In an astounding few hours, the Cannabis based company, Paragon, experienced an almost 10,000% pump in price to ring in the new-year.
Unsurprisingly, the token has been unable to sustain this absurd increase in value. A peak price of $10 per token was reached, after beginning January 1st at around $0.1 per token. In the time since this, prices have returned to roughly $0.3 per token.
A pump-and-dump group is believed to be have been responsible for this short-term growth. It is important to note that this rapid rise was only seen the exchange known as YoBit. This isolated response further cements the notion that these price actions were the result of a pump-and-dump scheme.
Co-ordinators behind the pump were most likely capitalizing on the upcoming deadline for the return of investors’ funds from Paragon.
Paragon was the subject of an investigation by the SEC earlier in the year. Upon doing so, the SEC deemed that Paragon illegally marketed and distributed digital securities, under the pretense they were not securities.
In addition, Paragon tokens would be registered as digital securities, and a fine paid to the SEC.
Some may recognize the name Paragon. It has previously been affiliated with US rapper ‘Game’. Acting as one of the first celebrities to endorse a blockchain project, ‘Game’ found himself on the wrong end of a lawsuit. This involved plaintiffs claiming that Paragon had falsely represented business dealings, with ‘Game’ being a spokesperson.
In the time since this, various other celebrities have found themselves caught up in similar situations. We recently detailed several of these HERE.
Pump and Dump Schemes
Simply put, a pump-and-dump scheme is a preplanned, coordinated event that is orchestrated by a group of individuals. These individuals will often take advantage of projects with upcoming news, and communicate a plan to artificially boost the price prior to news occurring. Participants will agree to continually buy the token/coin up until a certain price, and then all at once, sell their tokens.
This process takes advantage of individuals outside of the group. For example, individuals that purchased the Paragon token during the pump may have done so at $10, thinking that the project was finally taking off. Only to find that they were taken advantage of, with their money going to the group after they intentionally crash the price.
These schemes are unfortunately commonplace on cryptocurrency exchanges. They are especially common on smaller exchanges with low liquidity, as token prices are easier to influence. Not only are these groups illegally manipulating markets, but they are an active detriment to both the present and future of blockchain.
It should be noted that companies typically have nothing to do with pump-and-dump schemes at all. These events are orchestrated by random individuals with no connection to the token issuer.
Pump-and-dump schemes are a perfect example of the market manipulation causing hesitation by the SEC towards ETF approval.
The SEC has stated that until such schemes can be kept under control, an ETF will not be approved. As it is their job, afterall, to protect investors.
Paragon as a company has persevered throughout all these struggles. They continue their goal of revolutionizing the Cannabis industry through the implementation of blockchain.
Upon striking a settlement with the SEC in November, Paragon CEO, Ms. Versteeg, stated the following, “This resolution with the SEC gives Paragon the path forward to full compliance with the U.S. securities laws and clears the way for Paragon to pursue its vision of bringing transparency and accountability to the cannabis industry through blockchain technology. Paragon is proud that the PRG token is included in today’s action by the SEC and are thereby being granted the opportunity to avail itself of this groundbreaking path forward while continuing to pioneer efforts and to participate in the ever evolving ICO marketplace…We believe many purchasers of PRG tokens share our vision of revolutionizing the cannabis industry through blockchain technology, and this action today is an important step in solidifying our compliance and furthering developments of our state-of-the-art cannabis seed-to-sale technology platform and co-working space.”
3 More Executives Leave SDX Due to Discrepencies
The blockchain-based digital asset trading venue SDX continues to have a rough start to the new year. This week, another high-level executive announced their departure from the firm. The news brings the number of executives who left the company in January 2020 up to three. The news demonstrates a realignment and shuffling of SDX’s business plan. Also, it showcases the growing pains associated with these changes
According to company documentation, all of these executives departed from their full-time positions in January. The three individuals to leave are Alex Zinder, an architecture lead at SDX, Ivo Sauter, SDX’s head of clients and products, and Sven Roth, the firm’s chief digital officer. The later of the trio agreed to stay on as an external advisor to SDX.
In a recent interview, Sauter explained the motivation behind his decision to leave. He touched on a number of critical changes made throughout the firm. These changes included a shift from the platform’s original vision. He explained that at first, the platform was to utilize the banking sector as a bridge into the rest of the market.
However, this strategy quickly changed as SDX began to tailor its platform specifically, and solely for use by banks. Sauter described how these changes effected moral and fueled the growing dis-alignment between executives and owners. He explained that originally, the platform was to be much more inclusive. For example, SDX was to enable startups to provide services around its features.
