BEWARE all ICOs and ICO issuers!!!!! Part 2
Luvdub Coin recently made a public announcement for our airdrop and in less than 1 week, received submissions ranging in the thousands despite our intense KYC-AML procedure.
At this time, I felt compelled to write an article due to the alarming frequency of fraudulent activity and stolen data our verification team has witnessed in these past few days.
This article is broken into two parts and you are reading the second part, "What ICO issuers need to be aware of."
1. Why ICO participants should AVOID ICOs unless they ABSOLUTELY TRUST the issuer.
2. What ICO issuers need to be aware of.
This is by all means not a comprehensive list and I do not suggest that you rely solely on this article to make any decision that may have an impact on your privacy, security, or life. I, nor anyone at Luvdub Coin or Luvdub Nation Inc. can be held responsible for what you do with the information provided. You are the only person who can make sure your data and privacy is safe.
---
What ICO issuers need to be aware of.
So you hear all about the ICO craze where massive amounts of capital is being poured into a burgeoning industry. With ICOs like Telegram raising 1.7 billion dollars on its private sale alone or the Venezuelan government raising $735 million dollars for their oil backed cryptocurrency, you think, why can't I do this?
While the allure of starting an ICO may sound endearing, keep in mind there are grave consequences if poorly executed. I'm not just referring to fines or imprisonment from government agencies either but the potential for your ICO to adversely impact the lives of hundreds or thousands of innocent individuals across the world. If you fail in your execution, your ICO participants will suffer too.
Assuming that your intentions are pure and that you really are trying to create a solution for an unmet problem, I'd like you to consider several aspects of an ICO that are crucial to your project.
1. Jurisdiction
2. Security
3. Values
---
Jurisdiction
Where you and your ICO participants reside matter
While every country, state, or city may have their own perspective on the regulation of ICO offerings, it's paramount to the survival of your ICO to understand these laws. Not adhering to their requirements can have dire consequences such as receiving a fraud suit filed by the SEC.
Since we are a company incorporated in New York, I will briefly discuss some aspects to be aware of during an ICO from our stand point. Some of these include the exclusion of unsophisticated investors, verifying and defining accredited investors, FinCEN compliance, and a slew of other matters.
---
In December 2017, SEC (Securities Exchange Commission) chairman Jay Clayton stated that all ICOs he came across should be classified as securities. This meant that ICOs that didn't comply with existing securities regulation faced scrutiny by the SEC. ICOs now are required to register with the SEC for their ICO and to undergo an extra layer of complexity in a murky world. Some alternatives to registration include:
Regulation D Rule 504: This rule allowed for companies to offer and sell up to $5,000,000 worth of securities within any 12-month period. The purchasers of the securities are to receive "restricted" securities where they cannot be sold for at least six months or a year without registering them. There are no limit on the number of investors.
Regulation D Rule 506(b): This rule prevents general solicitation or advertisement to market the securities. Companies are allowed to sell to an unlimited number of accredited investors and up to 35 other purchasers. Even with the 35 other purchaser stipulation, all non-accredited investors would have to be considered "sophisticated" where they have sufficient knowledge and experience in order to effectively evaluate the merits and risks of the investment. The company would also provide information to investors that are free from false or misleading statements.
Regulation D Rule 506(c): This rule allows for general solicitation as long as:
1) The investors in the offering are all accredited investors; and
2) The company takes reasonable steps to verify that the investors are accredited investors, which could include reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the like.
Regulation S: This rule allows for foreign investors to partake in securities purchase as long as the sale is made in an offshore transaction to a buyer outside the US. Also keep in mind that the tokens are to be considered "restricted" securities and not permissible to be resold under certain circumstances for a specific time frame.
Accredited Investors: Accredited investors can be individuals with an earned income that exceed $200,000 (or 300,000 together with a spouse) in each of the past two years, where they reasonably expect the same for the current year. They can also be individuals or together with a spouse having a net worth over $1 million excluding the value of their primary residence. Other accredited investors can be entities where all equity owners are accredited investors or trusts with assets exceeding $5 million.
---
We're still watching you
Even if you do register your ICO appropriately, there are still other safeguards that must be put in place. Any deviation from certain requirements can result in significant ramifications for your ICO which would adversely affect your community involved. Some things to consider are:
FinCEN: The Financial Crimes Enforcement Network (FinCEN) has established certain requirements in regards to the exchange of securities/money/value. Some of these requirements include the registration for BSA (Bank Secrecy Act) E-filing to transmit data for questionable transactions. They also require that certain protocols are created and implemented by the ICO organizers to ensure that a standard is set by the organization.
OFAC Sanctions List: Following the terror attacks of 9/11, the USA PATRIOT Act was created to thwart specific money laundering and terrorist financing activities. This prevented certain individuals from conducting transactions with personnel on the OFAC Sanctions List.
KYC-AML: If you aren't supposed to deal with terrorist organizations or individuals who finance such activities, how would you know? By complying with KYC-AML(Know your customer/Anti-money laundering) procedures. Some of these include:
1) obtaining customer identifying information from each customer prior to account opening;
2) verifying the identity of each customer, to the extent reasonable and practicable, within a reasonable time before or after account opening;
3) making and maintaining a record of information obtained relating to identity verification;
4) determining within a reasonable time after account opening or earlier whether a customer appears on any list of known or suspected terrorist organizations designated by Treasury and
5) providing each customer with adequate notice, prior to opening an account, that information is being requested to verify the customer's identity.
