Cobinhood chief apologises over special rates for ICO fundraising

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The chief executive of Cobinhood, a Taipei start-up that has raised nearly $10m through a so-called initial coin offering has apologised for offering secret investment discounts to a Twitter personality.

Critics say that Cobinhood, which is advised by a former US chief information officer and endorsed by Oscar-winning actor Jamie Foxx, is emblematic of the opaque and barely controlled ICO market, which is drawing scrutiny
from regulators concerned about retail investors.

Cobinhood, which has attracted more than 7,000 investors, claims it will be the first no-fee cryptocurrency exchange. It is not yet operational.

ICOs allow early-stage “virtual companies” to raise money by selling tokens that can later been exchanged for services or sold. So far this year, 153 ICOs have raised $2.3bn, according to Coinschedule.com, reflecting the surging value of cryptocurrencies.

But despite promising to democratise investor participation, the non-standardised sales often offer heavy discounts to insiders and celebrities.

In Cobinhood’s case, some investors who bought Cobinhood’s “COB” token in its presale got a 100 per cent bonus — two tokens for the price of one. They were then permitted to sell their discounted tokens on the open market, possibly at profit, before outsiders could buy them through official channels. 

The company also offered a 150 per cent bonus to strategic partner Ian Balina, who styles himself as a “Cryptocurrency Investor, Entrepreneur and Author” and has 14,000 Twitter followers. He charges for information on ICOs through Patreon, the membership business platform, and some of his subscribers were also offer the bonus deal.

Although Cobinhood’s ICO continues, COBs are being traded on the EtherDelta exchange below their current ICO price.

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After the Balina deal was leaked online, Popo Chen, Cobinhood’s 26-year-old chief executive officer and founder, said he had “made a mistake” and the arrangement was “unfair for participants who joined [the] ICO through the official channel”.

Mr Chen said the leak of the arrangement had “totally violated the agreement,” which “should have only been shared with accredited investors”, adding Cobinhood had terminated its “co-operation” with Mr Balina and returned his investment. 

Mr Balina said Cobinhood had allowed him to share the deal with a select group but added that the terms “were leaked out to people outside the syndicate.”

Tony Scott, who served under Barack Obama as US chief information officer and was Microsoft’s CIO for five years, was recently appointed chief strategic adviser to Cobinhood. He said he and the company shared “common goals in advancing the cryptocurrency industry in a way which protects consumers”.

Under Cobinhood’s “Simple Agreement for Future Token between token buyer and BEING, Inc, the Cayman Islands entity registered to Cobinhood’s ICO, token buyers assume all risk and liability. 

Filings indicate Cobinhood incorporated as a private company in Hong Kong in late August. China banned ICOs early September.



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