I have received an answer(s) to various questions asked about the Apollo currency, and these were answered via Telegram.
ICO/CDEAs stated by the Apollo team the Apollo cryptocurrency is NOT an ICO but rather a Coin Distribution Event (CDE).
So let’s look at a definition for an ICO. As stated by Wikipedia it is a means of crowdfunding centered around cryptocurrency (
https://en.wikipedia.org/wiki/Initial_coin_offering), and correct me if I am wrong – isn’t Apollo crowdfunding, therefore it is an ICO? It does not matter what the funds are for, crowdfunding is just that: raising capital, it also doesn’t matter if you have already previously raised capital.
Let’s take this a step further and investigate what the local authority (legally) might suggest the outlook would be before discussing the Apollo teams response.
From my understanding and being told by the team, Apollo is based in the US, Texas. On the website an address is supplied for their Customer Support giving a Texas address: 4001 S. Shary Rd Suite 300, Mission, TX 78572. The jurisdiction is Texas, US so let’s review some recent history in this area with crypto.
The Texas Securities Commissioner would only be interested if the crowdfunding was deemed a security. A non official description of a security would be an individual expecting a return (ROI) from an initial investment such as a cryptocurrency received for fiat. This is not just limited to swapping fiat for ownership in a company (ie shares), which is deemed a security, but covers a wide range of aspects. Let me inspect these aspects in regards to crypto.
Bitconnect as we all know is currently one of the largest fraud investments in the crypto world. It had many failings and the Texas Securities Commissioner specifically pointed out how Bitconnect was a security. I will only cover those points that are similar to Apollo.
Bitconnect did not state what the crowdfunding was for and was one of the reasons to be classed as suspicious, however, Apollo does inform us. The point here is it does not matter what you do or don’t state the funds are for, capital raising is just that, raising capital.
Changing the definition to a CDE is still raising capital and subject to local jurisdiction laws. It is not what the capital is raised for but the act of raising capital. To reiterate the point- if you have already raised initial capital for a project and you raise more funds this does not change the definition to a CDE in the eyes of the SEC. Let’s look at some historical events that made a cryptocurrency a security.
The Order from the Commissioner alleged Bitconnect marketed tokens through an ICO to the general public in the US using “affiliates” for promotion. In exchange the “affiliates” were credited for each token sale through their efforts, a reward varying from 2-5%. This was done via “referral links”. Does this sound familiar? This is classified as income received for work rendered and to the Commissioner it makes it a security (
https://www.sec.gov/litigation/admin/2017/33-10445.pdf,
https://www.ssb.texas.gov/news-publications/4-billion-crypto-promoter-ordered-halt-fraudulent-sales,
https://www.sec.gov/litigation/investreport/34-81207.pdf)
Another similar attribute that the Commissioner outlines is Bitconnect had a platform Staking program where users held their coins in their QT-wallet. This is Proof of Stake (POS) minting where investors passively receive income by holding the coin in the wallet making a profit. This is deemed an investment and thus a security as the Commissioner points out. Via Telegram the Apollo team advices me that Apollo is Proof of Stake (POS) offering a Leasing system, or as the team states “forging” generating an income from transactions fees. This is also mentioned in the whitepaper located on the Apollo website.
My interpretation from published material based on this historical event unfortunately leads me to believe that Apollocurrency will also be seen as a security.
Just on a side note, the Securities Commissioner on the 20 Dec 2017 entered an emergency Cease and Desist Order against USI-Tech Limited based in Dubai selling investments tied to bitcoin mining (
https://www.ssb.texas.gov/news-publications/4-billion-crypto-promoter-ordered-halt-fraudulent-sales). This was classified as a security due to earning BTC through POW with the Bitcoin network. POW is used to secure the BTC network as POS is to secure the Apollocurrency. There is no differentiation between making income from POS or POW, only the fact it is a passive income making it a security. It was not just Bitconnect that was issued a Cease and Desist order for generating a passive income but paves the way for all future cases to be marked as a security in this jurisdiction.
Now we have looked at what the Security Commissioner says a security is lets look at the team’s response to what the difference is between a CDE and ICO.
Apollo’s version of an ICO/CDEI quote from Telegram via the Team; “the key difference with a CDE we are a non profit meaning that all proceeds from the CDE will be used to build value in Apollo, marketing being new upgrades etc”. I further pressed how they see the difference between what they see an ICO is and a CDE.
