Prepared by Peter Hagias
Surprise, surprise … ASIC’s targeting ICOs. Alt-coins are all the buzz, but there is a perception that it’s free rein in the wild west when alt-coins aren’t securities and not subject to our financial services laws. That’s not correct. ASIC has clarified that it is targeting misleading and deceptive statements made in the course of promoting and conducting an ICO. Misleading and deceptive statements can be made in the alt-coin’s white paper or by representations made by the issuer (think twitter and how that’s used as the key platform for ICOs and communications with crypto communities). An issuer saying something that is not true, or is true based on future things occurring or is taken out of context are all examples of where a legitimate and awesome project may come undone for misleading and deceptive conduct. Misleading and deceptive conduct can also arise by omission. By not saying something issuers can mislead the market. It happens when investors don’t have the whole story or are led to believe one set of events which are ultimately untrue.
What to do? Representations by an issuer should be controlled and subject to, essentially, a common sense vetting process. The white paper should be carefully drafted and be tailored to the alt-coin. Don’t copy and paste someone else’s – we have seen allegations fly in the crypto community about white paper plagiarism and regardless of whether it’s true it has the potential to de-rail revolutionary projects. Make sure you have evidence to back up any statements you make and keep a file in case ASIC later comes knocking. Don’t make wild outrageous claims about the future state. Keep future projections reasonable and based on reasonable assumptions that clearly exist (and are evidenced) as at the date of your white paper. Have someone else not involved in your project read your white paper with fresh and critical eyes to see how an objective bystander would view the project. This is of course in addition to making sure the structure of the project meets all relevant financial services laws.