The market for initial coin offerings is getting tighter, with the regulator cracking down on what it sees as sub-standard issues. But there is still life in the market, as the latest First Growth Funds deal shows.
In August, Global Tech Exchange announced plans to raised $50 million by way of an ICO. But last week it announced that its initial coin offering would not go ahead after the Australian Securities and Exchange Commission intervened.
The company, which plans to operate a cryptocurrency exchange and establish a “crypto-education network”, says it has returned all funds invested.
It was a better week for CryptoData Vault, which raised US$25 million by way of a token listing on a cryptocurrency exchange.
The CryptoData Vault story goes back to April, when ASX-listed investment company First Growth Funds announced that it had invested US$250,000 in the cybersecurity company and secured US$2 million of funding for the company.
Those funds were for the development of a hardware wallet for a fully compliant, secure and geo-fenced solution to storing digital currencies CryptoData Vault also developed a utility token, Sovereign Cash, to be used in combination with the wallet.
Last week First Growth Funds announced that the Sovereign Cash token was listed on the BTCEXA digital currency exchange. CryptoData Vault issued 4.3 billion Sovereign Cash tokens, which listed at a price of US$0.0058 per token, for a market capitalisation of US$25 million.
First Growth Funds holds 15.5 per cent of the Sovereign Cash tokens on issue, worth US$3.9 million at the listing price. It also has a 50 per cent interest in CryptoData Vault LLC (which holds 30 per cent of the tokens).
First Growth Funds says it will seek to convert the tokens to Australian dollars over time.
First Growth Funds describes itself as an investment company that manages a “diversified portfolio of different asset classes”, including private equity, pre-IPO investments, blockchain investments and initial coin offerings.
It says its focus is investing in businesses developing blockchain and digital currency infrastructure.
In July, it facilitated an investment in ASX-listed company CCP Technologies, an industrial monitoring and internet of things company, by blockchain platform Penta Capital Blockchain Foundation. The deal involved an investment of digital currency – Penta tokens – in return for shares. The deal raised $861,000 for CCP and was the first such transaction in Australia’s equity capital markets.
So far this year ASIC has stopped five ICOs raising capital because they did not have appropriate investor protection. It says it has identified a number of problems with ICO offerings and crypto-asset managed investment schemes.
These include the use of misleading or deceptive statements in sales and marketing material, operating an illegal unregistered managed investment scheme and not holding an Australian financial services licence.