$15M Munchee ICO refunds investors
By: Howard Marks
Tags: ICO, Bitcoin, SEC, Jobs Act, Blockchain

Talk about an amazing holiday season. The SEC just convinced Munchee Inc, a self proclaimed solution to Yelp’s problems that uses the blockchain, to repay the money it received from eager investors. These lucky investors will see their BTC and ETH refunded, and they’ll be able to gain back those amazing recent jumps in prices from these cryptocurrencies.

Time to celebrate in style.

Now we all know corporate generosity usually has some strings attached. The following is a pure speculation at what really happened: Munchee, launched its ICO as a solution with a whitepaper. Then it started a pre-sale giving those big whale investors nice discounts ahead of the actual sale to unsuspecting investors. While they were celebrating their success, they got a call on their 1–800 customer service phone number from an attorney at the SEC. Small talk ensued and they promised to call back the SEC in short order. Chelsea Lam, the co-founder, called the company’s attorney and after much debate about whether fighting the SEC is worth it, Chelsea called the SEC back and asked for forgiveness. Actually, she offered to rescind the entireraise and signed a consent form.

It is interesting that no officers of the company were named in the order, preserving some of their reputation.

Looking into this story, I was able to find something that was really unusual and may demonstrate how crazy the ICO marketplace is. One of the listed advisors to the ICO is Christina Gagnier. For those who are not familiar with what an ICO advisor is, this is one of the great make-believe schemes ever invented.

Here’s how it works: A company looking to launch an ICO realizes they have no credibility or reputation for receiving these thousands of Bitcoins from investors. So they run around looking to bring in advisors who probably know nothing about the company and pays these new “advisors” in tokens to put their names on the list. Sometimes they pay a percentage of the proceeds to the advisors. Investors see the list of advisors and decide this is a great deal and invest.

So who is Christina Gagnier? She is an IP attorney at Gagnier Margossian, former member of the FCC consumer advisory committee and was on a task force for then Attorney General and now Senator Kamala Harris. She is an adjunct faculty as UC Irvine School of Law and ran for Congress in 2014. Basically, a superstar and very successful attorney. So why would she get involved in a company illegally selling securities to the general public?

What is clear is this: Launching an ICO with a utility token is no longer fashionable. The SEC’s chairman, Jay Walker, who recently wrote a seminal paper on this subject, warned the marketplace that his commission is watching everyone and calling those who disguise securities as utility tokens. He is targeting not only the companies, the CEO, and the officers, but also the lawyers, accountants, advisors and anyone helping raise the capital. The party is over.

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