Topic: [GLBSE] Kronos Floating Bond, IPO on June 15th (Read 5460 times)

Please see updates @ https://bitcointalksearch.org/topic/bdk-bdkbnd-rebate-zipa-kronosbnd-hermes-update-thread-84363

I'll be writing up a proper thread both when I have more info and when I don't have a backlog of stuff to respond to. I'm sorry I can't immediately update everyone on everything. Please direct any questions you have to that thread.

We have decided to list on Hermes once it's ready (I'll make a full announcement on Hermes within a week). All reservations made are currently void. We'll begin fundraising again once Hermes is ready for it.

Relevant: https://bitcointalksearch.org/topic/m.928697

Agreed, but I'll keep an eye on it. I'd like to see the site developed more. Things like the FAQ still not being done leave me wondering at what stage they're in with their security.

Kronos.BND IPO has been canceled by GLBSE. We are working to resolve this. Please give us some time to work this out.

It's my understanding that we're talking only about Kronos net operating profits, which don't include those large one-off startup costs. I'll ask again to make absolutely sure.

When calculating the profits for distribution, are the one-off start-up costs (such as legal fees) counted against the first two-week profits, or are they spread out across the whole of the first year's operation?

It seems quite possible that Kronos will not turn a profit before buying back the bonds (due to start-up costs), even though Kronos may be wildly profitable after that.

Sorry but to me that doesn't mean much. You are just 2 guys behind a screen name(yes, I know you are GLBSE verified) who most likely live across the Atlantic. If you decided not to pay you can be sure I won't cross the ocean to get my $1300 and even if I did pursue it, would it be worth it or would I have any ground to stand on?
High risk, high reward. What you offer is high risk, very low reward(at least as I perceive it).
Thank you for answering my questions.

I'll be holding well over 10k bonds myself, fwiw. No, I'm not selling my risk. You're misunderstanding a simple fact I've stated at least four times in this thread, now. IOU (that is, INAU and myself) is liable to bondholders in the event of a problem with Kronos.

So you want to get the biggest part of the profit to yourself by selling your risk, interesting... Shouldn't that be the other way around?(Rethorical question only)
I don't remember who said it before, but it's an idiot-tax indeed.
Good luck with your "IPO". Was planning to buy at least 2000 shares, but forget about it.
The only one with guaranteed profit is you, not your investors.
Sorry if I made you lose your sense of humor. Wasn't intended. You should've expected that people will ask questions when you ask them for money. Or are you keen for clouding things with vague wording instead of explaining things very clearly to potential investors? <--- You don't need to answer this, right now, I'm not a potential investor anymore.

IOU is considered under the BDK umbrella. All risks, liabilities, assets, gains, and losses of IOU are also BDK's. If there is enough demand, I'd be very happy to consider them separate -- I was worried people'd be pissed if I separated them and then kept all IOU gains for myself. This wasn't in the original scope of BDK when the first 4.5% of BDK monthly profits were sold, so I can understand people wanting to go either way. I'd be happy to take liability of IOU on myself and not subject BDK to the risk nor potential reward, though.

Motion created: https://bitcointalksearch.org/topic/m.926629

Kronos is not offering this bond, by proxy or otherwise. I have no equity stake in Kronos. In the contract between IOU & Kronos, the bond sale was a final sale to IOU. It doesn't say "IOU will underwrite a security for Kronos and pay Kronos the proceeds minus a % fee." The contract has been reviewed by a lawyer.

Potential causes of a default: zombie apocalypse, double-suicide, EMP strike, police raid, earthquake. Kronos defaulting on their bond to us isn't relevant to our deal with GLBSE bond-holders, though it would likely take a few months to get all funds due to bond-holders in the event of a Kronos default.

Min. Annual Interest Rate by tier in worst-case scenario, assuming no dividends paid and buyback not occurring until 180D after bond issued:
.115BTC/bond = 0% APR
.1125BTC/bond = ~4.444% APR
.11BTC/bond = ~9.09% APR
.105BTC/bond = ~19.047619% APR

Just don't take things so personally.... the trolls are there for 1BTC loans and 1M$ mining companies and everything in between

IANAL, but if one knowingly sells bonds to unaccredited investors via proxy, one probably violates those pesky securities laws anyway.

