Lessons Learned from Titanium Blockchain — A Failed ICO

By Daniel G. Viola, Partner of Sadis & Goldberg, LLP, a New York based law firm. Daniel is the Head of the Digital Asset and Compliance Groups at his firm and is also the founder of the Crypto Asset Webinars and the Blockchain Shift Conferences.

Not all offerings of tokens are improper, and when conducted in accordance with federal and state securities laws, can be a positive source of capital for entrepreneurial start-up companies. The U.S. Securities and Exchange Commission (the “SEC”) continues to aggressively investigate fraudulent offerings and to protect investors from alleged wrongdoing. For example, on May 29, 2018, the SEC issued a press release announcing that it obtained a court order halting an ongoing fraud involving an initial coin offering (“ICO”) that raised as much as $21 million from investors in and outside the U.S. The SEC also convinced a court to approve an emergency asset freeze and appoint a receiver for Titanium Blockchain Infrastructure Services Inc. (“Titanium”), the firm behind the alleged scheme. Titanium was also the subject of a “wallet hack” in February 2018, resulting in a theft of a large supply of their token supply. Clearly, ICO issuers must impose proper security precautions to avoid site and wallet hacks. Investor confidence demands a secure environment in order to promote trust. Moreover, Titanium also highlights the importance of investor due diligence and presents a number of valuable marketing lessons that legitimate ICO issuers can learn from.

In general, ICO issuers should not use testimonials in their offering documents or otherwise. Testimonials are suspect for a number of reasons. You could easily misinterpret the tone of a testimonial or leave out important qualifications from a person’s testimony about your product or service even if you have the best of intentions. In addition, if you fail to obtain the written permission from the person providing the testimonial, then you could risk disclosing personal information about the person’s tastes or preferences in violation of privacy laws. Finally, SEC registered investment advisers are strictly prohibited from using client testimonials in their marketing materials as prescribed by specific SEC rules under the Investment Advisers Act of 1940, as amended. These rules would apply to investment advisers offering limited partnership interests or security tokens to investors.

In the SEC’s press release on Titanium, it reiterated warnings to ICO investors about the importance of conducting due diligence on ICOs and their principals and how a fraudulent ICO issuer can deceive investors using social media outlets. Note the following quotes from Robert Cohen of the SEC:

“This ICO was based on a social media marketing blitz that allegedly deceived investors with purely fictional claims of business prospects,” said Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit. “Having filed multiple cases involving allegedly fraudulent ICOs, we again encourage investors to be especially cautious when considering these as investments.”

Lessons Learned: Issuers should only publish truthful representations in their marketing material, especially if they blast out their representations using social media. Issuers should also confirm, with securities counsel, the ability to market to the general public and the placement of proper risk disclaimers in their marketing material, prior to starting a marketing campaign, since some offering laws preclude an issuer from advertising the sale of securities to the general public. Avoiding testimonials and sales puffery can also help mitigate claims of offering fraud and violations of federal and state antifraud laws. Using industry logos without permission or promoting yourself as an expert without any actual certificates or degrees to support your claims will also attract negative regulatory scrutiny and will be viewed as unprofessional by prospective institutional investors. Finally, issuers must carefully consider the Howey Test when analyzing their offerings. The SEC also sued Titanium for not registering their offering or relying on a valid offering exemption. In the complaint against Titanium, the SEC requested the following sanctions: preliminary and permanent injunctions; return of allegedly ill-gotten gains plus interest and penalties; and a bar against the principal of Titanium to prohibit him from participating in offering digital securities in the future. If you have any questions, please call Dan Viola at 212–573–8038.

XTRD Community Update — June 4th, 2018

We want to share with you the most recent updates on what XTRD has been up to!

This week was full of meetings and negotiations, we were exploring possibilities of different partnerships and options to buy-out licensed businesses. Last, but not least — it was a week filled with understanding that we are moving forward in the right way.

First of all, we are pleased to announce that we have added a new low-latency channel to our Hong Kong destination. Its only 173 ms from NY4 to HK1. Check on your side and tell us who is faster :). This will allow us to facilitate worldwide market data streams and faciliate lower latency worldwide execution.

Another reason we did this is a growing relationship with one of the major crypto exchange players in that region.

We were contacted by a global telecommunication company(!) that is looking to deliver normalized market data for crypto to their clients. We want to warn our community that it is not a one-day task to seal that kind of large deal, but we are working on it.

We had a meeting with Kx Systems — truly the number one provider of in-memory vertical databases (sorry, Oracle, this is really true). There are tons of possible interactions starting from simply feeding data into their engine and ending with an integration of XTRD backend with their state of the art trading platform with the capability to offer this to our clients.

Another great conversation we had is with Blockchain Terminal. Super smart guys, great technology, and solid vision. Like us, they want to focus on the part of the business that is more organic for them. For us it’s back-end, hardware, networks and for them — GUI, advanced analytics, interaction with clients. Time will tell what we can do together.

Our FIX API is a great fit for many hedge funds and index providers. Based on growing demand, we decided to extend the tradeable instruments lists by adding altcoins besides ETH and BTC.

XTRD is also exploring the possibility to become a solutions vendor for exchanges by providing managed colocation services, security, and building required software components such as FIX gateways. Stay tuned for updates.

Based on conversations with our clients and potential partners, we built the following road-map of additional routing destinations: OKEx, Bittrex, and Binance.

To increase awareness of our project and attract more clients, partners, and new community members, XTRD will participate in series of events such as Blockchain Futurist Conference (Toronto, Canada, August 14 -16, 2018), The Trading Show 2018 (New York, USA, September 26, 2018), and Blockchain Shift (Miami, USA, October 11–12, 2018). Feel free to stop by our exhibition booths and say “hello” or ask tough questions during roundtables.