Sauter also took a moment to touch on the negative effects this corporate culture had on the project. He explained that, in his opinion, a bit more separation needed to occur between SDX and its mother company, the Swiss stock exchange operator SIX Group. Apparently, these feelings of discourse only grew as the mother company took more and more influence on SDX’s day to day operations.
Additionally, Sauter explained how the big-company approach also inhibited the company’s ability to save. Large corporations require much more reporting. In turn, this reporting raises operating costs. Additionally, smaller firms have more liberty in terms of flexibility and risk management. In the end, the corporate approach made many of the executives feel as if they had been stifled.
Despite the discrepancies, Sauter stated that he had left on good terms. He went as far as to claim that he was at a point in his career that he had no desire to have his contract renewed. Consequently, SDX chose to not offer a renewal.
Challenges in the Market
As with any major corporate reshuffle, there are going to be individuals that no longer fall in line with the platform’s overall goals. Discussing these challenges, a SIX spokesman touched on the changes and what they mean to the project. They explained that whenever you have a concept built from scratch, there are going to be many ups-and-downs associated with the development. In the end, the firm acknowledged that these changes have begun to add up with the spokesperson stating that the firm has “spent quite a few Swiss francs” on the ordeal.
SDX Moving Forward
From the tone of SDX’s past employees, the company is undergoing some heavy internal changes. As such, there is no way to determine exactly how these personnel changes will affect the overall strategy the company has chosen to follow. One thing is for sure, SDX appears to have made a priority shift towards servicing the banking sector exclusively with its new platform.
SEC Charges Opporty for 2018 ICO
This week, the Securities and Exchange Commission (SEC) continued its ICO crackdown. This time, the firm levied charges against project Opporty Founder and Brooklyn-resident Sergii Grybniak. The firm alleges that Grybniak broke the law when his firm raised approximately $600,000 during its 2018 ICO.
News of the charges first broke via Jan. 21 press release. In the release, the SEC reveals the charges laid against Grybniak in detail. Importantly, the primary charge is participating in the unregistered sale of securities. Additionally, the SEC claims that Grybniak made false statements in order to encourage more investor participation.
These statements include a myriad of exaggerated and completely fake claims. In one instance, Opporty claimed that its 2018 ICO was “100% SEC-compliant.” Unfortunately, this claim proved to be the tip of the iceberg. Apparently, Opporty also claimed to have thousands of “verified providers” who were ready to work with the platform.
This claim became so overblown that in one piece of marketing material, Opporty suggested it had a business database that included around 17 million participants. In actuality, the firm had no partnerships. Unfortunately, these claims served one main purpose, to push more investment capital into the ICO.
Major Software Firm
As if the shower of lies put forth weren’t enough, Opporty also made some very specific partnership claims that proved to be bunk as well. According to the SEC, the firm lied about a partnership with a major software company. This lie was to help ease investor doubt about the ability of developers to deliver on their hefty platform promises.
SEC Steps In – Opporty
It doesn’t take much research to see why Opporty ended up in the SEC’s crosshairs. Now, the SEC seeks injunctions against all future digital offerings by the company. On top of the cease-and-desist, regulators require Opporty to return all the funds the company raised during its 2018 ICO. Also, the firm is to face a variety of civil penalties for its actions.
Opporty executives sold the concept to investors as a blockchain-based ecosystem for small businesses. The platform was to provide these small-to-medium sized companies with access to advanced blockchain systems. For example, businesses could list their services and lock in their clients via smart contracts.
United States Investors
Aside from the obvious scamming that took place, Opporty made another key error in its strategy. You see, unlike many similar ICOs, the offering did not explicitly exclude U.S. investors from participating. The 2018 ICO included investments from around 200 US citizens. In this way, the firm invited the SEC to monitor its actions throughout its entire crowdfunding campaign.
An Oppurty Lost
Given the long list of violations this firm now faces, it’s easy to imagine a scenario in which Opporty decides to close its doors. Already, numerous SEC-charged firms have taken similar measures prior to refunding clients’ funds. For now, Opporty has a long legal battle and hefty fines to deal with. You can expect to hear more from this case as the SEC pursues its charges against Grybniak.
A Quick Look at – The Security Token Market Secondary Trading Analysis: 2019
This week, the Security Token Group released its yearly comprehensive study – The Security Token Market Secondary Trading Analysis: 2019. The study provides direct insight into the current state of security token adoption. Additionally, it sheds some light on the major hindrances encountered by investors looking to participate in the secondary market.
The study produced some interesting data. For one, the stats revealed a lack of progress on multiple fronts concerning security token adoption. The report highlighted areas of concern ranging from a lack of understanding surrounding the new technology, all the way to postponements due to regulatory approval. Perhaps the most glaring piece of data the report confirmed is a surprising lack of global investor demand for these regulated tokens.