Was I expected to do this out as charity? I have no equity stake in Kronos and Kronos cannot sell bonds to everyone legally or they'd very possibly violate accredited investor laws. Kronos needs funds now - not after launch, and so IOU is liable to Kronos to pay what's needed as needed. There's a tight time-schedule for when funds need to be paid to Kronos which can't be met by releasing all shares on June 15th. What we don't sell, we cover. Additionally, discovering I have lost my sense of humor has ruined my holiday, which JRO & team have been saved from. I will be going to the family picnic in a poor mood!

Also giving annualised minimum interest rates for every tier would be great. You surely do not want to mislead investors, so it must be a good idea.
What kind of risks are there, i.e. what would potentially cause you to default and return nothing or less than invested capital?

Doesn't this
contradicts this
?

Does that mean that for each bond you sell Kronos is only getting 0.1 BTC(the bond face value) and you'll just pocket the difference, hence making a profit, or am I undestanding it wrong?
Care to enlighten a dumb guy about the discrepancy?

Super-condensed.

IPO date: June 15th
Face Value: .1BTC
Dividends: .00011428571% of Kronos net profit per bond unit paid every 14 days
Buyback Value: .115BTC, will be bought back by 12/12/12

Price per unit by order's unit volume
1500-7499 shares: .1125BTC/bond
7500-15000: .11BTC/bond
>15000: .105BTC/bond

I can condense it further....

IPO date: June 15th
Face Value: .1BTC
Dividends: .00011428571% of Kronos net profit per bond unit paid every 14 days
Buyback Value: .115BTC, will be bought back by 12/12/12

Price per unit by order's unit volume
1500-7499 shares: .1125BTC/bond
7500-15000: .11BTC/bond
>15000: .105BTC/bond

LOL, yep, waiting for ASIC's to be printed do that to people. 

Vladimir seems to have a lot of free time lately  

Also if someone is just trolling and not willing to invest a single bitpenny, he should not try to read the entirety of the OP. Too bad OP had failed to do executive summary.

And if you notice, both the cases you describe are from the same persons...

There are no GLBSE fees for a forced buyback AFAIK. If there were, IOU would cover the fees without expense to bondholders.

Partial response to Shuai & Sukrim (got about two hours of sleep, little grouchy) - not only do you get additional funds from buyback value over purchase price, but there's of course the additional dividend payments made in the meantime. If people are expecting Kronos to be the small-time junk sites which Bitcoin (with its very small total worth) tends to attract, they would be mistaken. Profit estimations will come soon. Let's not call it an "idiot tax" without even having profit estimates. Let's say the bond lasts 90D, and the deals made up largely of a few people buying @ .105. 9.5% alone over three months is >3% monthly, and on top of that, add dividends from Kronos net profit (which we don't have an estimate on until JRO/Jered release investor docs). Not Pirate rates, but "idiot tax" is just offensive.

ETA: ^ sorry on that. Only just realized both posts weren't by Sukrim.

Everyone needs to weigh the costs and benefits. No, it's not going to be as profitable for "average Joe" to get in on this. That's not really my problem nor an unwise business practice -- there's an increased cost of doing business with 100 "average Joes" vs 10-20 larger investors who have enough invested to actually read the contract and ask relevant questions.

I doubt JRO would be interested in having contracts written up for 6 different deals, and this allows people with just a few hundred to help out.

*The borrower is INAU and myself. This is stated explicitly in the contract. However, money getting to Kronos relies on this bond being purchased.
*If BDK can exist, there's no reason IOU can't.
*I'm not going to disclose the entirety of our private contract with Kronos.
*Because this is a floating bond (which isn't too terribly uncommon), there is no guaranteed amount of interest. This will remain so because there is too much risk to Kronos paying a fixed percentage per month when they cannot make an accurate prediction of future income based on real numbers. I believe the details of this contract are pretty clear for anyone who takes the time to read the entirety of the OP. If someone's not willing to read the entirety of the OP, they probably shouldn't be investing hundreds of BTC in this, anyway.

Sounds too much like a very cheap loan to me, especially to people with less than 1600 BTC. Why would I want to risk a return of exactly 0 (if kronos.io doesn't have huge income right from the start) if I can't even keep the bond for the future, where it might be more valuable or have higher returns? Worst case scenario for the "average joe" is that he buys at 0.115 (or even a little bit above!), kronos.io pays it's profits as salary/bonus to it's programmer(s) and owner(s) and gives 1 BTC in total to kludge + the bond holders. Then the bond gets bought back for 0.115 BTC and all that happened was that his money was not available for up to half a year.