XTRD Update: June 4, 2018

Summary

  • Live interview for Voice of America
  • XTRD Community Update
  • Lessons Learned from Titanium Blockchain
  • Upcoming events

Live interview for Voice of America

XTRD CTO Serg Gulko performed his fourth live interview for Voice of America talking about crypto Wild West: https://bit.ly/2xoyAxK.

XTRD Community Update

We want to share with you the most recent updates on what XTRD has been up to. Find more details in XTRD Community Update — June 4th, 2018.

Lessons Learned from Titanium Blockchain

We’re glad to share a great article written by Daniel G. Viola, Partner of Sadis & Goldberg, LLP — Lessons Learned from Titanium Blockchain — A Failed ICO. Daniel is the Head of the Digital Asset and Compliance Groups at his firm and is also the founder of the Crypto Asset Webinars and the Blockchain Shift Conferences.

Upcoming events

To increase awareness of our project and attract more clients, partners, and new community members, XTRD will participate in series of events such as

Feel free to stop by our exhibition booths and say “hello” or ask tough questions during roundtables.

XTRD CTO Serg Gulko – Voice of America – Crypto Market Commentary

XTRD Update: May 28, 2018

Summary

  • XTRD CTO Serg Gulko performed his third live interview for Voice of America
  • XTRD is a member of the FIX Trading Community
  • Review of XTRD on CYT-Crypto

Live interview for Voice of America

XTRD CTO Serg Gulko performed his third live interview for Voice of America, talking about talking about blockchains adoption by big players and The Trading Show in Chicago. Please find more details in Serg’s blog post: http://bit.ly/2IV7m6z.

XTRD is a member of the FIX Trading Community

XTRD is a member of the FIX Trading Community along with Goldman Sachs and others, setting standards in the FIX working group dedicated to cryptocurrency institutional FIX protocol trading standards. For more info please see article: XTRD.io joins the FIX Trading Community by Institutional Asset Manager.

Review of XTRD on CYT-Crypto

The CYT-Crypto Youtube channel conducted a review of XTRD: https://bit.ly/2xiGpVB.

XTRD CTO Serg Gulko Interview – Voice of America 5/18/18

XTRD Update: May 20, 2018

Dear community! This is the first XTRD weekly report. We plan to continue providing you with the latest updates on our project.

Summary

  • Product updates (May 13)
  • XTRD Team has visited Consensus 2018
  • Bounty #1 Summary

Product updates

On May 13 we have shared some news on what has been done on the technical side in the last several months. Please find more details in our Community Product Update. The XTRD team will continue to publish regular technical updates to keep our community apprised of progress in product and expansion.

Consensus 2018

XTRD team represented by Alex Kravets and Michele Guo has visited 4th annual blockchain technology summit Consensus 2018 held by CoinDesks on May 14–16, 2018 in New York. We will provide the community with the report on our visit in a few days. Stay tuned!

Bounty #1 Summary

We have released and distributed all the bounty tokens. Thank you to all participants in the XTRD bounty! We couldn’t have gotten the word out without your help, and it’s greatly appreciated. Find more details in XTRD Bounty #1 Summary. The first round is finished. We will publish the next bounty program shortly.

XTRD Community Product Update

We would like to share what was done on the technical side in the last several months.

Hardware and Point of Presence

As a relatively complex software/hardware project, we heavily invested our resources in building infrastructure — point of presence in NY4, network, and switches/servers. Right now XTRD is listed in the Equinix Marketplace so shortly clients will have an option to order our services within the NY4 datacenter, one of the biggest hubs in finance (more locations are coming in the nearest future).

Available cross-connectivity options will be 1/10 Gbps, for colocation we are happy to offer fully managed services for 1U, 2U, and 4U machines. We have ordered around $100,000 USD worth of equipment to be installed this month at NY4.

Software Components

Our engineering team also did not leave software components behind.

Our first product — FIX API is currently up and being heavily tested by several early adopters. Based on the standard FIX 4.4 specification, our gateway allows users to trade and receive market data from the following exchanges:

  • CEX.IO
  • Gemini
  • Bitfinex
  • HitBTC
  • BitStamp

FIX Messaging

In terms of messaging, we are providing the “must have” set:

Using these messages, clients can easily integrate their crypto portfolios into existing OMSs (Order Entry Systems).

Right now the FIX gateway supports two orders types

  • Limit(40=1)
  • Market(40=2)

A full spec will be New messages and more advanced orders types will be added next month.

Market Data

Market data will be streamed using the combination of:

messages.

We know that many exchanges simply don’t have delta updates so our system will manage all books internally. So instead of receiving full book snapshots (what is super inefficient but kind of standard for crypto) clients will receive only actual changes. We’ve been in this business for a decade and know how to build reliable and efficient market data management systems.

The XTRD team will continue to publish regular technical updates to keep our community apprised of progress in product and expansion.

XTRD attending Chicago Trading Show May 9–10

The Trading Show is taking place in Chicago on May 9th and 10th. It’s one of the only shows that combines the world of quantitative and automated trading with cryptocurrency, the title sponsor being Kraken. Key topics include blockchain, exchange tech, low latency HFT applications, institutional participation in crypto, OTC trading, and many others.

Most industry players will be present, ranging from Tudor Investments to Credit Suisse, Galaxy Capital to Citadel, etc. We look forward to connecting with the community and delivering on XTRD’s mission to bridge institutional technology with cryptocurrency trading. We will provide state-of-the-industry feedback post conference via a video update on the XTRD Youtube channel.

Let us know if you are attending, we would love to connect!

In addition, XTRD will exhibit and speak at the New York Trading Show in September 2018 as a show sponsor.