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.”
ABACA Partners with CoolBitx on CEZEX
This week saw more exciting developments in the Asian security token sector. CEZEX, Asia’s first licensed security token exchange, announced a strategic partnership with longtime blockchain hardware developers CoolBitx. The partnership strengthens CEZEX’s already pivotal role in the Asian market and demonstrates a desire for more security token integration in the region.
CEZEX is a Philippines-based security token exchange. The platform is unique in that it is the first licensed security token exchange in Asia. The platform is based in the Philippines Cagayan Economic Zone Authority and is the brainchild of the Asian Blockchain and Crypto Association (ABACA).
News of the CEZEX exchange first hit the market in January of this year when the platform’s backers announced plans to expand their operation into Hong Kong by 2020. This move places CEZEX in the ideal location for a security tokens exchange in the region. Hong Kong continues to see growth in their crypto sector ever since China banned most crypto-related activities back in August 2017.
CoolBitx is an industry leader in the region. The firm made headlines way back in 2015 when it became the first company to introduce a Bluetooth cryptocurrency wallet. Since then, CoolBitx continued to expand its services. Today, the company offers a host of blockchain related products and services.
For their part, CoolBitx will handle all security token custodial services for CEZEX. Security tokens differ from utility tokens in that they don’t permit anonymous transactions. Instead, security tokens must follow the strict securities laws already covering the market. CoolBitx will be responsible for verifying and completing tokenized securities exchange transactions. Their responsibilities extend after issuance and into secondary market transactions.
Secondary Market Concerns
While primary regulations are often integrated directly into a security token’s smart contract, secondary market compliance is a hot button issue in the market. Secondary market concerns hit a fevered pitch this week when the DTCC released their fair market practices paper which outlines how to deal with security tokens on the secondary market.
The intervention of the DTCC marks a turning point in tokenized securities. The DTCC handles securities exchanges for the traditional markets. The group handles quadrillions in securities exchanges yearly and their influence in the market can’t be understated. DTCC’s paper argued that security tokens need secondary compliance in order to maintain fair market practices currently in place. This is an argument echoed by many in the industry
ABACA Asian Blockchain and Crypto Association
ABACA continues to see expansion with this latest partnership. The group now includes multiple blockchain industry leaders. One of the group’s most prominent new members is the Taiwan-based Formosa Financial. Speaking on the group’s unprecedented growth, ABACA’s director, Mel Songco explained how the group creates a more “compliant and secure business environment.”
Security Tokens in Asia
Asia has always generated momentum in the cryptomarket. This latest maneuver demonstrates a desire by traditional investment firms to enter the blockchain space. You can expect to see more firms join ABACA in the coming months as the digital economic revolution continues.
Archax Gears up for Launch with Quod Financial
Today, a forth coming digital securities exchange, Archax, has announced a partnership with Quod Financial. This pairing will see Archax turn to Quod Financial for various services, ranging from smart-order routing, trade automation, to order management and more.
These services are made available through integration with Quod Financial’s ‘Adaptive Execution Platform’. Capabilities made possible through this platform will allow for Archax to effectively deliver their product to institutional investors this coming year. If they achieve this goal, Archax will become – with the help of Quod Financial – one of the first offerings of its type seen in the industry.
In their press release, representatives from both companies took the time to elaborate on the development.
“Archax will be the first venue to bring digital asset trading into the mainstream financial community. Existing crypto venues have been primarily retail driven, and so it has been incredibly challenging for our buy-side and sell-side clients to include any form of blockchain-based instruments in their portfolios as they have lacked a regulated and stable venue. Given the rigorous selection process, we are proud to have been selected for this market-changing project to bring both digital assets as well as our data-driven execution intelligence to a wider audience.”
“We wanted to find a best-of-breed partner with an established and proven trading platform used by both the buy-side and sell-side. And one that was ready to handle the complexities of digital assets. Quod’s open, scalable and robust platform fitted the bill perfectly and we are happy to be able to offer it to clients as one of the ways of accessing our exchange…A key decision when evaluating technology providers from the traditional world was to find a platform that could be fully customised to support the new and developing security token space. Quod’s design, using industry standard architecture, allows easier customisation when required. That, coupled with their experience of handling high throughput trading for many tier-one banks and an array of other established regulated clients, made them an ideal partner.”
Quod Financial is an established company specializing in capital markets. Since their launch in 2004, the company has expanded from London to maintaining offices in New York, Paris, Hong Kong, and Dubai.
Company operations are overseen by CEO, Ali Pichvai.
This London based company was founded in 2018 by Graham Rodford, Matthew Pollard, and Andrew Flatt. The company is aiming for a 2019 launch of their platform, designed to act as an exchange for digital securities.
In Other News
Archax, in particular, has found themselves in our news feed various times in past months. They have had an impressive development period, resulting in investments from SPiCE VC among others. Check out the articles below to learn a little more about Archax.
seriesOne to Utilize ST-20 Standard by Polymath
Various companies have made announcements detailing intended usage of token standards lately. As the development of various crowdfunding platforms in the digital securities sector continues, the time has come for many to choose what they feel is the most promising standard. With this in mind, seriesOne has just announced that they have partnered with Polymath.
This partnership will see seriesOne utilize the ST-20 token standard to issue and manage digital securities. The ST-20 protocol is based off of the Ethereum blockchain, and will allow for seriesOne to maintain compliance with global regulations governing the industry.
The Future is ST-20
For seriesOne, it was a simple choice to settle on ST-20. This token standard was one of the first to be developed specifically with digital securities in mind. As such, Polymath has had more time than most to develop, hone, and market their offering. This effort has seen the standard adopted by various companies, with seriesOne being the most recent.
In their press release, the CEOs of each company took the time to express their thoughts on the announced partnership.
“Investors around the world trust Polymath, which was fundamental to our decision to work together…We are confident that working with the Polymath team using the ST-20 protocol will enhance the process of raising capital on our platform.”
“Polymath is proud to work with innovative partners like seriesOne, who has fulfilled a specific demand for a turnkey financing portal for any fundraising process…We are thrilled to be the chosen technology standard for the seriesOne platform, and we look forward to demonstrating yet again how industry can work together to set a standard for creating and managing a successful Security Token Offering (STO).”
seriesOne is a crowdfunding platform, which specializes in the issuance, distribution, and management of digital securities. Through their platform, issuers are able to effectively, and efficiently, host security token offerings. The company is based out of Miami, and was founded in 2013.
Polymath is a Canadian company, which maintains headquarters in Toronto. The company was established in 2017, and is spearheaded by CEO, Kevin North.
To date, Polymath and their token standards remain one of the most adopted solutions in the young world of digital securities. Their own utility token is available for trading on various industry leading cryptocurrency exchanges such as Poloniex and Bittrex.
In Other News
Each of these companies discussed here today have found their way into our headlines in recent months. For a look at what they have been up to recently, make sure to check out the few articles listed below!
- The Application of Broker-Dealer and Exchange Regulations to Secondary Markets – Thought Leaders March 21, 2019
- ABACA Partners with CoolBitx on CEZEX March 21, 2019
- Equity Tokens vs Security Tokens March 20, 2019
- Archax Gears up for Launch with Quod Financial March 20, 2019
- seriesOne to Utilize ST-20 Standard by Polymath March 20, 2019