Caixin
Sep 22, 2017 07:39 PM
FINANCE

ICO Refund Issue Emerges as New Cryptocurrency Flashpoint

With refunds for initial coin offerings (ICOs) now underway, how much investors can recover has become the next flashpoint between them and cryptocurrency crowdfunders.

Two weeks after outlawing ICOs, Shanghai authorities on Friday reported that 90% of refunds are complete. But the dust is far from settled. Some investors complained the refund process has been slow, while some took to the street and asked for more money to cover their losses.

Regulators have not given guidance on whether the refunds should be based on the original purchase price or the latest trading price, leaving issuers to negotiate with investors.

While some ICO issuers have offered refunds at prices higher than the market price, others are refunding investors at the original purchase price, which in many cases represents a large cut from recent trading prices.

As most cryptocurrency exchanges are slated to close before the end of September, investors that have not been refunded are growing increasingly wary. But a source close to regulators told Caixin that shuttering exchanges does not mean an end to the refund process, which is expected to take longer.

Investors who invested in ICO projects issued by Shanghai-based technology company Viewfin recently protested at the company’s headquarters. Some have yet to cash in any money after applying for a refund, while others have a problem with the price the company is offering.

These investors also went to Wuhan-based ICO platform ICO Shidai, from which they bought Viewfin’s cryptocurrency, but they were not welcomed by company employees.

According to a Viewfin employee, one of their cryptocurrencies called ZenDao was offered on five different ICO platforms. According to a notice from ZenDao, ICO Shidai and the platform AIMWISE have been the slowest to refund investors. ICO Shidai has only completed 22% of returns and AIMWISE has yet to start making refunds.

Viewfin also said ICO Shidai did not provide the company with a list of investors, slowing the refund process.

In addition to being the issuer of three large ICO projects including ETP, ZenGold and ZenDao, Viewfin also runs a cryptocurrency exchange platform called SZZC.com. Like other exchanges, it issued a notice on Sept. 15 saying it will halt cryptocurrency trading by the end of September, and complete cryptocurrency to cash conversions between Sept. 18 and Sept. 25.

One ZenDao investor told Caixin he traded 1,000 ETP for 80,000 Zendao. At the time, the price of ETP was 36 yuan ($5.46). Viewfin is currently offering investors 10 yuan per ETP, which means the investor would take a loss of 26,000 yuan if he accepted the offer.

On Thursday, Caixin journalists reached Viewfin founder Eric Gu through the social media platform WeChat, and learned he was in London participating in the Blockchain Live conference. When asked about rumors on social media that he had “run away,” Gu said he had no comment and only wished to make his company successful and protect investor interests.

A regulatory source said that regulators’ first goal is to identify which ICOs have been issued, so they are primarily focused on ICO issuing platforms. Later, they will shift their focus to cryptocurrency exchange platforms, the source said.

Contact reporter Liu Xiao (liuxiao@caixin.com)

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