Class-Action Suit Targets ICO Promoted By Floyd Mayweather, Jr.

An initial coin offering (ICO) promoted by boxing champion Floyd Mayweather, Jr., is at the center of a newly filed class-action complaint.

Dated Dec. 13, the lawsuit names Sohrab Sharma, Raymond Trapani, Robert Farkas and William Hagner, as well as Centra Tech, Inc., as defendants, accusing them of violating U.S. securities law through a token sale that ultimately raised $30 million for the development of a cryptocurrency-focused debit card.

The filing comes more than a month after two of the firm’s founders left the startup. According to an Oct. 31 blog post from Centra, both Sharm and Trapani exited the project following the sale’s completion, as well as a profile of them and the ICO by The New York Times.

In the complaint, lawyers for the plaintiff alleged that the Centra sale constituted an unregistered offering and sale of securities.

They wrote:

“…in connection with Centra Initial Coin Offering (the “Centra ICO”), Defendants raised over $30 million in digital cryptocurrencies by offering and selling unregistered securities in direct violation of the Securities Act.”

The complaint also accused the defendants of misleading investors about the nature of its relationship with card networks Visa and Mastercard, as well as listing fake team members on its website.

In a statement posted to its blog, the Centra team disputed the lawsuit filed by “an alleged purchaser of Centra Tokens.”

“This lawsuit, which for the most part, appears to repeat unfounded claims regarding Centra Tech, alleges that Centra Tech’s initial coin offering of Centra Tokens was an unregistered sale of securities. The plaintiff’s complaint attempts to mimic claims and allegations the Securities and Exchange Commission has lodged against other cryptocurrency offerors,” the startup wrote, adding:

“Centra Tech disputes the allegations in the complaint.”

The Centra ICO was notably promoted by Mayweather as well as music producer DJ Khaled prior to its completion. Though the timing is currently unclear, the original posts by Mayweather on Instagram and Facebook that promoted the sale appear to have been deleted, and a post on Instagram by DJ Khaled is also unavailable as of press time.

Neither Mayweather or Khaled were named in the suit.

Jacob Zowie, the plaintiff, is being represented by Komlossy Law and Levi & Korinsky LLP in the suit. A representative for Mayweather did not immediately respond to a request for comment.

A full copy of the class-action complaint can be found below:

367102541 Rensel v Centra Tech Inc Etal 1 17 Cv 24500 JLK S D Fla Dec 13 2017 Class Action Complaint by CoinDesk on Scribd

Image Credit: Funtap / Shutterstock.com

Editor’s Note: This article has been updated with comment from Centra Tech.

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As Wall Street Bids Up Bitcoin, Tactics Change for ICOs

Dr. Paul Ennis is an assistant professor at The Centre for Innovation, Technology & Organization at University College Dublin, specializing in bitcoin and blockchain studies.


November was a tricky month for initial coin offerings (ICOs).

But one thing’s for sure, the hype has most certainly cooled in an environment where Tezos has been beset by legal issues and Bancor by technical glitches, both reported by CNBC no less. Even more remarkable than the press attention, the report suggests, “just 23 percent” of ICO deals are now reaching their maximum goals.

This is no doubt linked to the bewildering array of ICOs currently on offer, all competing for the attention of investors at a time when simply holding bitcoin or one of the stronger alternative cryptocurrencies might be more appealing.

Furthermore, the ICO media-sphere remains immature, and this makes it difficult to assess what information is good or bad.

All told, this situation is particularly stressful for those ICOs that aim to avoid the hype cycle and operate cleanly. One recent ICO, Confideal, missed its target by a considerable amount, raising approximately 303 ETH ($160,000) of a projected target of 70,000 ether (roughly $35 million).

This was particularly frustrating for CEO Pyotr Belousov, who told The Global Blockchain that the market is “full of startups who can’t demonstrate any product or prototype, only a white paper and vague promises,” noting that this “reduces trust in all ICOs.”

It is an interesting phenomenon, then, that an ICO with a demonstrable product, in this case a functioning smart contract app, can get lost in the haze and effectively lose out to a hyped-up ICO running primarily on promotional steam.

Belousov has responded to this failure by taking a new strategy: the relaunched ICO will have a much lower cap, 5,000 ether, and it will target cryptocurrency whales and investment and hedge funds active in the space.

