The unraveling of Tezos: How one of the biggest ICOs plummeted

Stacks of bitcoins sit near green lights on a data cable terminal inside a communications room at an office in this arranged photograph in London, U.K., on Tuesday, Sept. 5, 2017. Photographer: Chris Ratcliffe/Bloomberg

Tezos, the startup which raised $232 million in a July initial coin offering, plunged on derivative exchanges after revealing a management spat and little progress in developing its product.

Derivatives on Tezos tokens fell as much as 31 percent, according to exchange HitBTC. On BitMEX, December futures on the tokens plunged 58 percent as traders unwound bets the project would be launched before the end of the year. The actual tokens have yet to be created.

Founders Arthur and Kathleen Breitman said in a blog post on Wednesday that recruitment had come to a standstill and little work has been done on their product: a better blockchain for digital currencies. They also criticized Johann Gevers, the head of a Swiss foundation which oversees their funds. Gevers didn’t respond to an emailed query.

Experts have warned for months about the risks and lack of transparency in ICOs, which have raked in $3 billion this year despite offering little protection or guarantees to investors. Whether Tezos recovers to deliver value to investors could go a long way to shaping how authorities regulate ICOs.

“People had no idea what was going on in Tezos,” said Arthur Hayes, a former market maker at Citigroup Inc. who now runs BitMEX, a bitcoin derivatives venue in Hong Kong. “There’s a lot of public information on what’s going on with a project, but most people are too lazy to do any real homework.”

The ICO was run by the Tezos foundation, which is based in Zug, Switzerland and operates independently of the Breitman’s Dynamic Ledger Solutions Inc. DLS owns the intellectual property of Tezos, include source code for its ledger, logos and trademark applications.

“From the outset, we worked nonstop to make the transition as smooth as possible, making suggestions to the foundation to help them continue the work we had been doing,” the Breitmans said in the blog post. “However, getting anything done proved difficult.”

The token for ethereum, which is used as a platform to launch most ICOs, slipped about 2 percent following the news, according to data compiled by Coindesk. Other ICO tokens such a OmiseGo and Bancor also fell.

Zhou Shuoji, a Beijing-based founding partner at FBG Capital, said the firm invested 120 bitcoins into Tezos. Zhou is doubtful Tezos will be able to deliver by its promised deadline.

“For a fundraising of this scale, they probably can create a product in the end, but for investors, it’s not always a certain bet that will deliver returns,” he said. “The market is at a turning point now.”

Also Read:

ICOs show ‘follow the money’ still rings true

ICOs rake in another billion in under 2 months

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.