Category: Innovation

Airfox SEC Cryptocurrency Alt-Coin Settlement Is Everything Coin Issuers Hoped to Avoid – Securities Act Analysis Applies to Token Issuances

Airfox settles with SEC and treats tokens like the securities they are

CarrierEQ, Inc. (Airfox) did an initial coin offering in October 2017. They raised about $15 million to finance their digital token-denominated ecosystem for playing with ads.

Not bad, right? After all, lots of people were saying how ICOs were a cheap, non-dilutive way to raise money because SEC rules didn’t apply.

The SEC didn’t agree, as it warned in the DAO Report.

For its trouble, Airfox will pay a $250,000 penalty, which is not too bad.

However, they must also:

  • Register the tokens under the Exchange Act; and
  • File periodic reports with the SEC.

So far, expensive but still less than $15 million.

Airfox says they’re pleased with the result:

“We are pleased with these developments. We believe by reaching this resolution with the SEC and MSD, we are removing uncertainty and positioning Airfox to grow our blockchain platform within a regulatory framework,” said Victor Santos, CEO and co-founder, Airfox.

I doubt it. They must also offer rescission rights to everyone who bought their tokens from the Company.

Here we go.

Airtokens were issued at about $0.014 per token (they issued 1.06 billion tokens for $15 million).  They are currently worth about 1/10 of that. If you invested, would you get your money back if you had the chance?

For their sake, I hope Airfox had another source of funding.

Expect more of this from the SEC:

“By providing investors who purchased securities in these ICOs with the opportunity to be reimbursed and having the issuers register their tokens with the SEC, these orders provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.

Other notes:

  • The Massachusetts Securities Division was also involved, and it has been active in trying to police these activities.
  • Paragon Coin also settled with the SEC.  Paragon wants to integrate blockchain and the cannabis industry.
The Airtoken ecosystem.

When Innovation Is More Than Technology: Software Company Allows Customers to Steal Their Software

Freakshow Industries implements innovative business model for its music tech software by letting customers “steal” the software.

As Freakshow says:

We fight crime by legalizing it.  You can’t break an agreement you never made.

Creating products in the digital world can be difficult.  Anyone can steal and reproduce your products at will.  Copy protection is weak and generally only hurts your paying customers by making their experience inconvenient.  I have a pile of license fobs as testament to this.

Some companies provide freeware and simply don’t charge.  Others put out a tip jar.  Freakshow Industries takes it a step further and provides a link for customers to steal their software.

It does not come without a cost.  First, the thief must endure a Q&A with insults around why he or she chooses not to pay, with options including ‘Money is Tight,’ ‘Software Should Be Free,’ ‘I Am A Dick,’ and “I Changed My Mind and I Want to Pay.’  Each provides some additional commentary and ways for the thief to do a little on their part, such as pay less than full price or to provide a tip.  However, the ‘I Am A Dick’ tab replies with “Well there is no fixing that.  Download away asshole.”

Why would Freakshow do this?  Resigned to their fate, perhaps?  As they say:

Stolen product licenses are fully functional, they are just not eligible for any upgrade stuff. We do not otherwise taint these licenses in any way.

Also, if you steal a license then we’ll be using our own discretion around just how much we’re going to support you. Just be a good person and we’ll probably help you out. Yeah.

Don’t get us wrong. We would definitely rather you actually buy our software. But we realize that some people, for whatever reason, just won’t. So, if you’re going to be that person, then we would rather you steal directly from us than catch some shitty computer cancer from whoever else would be hosting our work.

Basically, stealing is inevitable and they don’t want to make life worse for their legitimate users.  They also recognize the risk involved in acquiring pirated software on the streets, or at least through p2p networks.  They probably also recognize that users of cracked software may actually come back and buy stuff if they decide they like it.  Freakshow also provides easy access to links for buying their other merchandise, like t-shirts.  Nonpaying customers may become paying customers, of some sort or another, eventually.

Whatever their reasoning, it is refreshing to see a company that cares about its users, paying and otherwise.  It is refreshing to see a new take on this issue.

Obviously developers want to sell their products, but no amount of wishing is going to offset the reality that the cost to reproduce and distribute digital goods is zero.  If you make your software unwieldy to validate and use, people will crack the copy protection or go elsewhere.  Cultivating these users may actually turn them into paying customers, even if they wind up paying for other goods and services apart from the original software.

Freakshow Industries previews its Backmask plugin.