In other words, ICOs may look in the future to target large funds rather than rely on the collective power of smaller individual investors.

So many fish

The overall trend looks to center on how to distinguish one’s ICO within the sea of generic options. One tactic is to avoid the “ICO template” website look that has dogged the area since its beginnings.

The aesthetic is no doubt familiar to us all, a white paper, a list of team members with minimal details and social media accounts with tumbleweeds passing through.

In response we are starting to see more visual creativity in the space, as in the bubbly aesthetic of ICOs such as MetroCoin. This shift is welcome, disrupting the empty slickness that has beset the space for quite some time. Another approach may simply be to aim exceptionally high (pardon the pun) – flying taxis in Dubai, courtesy of McFly anyone?

Perhaps one of the most significant, but under-the-radar, moves has been to capture big-name advisers, as in the case of NAGA, which has brought onboard no less a figure than “Bitcoin Jesus” himself, Roger Ver.

Ver told The Global Blockchain that he was “honored to be involved” as an advisor to a company that “shared his ideals.”

It is difficult to say whether these moves will pay off, though NAGA has currently raised a highly-respectable $17,165,44 for its pre-ICO at the time of writing, a number that outscales many actual ICOs at this point.

Goodbye Easy Street

ICOs, therefore, are coming to terms with reduced expectations. In short, they must now actively pursue an audience, rather than expect one to arrive passively.

However, this creates the right conditions for the differentiation of projects. The ideal outcome is that investors, as per the wishes of the U.S. Securities and Exchange Commission, become more discerning about their investments in ICOs, avoiding the potentially misleading celebrity endorsements in favor of a more investigative zeal.

It also puts pressure on ICOs to avoid lapsing into genericity, a vague landscape of future promise, a kind of crypto variation on vaporware.

Reuben Godfrey of Deep Green consultancy, who advises no less than 14 ICOs, told The Global Blockchain that he has seen subtle but important changes in the ICO ecosystem in this regard, with projects using the funding vehicle now having to work hard to make clear what they have to offer.

In other words, the days of simply assuming investors will buy up any token are gone and in their place we enter the era of the discerning ICO investor.

Strategy image via Shutterstock

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Source: The Global Blockchain

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

‘All-You-Can-Fly’ Airline Begins Accepting Bitcoin and Ether

Regional airline carrier Surf Air announced late last week that it would support bitcoin and ethereum payments for its monthly membership and charter services.

The “all-you-can-fly” private airline will allow users to pay for their seats with either cryptocurrency through a mobile app. It serves several cities in California, Texas, and Europe, according to a press release.

The company allows members to pay a monthly fee in order to fly as many times as they want, according to the Independent. Passengers are also pre-screened through a government-approved background check. As a result, they do not have to wait in security.

The cryptocurrency acceptance is being conducted in partnership with Coinbase, which will handle the payments side. In statements, CEO Sudhin Shahani said that the move to accept bitcoin and ethereum forms part of their wider efforts to disrupt air services.

“Digital currency has been on our radar from the very beginning and we are excited to provide our members with another quick and seamless way to do business with Surf Air,” he said.

Airlines – particularly smaller, regional ones – are no strangers to the cryptocurrency world, with a number having begun accepting bitcoin over the years. Indeed, the airline industry has also moved to explore applications of blockchain, including in areas such as ticket disbursement and maintenance tracking.

Aircraft image via Shutterstock

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Teams and Products Aren’t the Only Way to Weigh Tokens, Says Ehrsam

Don’t launch a token no one wants today.

While that may seem obvious, it’s the distilled version of the advice Coinbase co-founder and board director Fred Ehrsam gave during his fireside chat at Token Summit II, a conference taking place today in San Francisco.

According to Ehrsam, demand in the crypto space is driven by people who are actually using the technology – largely entrepreneurs and developers working at crypto startups and early investors interested in building the basic architecture of the decentralized economy.

Demand isn’t coming from consumers interested in the prospective benefits of a blockchain-based Uber or Airbnb, he continued.

And in turn, Ehrsam – who since leaving Coinbase has continued to invest in and advise crypto projects – said that evaluating new tokens is about “matching the token and the project to the maturity of the ecosystem.”

Sure, the quality of the team and the progress they have made on building on their product are also good indicators of successful projects, but still, there are projects the world isn’t ready for yet.