Security Token Market Secondary Trading Analysis: 2019
As part of the Security Token Group’s comprehensive approach towards the market, researchers chose to evaluate all international jurisdictions. In this manner, the report is able to reflect a global metric of the market’s performance over 2019. This approach provided much-needed insight into the overall health and performance of the secondary markets internationally.
2019 STO Secondary Trading Market Overview
As one of the first reports published regarding 2019’s security token secondary market progress, readers are privy to a huge amount of previously unknown data. For example, the report indicates that the secondary security token market peaked in January at $229,501,221.25. Interestingly, this peak is the direct result of tZERO‘s TZROP preferred equity token trading.
Notably, by the end of the year, the secondary market experienced a 67% decline with December’s market cap at only $76,062,199.46. Currently, the total volume for the secondary markets is around $2,410,607.94. This volume breaks down into a monthly average of $214,682.90 or broken down even further, a daily average of $7,156.10.
Despite a flourishing STO market, 2019 only saw three security token exchanges go live. Interestingly, all three exchanges meet US jurisdictional compliance requirements. This data proves the growing desire of blockchain firms to enter the US markets. The three exchanges that went public in 2019 are tZERO, OpenFinance Network, and Uniswap Exchange.
The tZERO exchange entered service in January 2019. At that time, tZERO only hosted one security token, the TZROP preferred equity token. Despite the lack of variety the platform provided, tZERO maintained the highest market cap all year. As such, tZERO represented a remarkable 58% of the entire secondary market cap. Consequently, TZROP is the largest token in the industry to be traded over 2019. In addition to the most activity, TZROP also receives the title for being the most consistently traded security token on secondary markets regarding daily volume.
The OpenFinance Network opened its doors a couple of months after tZERO in the first quarter of 2019. Unlike the competition, OpenFinance managed to provide investors with a selection of security tokens to trade. As of December, the exchange trades five live security tokens: Blockchain Capital, Lottery.com, SPiCE VC, 22x Fund, and Protos Asset Management.
Uniswap opened later in the year. Uniquely, this exchange focused on real estate-backed security tokens. The exchange hosted three RealT tokenized properties in Detroit, Michigan. Since Uniswap primarily trades real estate tokens, the exchange provides investors with a host of new and unique investment opportunities. Importantly, analysts see tokenized real estate as having unprecedented upside potential.
Security Token Market Secondary Trading Analysis – 2019
The report also shed some light on the pace at which these tokens gained popularity. Notably, the start of 2019 was strong. Importantly, there were five live security tokens trading in Q1. Despite the strong start, most of these tokens did not see daily trading. In fact, the report revealed the vast majority of security tokens only experienced a few trades per month.
Security Token Market Secondary Trading Analysis Reveals Two Truths
After reviewing all the data presented, the Security Token Market Secondary Trading Analysis proved two important points regarding security token activity on the secondary markets. One, it showed that security token infrastructure is beginning to permeate across traditional markets. This adoption is evident as many of the world’s largest institutions decided to trial blockchain tech as an alternative to the current business systems surrounding transactions and settlements.
This decision makes sense when you consider the improved efficiency and reduced costs a company gains from the integration. As examples of major institutions seeking to enter the security token sector, the report lists Santander Bank’s latest blockchain venture. Also, the tokenization of a $700B asset management firm by Franklin Templeton and Deutsche Boerse settling digital securities trades on-chain are listed.
The second, and perhaps most important takeaway from this report is that most retail investors (crypto and traditional) don’t have much interest in the current batch of security tokens on secondary markets. This lack of interests translated into the lackluster performance of most of the security tokens examined.
This dismal investor participation can be attributed to a number of causes. Analysts pointed to regulatory roadblocks, investor fatigue, and low expected returns as some of the main reasons behind the lack of participation. In turn, this disinterest translates into trading platforms struggling to provide much-needed liquidity to the sector.
Future Looks bright
While the Security Token Market Secondary Trading Analysis proved that there is much work to be done in the space, it also demonstrated that the market is developing slowly. Notably, the report showed that there are over 60 security token exchanges slated for launch in 2020. These exchanges span the globe including the United States, Canada, United Kingdom, Germany, Liechtenstein, Estonia, Netherlands, Switzerland, Gibraltar, Malta, Seychelles, Belarus, British Virgin Islands, Singapore, China, Philippines, Antigua, Jamaica, Barbados, Cayman Islands, Mauritius, United Arab Emirates, and Greenland.
Security Token Market Secondary Trading Analysis – A View into the Future
You really have to hand it to the Security Token Group. This team managed to put together a treasure trove of valuable information that is sure to help guide investors and organizations moving forward. For now, those interested in a geographic breakdown of these statistics can find the info here.