ICO suffered a critical blow! The largest ICO project in history is about to collapse before it is even launched

Due to internal team disputes, the largest ICO project in history is facing the risk of collapse, which has also ignited global investors' concerns about the ICO market.

The former darling of the cryptocurrency circle

If you are in the cryptocurrency world, you may be familiar with Tezos. The project claims to improve the management and development of decentralized networks, build a new blockchain system, and become a "self-revising" encrypted ledger, allowing stakeholders to decide on adjustments to network protocols.

This solved the controversy between Bitcoin miners and developers over the expansion plan from the beginning. The Tezos blockchain will also support proof-of-stake smart contracts, which is also rumored to be the development direction of Ethereum. When the project was pre-sold to institutional investors, it was favored by well-known venture capitalist Tim Draper, who provided seed round financing. It was also the first ICO project supported by this big shot.

Therefore, when Tezos launched its ICO for the general public in July, it raised 65,627 bitcoins and 361,122 ethers in just two weeks, totaling $232 million, becoming the world’s most expensive ICO, beating the previous record by $100 million. As the prices of bitcoin and ether have risen, the project’s funding value has also risen to $400 million.

Product development stagnated

But the project initiators, the Breitmans, suddenly published a blog post on Wednesday, accusing the independent foundation director who managed the funds in Switzerland of deceiving the committee and allegedly giving themselves a "ridiculous" large bonus. The latter said that the Breitmans tried to bypass the Swiss legal structure to directly control the foundation, which delayed the project for several months.

Regardless of who is right or wrong, the Breimans’ blog post reveals the risks of the ICO market that have been “willfully ignored” by everyone, namely inexperienced management, ambiguous corporate structures, lack of transparency in product development, and lack of investor protection .

The blog post revealed that not only are there disagreements among the management, but product development has made no progress and the hiring of core engineering and technical personnel has stagnated. Tezos had promised to issue tokens when the platform was launched in December, and currently the market is trading its token derivatives.

The price of Tezos token derivatives on the HitBTC platform plummeted by 31%, and the December futures contract on the BitMEX platform fell by 58%. Many people doubt that the platform will not be launched until February next year.

According to Coindesk data, negative news also led to a 2% drop in Ethereum.

ICO "dream-making" faces a turning point

Many mainstream American media pointed out that Tezos, the largest ICO project in history, may fail before it is even launched, which is a major test for the virtual currency and ICO market. This year, ICO projects around the world have raised at least $2.3 billion, which is seven times the total amount of similar financing in all previous years.

Arthur Hayes, former Citigroup market maker and current CEO of BitMEX, a virtual currency derivatives trading platform based in Hong Kong, pointed out that after Tezos was launched in 2014, people had no idea about its progress. Although the market was full of doubts about the project, most investors blindly bet without investigation, and they might end up losing all their money and the investment value could not be guaranteed.

Tezos’ failure also reflects the biggest problem of the ICO market, that is, investors continue to throw money at companies in the hope of creating the next “explosive phenomenon” like Bitcoin. As a result, most companies rely on white papers to “dream up” tokens without a working product, and this “empty-handed” strategy is surprisingly successful.

Reuters also found that the Breitmans did not disclose information in compliance with regulations at the beginning of their business. An early business plan circulated in 2015 showed that the Breitmans would be paid $210,000 to the husband in the third year of the project. At that time, the husband was still working at Morgan Stanley. The U.S. Financial Industry Regulatory Authority (FINRA) stipulates that if there will be compensation, registered professional securities agents must report to their employers in writing about their business activities outside of work, but the Breitmans obviously did not do this.

In addition, the entire project also had the problem of exaggerating facts in its early marketing. When selling the project to institutional investors, Tezos' technology was said to be widely recognized by industry leaders and adopted by multinational accounting firms such as Ernst & Young and Deloitte. However, spokespersons for both institutions believed that the statement was inaccurate. Ernst & Young said that it had never accepted the technology, and Deloitte said that it had not actually been used in client projects.

The U.S. Securities and Exchange Commission (SEC) has filed civil lawsuits against two ICO projects suspected of fraud. If Tezos is also labeled as a "fraud" due to the exposure of various problems, it may cause the collapse of the entire ICO market due to its own financing volume and huge influence.

Financial blog Zerohedge pointed out that Tezos is to ICO projects what Mt.Gox was to Bitcoin . Mt.Gox, the world's largest Bitcoin trading platform at the time, was reportedly hacked and forced to go bankrupt, causing the global Bitcoin price to halve. There is no doubt that with the tightening attitude of regulatory agencies in the United States, China, and the United Kingdom towards ICOs, the ICO market has reached a turning point.