Turning back to valuable projects for the ecosystem today, Ehrsam, specifically pointing to TrueBit and Basecoin, said:

“It seems clear to me that developers in this space would want a scalability solution or a stable coin.”

For example, blockchain developers, including those for the two most widely used networks – bitcoin and ethereum – have been under pressure recently for the technology’s inability to scale for new adoption. Bitcoin’s scaling debates created enough contention this year that several groups split off the main chain, creating competing cryptocurrencies.

Formula for success?

Otherwise, Ehrsam said he relies on an equation he learned as a currency trader to guide some of his investments – MV = PQ (money supply multiplied by the velocity of money is equal to the price of goods multiplied by the number of goods sold).

The velocity of money simply means how many times a given unit of money changes hands. So, if a lot of people are using a given product, then it should have a fairly high velocity, which starts to show the value of the overall protocol.

“Through this equation, I think you can start backing into how much a token is actually worth,” Ehrsam said.

However, he acknowledged (and moderator and Token Summit organizer William Mougayar agreed), this model requires more research.

Velocity, Ehrsam continued, is the most sensitive measurement in the crypto industry, since it depends on getting tokens into the hands of people likely to use them.

Because of that, many in the crypto community respond well to the “perception of fairness” in the economics of a token, whereby tokens favor potential users over speculators.

Citing the popularity of bitcoin betting site Satoshi Dice and the ethereum-clogging CryptoKitties, Ehrsam said the most valuable products today are sometimes the simplest decentralized apps (Dapps). He concluded:

“I think it’s really critical that people get the game theory around their end goal absolutely right.”

Image by Brady Dale for CoinDesk

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Source: The Global Blockchain

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

A Missouri Lawmaker Wants to Ban Blockchain Gun Tracking

A Missouri lawmaker wants to prevent blockchain from being used to track firearms – in most cases, that is.

State Representative Nicholas Schroer (R-107), public records show, is introducing a bill that would make it illegal to use a distributed ledger and other types of decentralized databases to hold firearm owner information.

The draft measure states:

“It shall be unlawful to require a person to use or be subject to electronic firearm tracking technology or to disclose any identifiable information about the person or the person’s firearm for the purpose of using electronic firearm tracking technology.”

The act provides for some exceptions, however. Those carve-outs cover law enforcement officials, sellers who use a distributed ledger or similar technology to report sales to the state, and firearm owners who have provided written consent to have their weapons tracked on a ledger.

Schroer’s bill was also careful to differentiate between electronic firearm tracking technologies, which refer to distributed ledgers or other decentralized databases, and official law enforcement tracking systems like the Missouri Uniform Law Enforcement System (MULES) database.

If passed, the bill states that anyone who illegally tracks firearms on a blockchain could be found guilty of a Class E felony. Class E felonies are the least severe of Missouri felonies and can be punishable by up to four years in jail, according to law firm Carver Cantin Mynarich, LLC.

Notably, the Missouri bill nearly identical to one signed into law in Arizona in February, which also makes it illegal to track firearms on a blockchain unless the user is in an exempted category (that measure, too, includes carve-outs for law enforcement and the like). That bill was signed less than a month after it was first introduced in mid-January.

Guns image via Shutterstock

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Token Summit Surprise: OpenBazaar to Launch Layer-Two Coin

“Over the last six months, things have changed a lot, I don’t think it makes any sense for us to be bitcoin only.”

That’s according to Brian Hoffman, CEO of OB1, the development company behind the decentralized e-commerce protocol OpenBazaar, who announced today the project will seek to incorporate a token into its existing product offering sometime in 2018.

Announced at Token Summit II in San Francisco, the news was revealed onstage by Hoffman, who indicated that it represents a response to ongoing congestion on the bitcoin network that he said has made it less useful for payments.

Still in its early stages, the white paper for the OpenBazaar Token (OBT) will be released in Q12018, with the goal of soliciting feedback from the community before any sale, Hoffman said.

However, Hoffman continued, that feedback process has already begun.

For example, he reported the idea has been floated around to industry insiders to get a sense of the reaction. One of the more notable and beloved projects built on the bitcoin protocol, Hoffman suggested he expects the response to the move will be critical.

“I’ve already floated it to people who will give me shit, so I have a sense of what we’re going to get,” Hoffman said.

As such, his comments echo other bitcoin entrepreneurs who have embraced a business model that includes the use of alternative protocols with publicly traded tokens. Earlier this year, startups Storj and Tierion, for example, made similar moves to varying degrees of backlash.