---
Security
Privacy matters
With the advent of the internet, the dissemination of information has increased exponentially. This revolution does come at a price where large scale hacks that jeopardize sensitive data appear to be a common occurrence. For our submission process, we noticed a plethora of stolen data being photoshopped to pass our KYC-AML procedures. Here are some things to help protect the data of your users and to comply with specific regulations:
Encryption: This alone should be a standard for all things. It's the difference from making your data public to the world or confining it. The minimum expectation is to have TLS (Transport Layer Security) for all transmissions over the internet. You may take this a step further and register your company for a positive EV-SSL certificate. You may also force https encryption through your site and apply forced https through your browser via an extension. Consider encrypting your hard drives and all other devices that store sensitive data as well.
IP Restriction: If there is sensitive data on any of your servers, please restrict entry to only the IP addresses that require access.
Backups: Servers blow up. Data gets lost. Code ruins everything. $!*& happens. Make sure you back up your data so that if anything goes wrong, you are able to revert back to a normal state for operation. Also, when dealing with sensitive information, you can also consider utilizing a device that is not physically connected to a network (air gap). Some people choose to turn off the WI-fi or disconnect the Ethernet cable but whatever you decide, think security first.
Formatting OS: Unless you're running Tails OS (Operating System), you may want to consider formatting the OS every few months. This can help reassure that anything malicious that made its way onto your computer can be effectively wiped.
Password Managers: If you aren't utilizing a password manager for your devices, start doing so now. You should not have the same password for multiple sites/apps. It's also a good idea to change your passwords every now and then.
2-factor Authentication: For sensitive information, you should look into 2 factor authentication. This requires a second step in order to access your site/files/app. Sometimes it is done through email, through text message, or using an app like Google Authenticator or Authy.
VPN: VPNs (Virtual private networks) are services that allow for you to access the internet with a different IP address. This helps to ensure that if someone obtains your IP, they would think that you are at another location thus ensuring your privacy and security. VPNs are generally inexpensive for the value and security they provide.
Scripts: If you are using Firefox, Chrome, etc., consider downloading an extension that blocks/restrict client-side javascript on the web browser. While it may make web pages more interactive, certain sites can add malicious code such as Cross-Site Scripting (XSS) attacks. Keep in mind that deactivating javascript can cause certain sites to malfunction.
Ad blockers: Whatever ad blocker you choose, use it. There have been reports of sites pushing phony updates and other phishing attempts through redirects. In general, if you see an ad, don't click on it.
Email: Aside from never clicking on links, you should consider using plain text email as opposed to html. It is a lot easier to hide unsafe links through html. This is why whenever Luvdub Coin sends you an email from an official email address, you will ONLY receive it in plain text.
---
Values
We lay out the foundation for success in the future
No matter what occurs in life, your decisions are based on your values. It is the experiences you encounter that determine your responses to your circumstances. If your team has strong leadership that is based on universal truths, you are able to accomplish anything and weather the storms. Without clear values and a mission, success becomes elusive and differences of opinion become divisive to the team.
Mission Statement: What is the purpose of your company/ICO? Are you looking just to reap tons of cash or do you want to make something better? Without a clear direction, your team will not have the focus to accomplish anything at its highest potential. Make a difference.
Accountability: Do you see the world through the lens of a victim or someone who's powerful? Do you make excuses or own your faults? Do you have the make it happen factor? If you are ever in a situation that requires action, ask yourself, "which one of these mental states am I in?"
1) Unaware/unconscious of the problem.
2) Blaming others.
3) Making excuses.
4) Wait and hope the problem washes over.
5) Acknowledge that there is a problem.
6) Own the problem.
7) Find solutions.
Getting into action.Be powerful, not a victim.
Integrity: One of the most difficult aspects of leadership is integrity. Mean what you say and say what you mean. Do the right thing. When your back is up against the wall, it's your integrity that stands out and determines if you stand by your word. When the chips are down, it is our discipline that holds ourselves to the highest standard and to never deviate from righteousness. If someone is offering a kickback, don't accept. If there's a conflict of interest, kindly decline. We at Luvdub Coin do not accept offers for marketing services/ promotions that require any of our tokens or other forms of payment in exchange for social media referrals, youtube reviews, website listing, etc. without a disclaimer attached. Any underhand transactions not only creates distrust in the community but effectively tarnishes the value and reputation of a company/token.
---
That's it for our ICO ramble!
The world of cryptocurrency is still in its infancy but if we hold ourselves and others to the highest standard, we can propel the human race forward. I wish that your upcoming ICO does as well as you could have ever dreamed!
Please help spread the word and let's all do the right thing.
This has been the second and last part of my ICO ramble.
For Part 1, please visit: Why ICO participants should AVOID ICOs unless they ABSOLUTELY TRUST the issuer.
GET INVOLVED at www.luvdubcoin.com
Also check out our other sites:
Telegram | Facebook | Github | White Paper | Youtube | Reddit | Twitter | BitcoinTalk