens When BITcoinz Implodes ? ? ?

Where Is the Complaint Box located ?

abyssinian's picture

such a moronic question. lol horse tooth jackass

MagicHandPuppet's picture

There can be only one true bitmonies!!!  Satoshi Nakamoto already thought of everything, and he already coded the world's tangible assets into his crypto currency... not into these copycat imposters, not even worthy of keeping scores for Fantasy football!

;)

VD's picture

Free "Satoshi"

 

or so they said...

God Emperor's picture

"Tezos founders Arthur and Kathleen (((Breitman)))" says it all.

Hang them high !



Dame Ednas Possum's picture

They're not getting their 'coins' ***cough***cough...

Interesting. 

Several days ago Kitco delivered the 15 silver and 1 gold liberty coins sat securely in my hand luggage resting alongside me. 

 

Tezos coins... so rare they don't even exist. 

 

HenryKissingerZuckerberg's picture

So their tax avoidance SPVs scheme is so complicated they have lost control of it?

NICE!

VD's picture

when bitcoin explodez, which it will 100% at absolute zero, tmoron pimps his poor old moms out on the street corner. so sad.

IH8OBAMA's picture

The Binconers who think they are rich are only rich if they can liquidate at price and do it before point zero.

blentus's picture

I have been listening to this since early 2012.

It's really taking a long fucking time.

On the other hand, I have also been listening how gold will go to $5,000 since 2012 as well.

Mostly on this site.

You guys really know what you are talking about, indeed.

Stuck on Zero's picture

Throw out a buzzwords when a market is hot and you can raise billions.

Ghost of Porky's picture

I invested because she looked smart with her glasses and said all kinds of tech words and shit.

VD's picture

& u thought she'd take you to the crypt0 vault LOL and give u a blowjob in the tunnel. oh well. eazy cum eazy go in the crypt0-ponzi that Deep Corp is using to get muppetz conditioned to cashless world while promising vast crypt0-fortunes. it will not end well.

btClunker's picture

Because that's what people say when they are not in the arena. 

Odegaard Falls's picture

So you have a position? That's his thesis, perhaps he thinks its tantamount to tulips, or the tech bubble backed by nothing with nothing, i would lean in that direction if i had a financial give'a'fak,  alas I don't, so stop with the childish reponse? Are you now not projecting what you have accused, i'm just confused?

Odegaard Falls's picture

So you have a position? That's his thesis, perhaps he thinks its tantamount to tulips, or the tech bubble backed by nothing with nothing, i would lean in that direction if i had a financial give'a'fak,  alas I don't, so stop with the childish reponse? Are you now not projecting what you have accused, i'm just confused?

PN7's picture

October 25th.  Big Day.  Bitcoin Gold.  Looking forward to getting my new coins.  And I like the idea of getting away from domination by ASIC miners and giving the nerds with their home computers a chance to mine coins again.

Pay no attention to the idiots.  Good luck.

BigJim's picture

Tulips. It's what's for dinner.

Ya know, T, after being so wrong about silver, one might expect you be just a little more modest about your current prognostications.

tmosley's picture

When conditions change, I change my thesis. Only retards stick to their prognostications after new evidence shows up that is contrary.

It is the same thesis--paper gold and paper silver to zero. Just now there will be no monetary demand spike, and with cheap energy and new technology, no industrial panic. The monetary demand shifted to crypto.

So I sold silver and bought crypto.

BigJim's picture

I'm not suggesting you stick with your previous (and very, very wrong) "thesis"; I'm suggesting you be a little less arrogant in asserting your current thesis, given your previous crystal ball failure.

Four chan's picture

wow another pink sheet scam, id rather talk about the deep state and hillary getting btfo by trump. maga

SILVERGEDDON's picture

I think tmosley had moved his entire nut into Tezos this summer. 

Gawd, his timing sucks.

He bought silver balls in deep at the peak in 2007 at 50 bucks an ounce, too.

Almost like he is the offspring of a 3 way between Gartman, Summers, and Middleton. 

tmosley's picture

You don't think, though. You just let your lizard brain do the typing. 

Easily exemplified by your supposition that silver was $50 an ounce in 2007 when I started buying.

Creepy_Azz_Crackaah's picture

Very impressive the way you collect so many down votes, tmosley.  Large quantities of people are just too stooooopid to understand your brilliance.  Keep calling them peanutz.  Eventually that will convince them.

VD's picture

he comes for the "abuse" -- he's addicted to it.

tmosley's picture

I have no need for your approval.

VD's picture

aw come on man, ease up. you're too invested in this whole thing. it's all fun and games here. be eazy. they're ribbing you is all.

Bay of Pigs's picture

Correct, it wasn’t ever at $50. Silver peaked on Friday April 28th, 2011 @ $48.70. It was there for exactly ONE weekend before the CB’s and paper humping faggots took it down that next Sunday night in Asia. It went to $43, $40, $37 and $34 over the following 4 days. The price has never recovered to those higher levels although it did breach $40 before being slaughtered again in 2013.

Back in 2007, silver traded between $13-15 bucks.

VD's picture

so sad how buy silver crash jpm didn't pan out. oh well. i think silver at some point exceeds $50 and goes much higher. when? who the hell know. when Deep Corp decides to pump up the muppetz -- maybe next time it's buy silver crash (____) or some such.

tmosley's picture

>laughs about people buying silver

>buys silver himself

Hypocrite.

VD's picture

i haven't bought silver in long while. come on, ease up. you're taking this way too seriously.

 

i propose we all stop making fun of tmosely. he may come off a bit rough and crazed, but he means well. everyone has a right to their convictions. lets all stop slinging shit at each other.

IH8OBAMA's picture

Maybe Stephen Paddock was a Bitconer and came to ZH and couldn't handle being spoon fed the truth.  Are we missiing any Bitcon posters lately?

 

manofthenorth's picture

Fuck you, shit slinging sells. This used to be fight club, not fucking daycare for brokedick slackers.

Stupid fuck wants to call names and start shit ??? GREAT !!!!

Sling some shit I say !!!!!

Sometimes being nice and getting along is fucking bullshit.

11b40's picture

And ther was no ZH IN 2007.

BarkingCat's picture

Bitcoin is about to crash.

How do I known?  I am serious about buying some.

ZorroHedge's picture

It won't crash before 25 october.

tmosley's picture

It could, but it seems to be basing for another run. Though the gap to $5000 failed to fill, and there isn't all that much ground between here and there to cover, I'm not sure we will see it again. Institutional buying and all that. Also think the markets are learning to ignore the proclaimations of the bankster dinosaurs.

If you don't have an exchange account set up and ready to go, now is probably not the best time to buy Bitcoin, as you are unlikely to be able to get all that set up, your coins bought, and moved into a private wallet before the fork, meaning you will miss out on the "free coins", or at best, have to wait a long time for the exchange to make them available to you.

There might be a correction or even a crash after the fork as people move out of bitcoin and back into the alts. Indeed, it might be a good idea to buy the alts now and profit off of that surge.

BigJim's picture

Silver peaked in 2011, idiot.