Still, Hoffman cautioned that this move can’t quite be equated with those decisions, as OpenBazaar will still use bitcoin as its main protocol. Rather, OBT will be used to reward the users of a forthcoming “channels” feature, in which fixed addresses for commerce would be auctioned off in a real-time bidding process.

As revealed in May, the channels feature was planned for the project’s Milestone 2 update, but was pushed back in development.

Hoffman explained that channels would be a way for solving OB’s discoverability problem.

The new feature is “basically a way for anybody on the network to make a curated list of content.” Hofman said, adding:

“You will be able to monetize that value to the network through the token”

Brian Hoffman at Token Summit II image via Brady Dale of CoinDesk

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

ICO Delayed by Ethereum’s CryptoKitties Congestion

The viral CryptoKitties ethereum app has sparked growing congestion on the network, a state of affairs that has spurred one startup to briefly postpone its planned initial coin offering (ICO).

The token sale for SophiaTX was originally planned to start on Dec. 5. SophiaTX, according to its website, is developing a blockchain platform for business-to-business use cases.

Yet the activity around CryptoKitties – an ethereum-based app that uses tokens to represent digital cats that can be traded, exchanged or bred to create more e-pets – has effectively clogged up the blockchain. And while some are calling it a “killer app” for ethereum, the resulting interest is resulting in potentially longer wait times for would-be transactors, including those trying to participate in token sales that accept ethers, the cryptocurrency of the ethereum network.

As a result, the SophiaTX team announced today, they will hold the ICO’s start until this Thursday, Dec. 7.

“We have decided to delay the [token generation event] start by 48 hours because a very large number of participants will use ETH during and it would be a major disappointment if their attempted contributions wouldn’t be processed timely and that would result in a significant backlog of transactions with very long waiting times,” they said in a statement.

It remains to be seen whether the interest around CryptoKitties will lead to similar decisions. Statistics from ETHGasStation.info, a network data provider, suggests that the network congestion has eased somewhat compared to yesterday,

Cats waiting in line image via Shutterstock

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‘More Bang for Less Byte’: ICOs Confront Growing Pains

If the opening reception at Token Summit II was any indication, the initial coin offering (ICO) market is still brimming with enthusiasm – but struggling to figure itself out.

The Global Blockchain arrived last night only a few minutes after the start time, but the room was already full of people eager to share their ideas about the potential applications for the new mechanism for raising capital and giving users a way to interact with decentralized platforms.

According to Laurent Féral-Pierssens of KPMG Canada’s emerging technology group:

“I think the whole equity-to-liquidity roadmap is being redesigned as we speak, and it’s all happening over the next 24 months.”

Yet exactly how it will be redesigned remains an open question, with several key issues yet to be resolved: How should investors evaluate token offerings? Can blockchains scale to accommodate all the proposed use cases? And to what degree will Web 2.0 companies get involved?

 These questions will be explored today as the conference, hosted by angel investor William Mougayar, in San Francisco – the sequel to the first Token Summit held in New York City in May – kicks off in earnest.

Token metrics

 In a sector with a lot of potential and hardly any products in the market, investors are grappling with how to differentiate good opportunities from the duds.

 The default answer on validation seems to be “the team,” but what does that really mean?

 In the immediate term, Kenetic Capital’s Jehan Chu gave a specific answer, telling The Global Blockchain:

 “The number of devs you have on your project is highly underrated and a metric that is not asked enough.”

Scalar Capital’s Jordan Clifford (a Coinbase alum) got even more specific, pointing to the scaling challenges facing the network. He’s looking for companies whose business plans have factored in the reality that blockchains aren’t ready for high volume usage.

 “They need to have clever strategies for how they are going to scale and get more bang for less byte,” Clifford said.

 He described the blockchain as a commons, and said he’s looking for developers with the skill to “push as much of the problem off the main chain.”

Can they scale?

Which raises the most fundamental question for the industry: can this technology handle all the work entrepreneurs envision for it?

While the ICO industry frets about the possibility of a regulatory crackdown, such interventions are a moot point if distributed technology can’t be fast, reliable and deliver a great user experience.

Because of this, multiple projects are ongoing to find ways to scale blockchain to allow for an ever-growing number of transactions without substantially increasing the cost to facilitate those transactions.