“A CDE is a coin distribution event, where we are not seeking funding from the public in exchange for securities in order to build something in the case of crypto they will put out a white paper based on the potential technologies they want to spend the money to build. In return for your money they will attempt to build this tech, in most cases these are never followed through. We have already got our own funding to build the tech and the tech has been built, we are just distributing the coins now so that as many people as possible can have it, it’s a mechanism for distribution”.
I understand they don’t want to seek money for a security but based upon why Bitconnect and USI-Tech Limited was issued a Cease and Desist Order I believe otherwise. If it were only a mechanism for distribution then only an airdrop would be necessary.
The Apollo team responded “we cannot exclusively only distribute through airdrops, where would the value be in the coin if we have it all for free? The CDE is there because all the funds will be used to build value and operational costs and more technical upgrades so that this coin would always be ahead of the competition”. My response was supply and demand dictates value.
If funds are to be used to build value and operation costs then how can this be non-profit? By taking a fiat to add value with advancing future projects that increases value to Apollocurrency isn’t profit taking then, what is? It is certainly not non profit otherwise no-one would swap fiat for Apollocurrency. No-one is donating to a charity. Am I wrong?
The fall out from being a security is you must register with the SEC and anywhere Apollocurrency is found, that is to say the Exchanges Apollo is listed on must abide by KYC laws, if not it will be delisted.
Apollo’s argument is because they are non-profit they are exempt to being a security. This brings me to my next question.
(Just a side-note, Bitconnect was registered in England not the US and look how the domino’s fell….).
Non-Profit FoundationMy next question was why I could not find this project in the database for Non-Profit Foundations in the US? The answer was because they have not applied. I also mentioned that there is no pending paperwork to do so and was told that this was correct as they have only been operation for 5 weeks (as at 9 June 2018).
I do not wish to even indulge with the time frame stated but in order for a massive project like this to work and to code all the wallets, website, writing the whitepaper and gathering the team they have certainly been going for more than 5 weeks.
My gripe here is they are being promoted as a Non-profit Foundation when in fact by the team’s admission they have not submitted any paperwork or even registered. To me this is deceiving and using a Non-Profit Foundation as a way to circumvent being a security is plainly incorrect. You can see here (
https://youtu.be/7iXMbUvC_2o) on this promotion for Apollo on YouTube that the Apollo team again uses this as a reason for it not to be a security.
A non profit organization is a charity that donates funds to support other organizations or to fund itself for charitable purposes. It is not to fund future projects or technologies to further the Apollocurrency or the associated platform(s) as they have stated. Even if the technology is already designed the fact remains the funds are used to further the project.
The TeamI have investigated various team members, even using Google Image Reverse Search, reviewing their Facebook profiles etc and the team seem to be real people. This is encouraging as so many projects are anonymous. The CEO for Apollo is Viktor Komovalov (
https://www.linkedin.com/in/konovalovxclv/) who is in the Ukraine. I don’t know what he is the CEO of since Apollo isn’t a corporation or non-profit organization but I will leave that up to you to decide. What is good to see is a personal Facebook link showing personal pictures etc of different members making them easier to track down. It would not make sense if this were a scam to have links to these accounts.
ConclusionPersonally I do not believe this is a scam, however I do believe with past historical Cease and Desist Order’s issued, Apollocurrency may also be seen as a security. Claiming to be non-profit and not even being registered does not circumvent around what a security is and in my opinion deceitful to the general public.
What they do have going for them is a real team but I will stand corrected if any evidence is presented to the contrary. I have not spent a huge amount of time investigating the team but from my limited research they seem to check out.
My purpose here was not for spreading FUD but concern for the definition of a security and to encourage a discussion and clarification on this topic.
I have been involved in crypto for many years and what I have seen is Coders/Developers trying to run a business model or to bend rules to make ends meet. This simply does not work. Claiming to be non-profit to be not classed as a security doesn’t seem to fit recent past rulings.
It is good to see a mix of legal and PR people being part of the team but it does concern me certain aspects may have been over looked. I do admit the team member(s) I received my information from are not part of their claimed legal team, thus incorrect information may have been relayed to me but I do invite a response from the Apollo team.
If I have misunderstood any information in what the Securities Commissioner deems as a security is in regards to crypto I invite anyone’s response to correct me.
If this project takes off I do believe it will be a top contender but remember my argument isn’t that it’s a scam but rather misappropriation of information for circumvention purposes.