Sardor Umarov is the co-founder of what he hopes will be an important blockchain-based hotel management app, BookLocal. His family also runs the Exchange Suites in Memphis, where they will be testing his solution. By the time they’re happy with how it works, he said, he is optimistic the networks will be ready.

 “Let’s just assume two years, the latest prediction,” Umarov said. “There’s just so many scaling options.”

Another entrepreneur and former VC in the energy sector, Jeremy Adelman, agreed. A co-founder of Bluenote, one of the companies presenting today, he said he’s not nervous about the infrastructure’s readiness to decentralize the global energy markets.

 He told The Global Blockchain:

“Human ingenuity will find a way to unlock the most value.”

 He could be right, but it looks tough currently, since programmatically bred cartoon cats are clogging up the ethereum network this week.

Wild card

But while blockchain developers work to find solutions to the technology’s scaling problems, more and more mainstream companies are being lured into the space.

 It will be telling if established internet companies have representatives at Token Summit looking for new ways to ship (in the Silicon Valley sense of “getting products out the door”).

After all, one baby unicorn, the messaging app Kik, has already distributed its own token, which it announced at the first Token Summit.

Mougayar has promised a big announcement – will it be another familiar name entering the space? Stay tuned to The Global Blockchain for updates.

Token Summit II image via Pete Rizzo for CoinDesk

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Source: The Global Blockchain

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Tokyo Financial Exchange Planning Bitcoin Futures Launch

A futures exchange in Tokyo is reportedly taking the first steps toward launching bitcoin-related products.

Bloomberg News said earlier today that Tokyo Financial Exchange has formed a working group as part of an early effort to start listing futures contracts based around the cryptocurrency. As the news service explained, this would constitute a first step toward pushing for a change in Japanese national law that would clear the runway for a bitcoin future.

The disclosure came on Dec. 1 during a press conference held by CEO Shozo Ohta, during which he said that the exchange would seek to move quickly pending regulatory approval.

Ohta said at the time:

“Once the Financial Instruments and Exchange Act recognizes cryptocurrencies as financial products, we will list the futures as quickly as possible. To achieve that, we will launch this working group to study various aspects, including bitcoin’s present status, its outlook, and what form it will take root in Japan’s society.”

That the exchange would move to even explore the launch of bitcoin futures is perhaps unsurprising, given the efforts of firms like CME Group and CBOE to create such products in the U.S. As previously reported, trading of CBOE’s future is expected to begin late Sunday, with CME commencing with their own roughly a week later.

Trading data image via Shutterstock

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Detroit Bitcoin Trader Gets Jail Time for Unlicensed Money Business

A Detroit bitcoin trader was sentenced Monday to 366 days in jail for operating an unlicensed money services business.

The individual, Sal Mansy, was arrested in June 2015 for funneling bitcoin transactions through a corporation he owned called TV TOYZ. Mansy conducted $2.4 million-worth of bitcoin transactions over a two-year period, according to a release from the U.S. Attorneys office in Maine.

Mansy pleaded guilty in May to purchasing bitcoin through the Coinbase and Bitstamp exchanges, and selling the cryptocurrency at a profit through LocalBitcoins, as The Global Blockchain previously reported.

According to the release:

“It is against federal law for a money-service business to exchange or transfer bitcoin without registering. Mansy was aware that he was required to register with FinCEN.”

Following his jail time for the offence, Mansy will receive three years of supervised release. He must further forfeit $118,000 in cash and bitcoin gained through the illegal scheme. Investigators confiscated roughly that amount during his arrest in 2015.

Undercover investigators conducted two trades with Mansy for amounts totaling 6.32 BTC – an amount valued at $1,900 at the time and now worth nearly $75,000, according to CoinDesk’s Bitcoin Price Index.

The case is just one of a number arrests in recent years for running illegal businesses using bitcoin.

In October, another Michigan resident, Bradley Stetkiw, was charged with running an unlicensed money transmitting business after selling some $150,000 in bitcoin.

Stetkiw also used LocalBitcoins to facilitate his transactions, and federal agents bought $56,000 worth of bitcoin from him at the time.

A third LocalBitcoins user in Missouri, Jason Klein, pleaded guilty to running an unlicensed money transmission business in May, after he sold 98 bitcoins (worth more than $1 million today) to undercover agents in 2015 and 2016.

Jail bars image via Shutterstock

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