Imho a nicer approach would have been to sell bonds at e.g. 0.1 each with no pre-IPO and promise to buy them back at 0.115 - dividends_paid_from_profits latest in December. 15% for half a year would be an ok rate on the lending forum, allow for a bidding war when going live and would make sure nobody cuts you for a quick profit just by buying bonds for 1600 BTC, getting an invite (and potential access to maybe very good short/long positions) and just at IPO time selling them for 0.14999999, cutting you out of the loop. 9.5% profit in ~2 weeks, an early invite to a platform that tries to be the next bitcoinica and the only risk is that there will be demand for less than ~1750 BTC worth of shares in total.

Also this kinda forces/expects a startup to make profits right from day 0 onwards - I would disagree that this is a wise move or business practice...

Your numbers are accurate. Anyway, I'd pass on all of this, never really considered as something I'd want to do. Too convoluted scheme for me to take it seriously. If one has 5-10k BTC to invest, one could as well go direct to JRO and get a better deal.

Where do you get 15% from?

The buyback price is 0.115BTC/bond.

If someone buys after the IPO at 0.115BTC/bond, they get their capital back.
If someone buys 1500 bonds pre-IPO at 0.1125BTC/bond, they get their capital back plus 2.2%.
If someone buys 7500 bonds pre-IPO at 0.11BTC/bond, they get their capital back plus 4.5%.
If someone buys 15001 bonds pre-IPO at 0.105BTC/bond, they get their capital back plus 9.5%.

I'm not sure how buybacks are handled at GLBSE. Are there any GLBSE fees to be taken into account here?

This isn't a bond. It's an idiot-tax.

~20% makes more sense and I kind of thought you might have written two zeros too many but man your OP is super confusing..

Can't you do a better job making it clearer what the bond is? That it is in fact just a loan to your BDK hedge fund, a loan that will finance the loan your hedge fund made to Kronos and can't you disclose the details of that loan and be a bit more transparent? I feel like calling yourself IOU and the bond Kronos.BND severely obfuscates who the bond issuer is even though you explained it but it leaves the door open for potential confusion for someone not carefully reading your OP.

What I'd like to read in your OP is this:

Who the borrower is exactly?: Kluge and INAU, or BDK, just don't call your self IOU
What are you borrowing for?: details of the loan you made and details about who you lent to
What deal exactly are you offering?: be clear about how much it will cost, how much it will pay by using a more standardized formulation(if you lend us this much, will pay you back this fast and will add this much of interest) like a loan normally is presented and be clear about how you intend to meet your obligations


Now these are just my suggestions but I'm telling you when I read the OP the first time I was very confused about what exactly I am reading and I bet I'm not the only one.

Yes, that's right. The buyback will certainly occur before December 12th (this is contractually guaranteed), but the estimate is for this bond to be paid in 90 days after it goes live -- but that 90D estimate is not guaranteed. I don't want to give anyone the idea that this will be paid 90D after IPO, because that very well may not happen.


ETA: Heading to sleep. INAU's been gone most the holiday weekend. I should be up within 6h. No pitch-fork mobs without giving me a chance to respond first, please.

I can understand that. I'll talk with JRO and see if that'd be possible for the expected 2nd offering. I don't think it will be possible until the potential third offering (either for raising additional funds or refinancing current debt existing through current outstanding bonds). The team's not willing to risk the future of Kronos by biting off more than they can chew, and without proven numbers, that could be anything. Offering a % of profits as well as a profitable return at time of buyback, Kronos is dramatically less likely to be exposing themselves to potentially more liabilities than they can cover.

OK I am just trying to wrap my brain about such exotic instruments. Of course it cannot be used for valuation.

I understand it is effectively a redeemable at any moment at option of issuer not preferable not convertible bond for a startup company. The bond pays percent of company profit.


In other words the deal here is: "you give me money, I will pay you some interest eventually, maybe, after a startup company becomes profitable, and right until I decide that the interest is too high and then I will return you your capital plus 15%" (plus December 12th, 2012 limitation). Well, if so this is not such an insane deal as I thought initially. Could you please confirm that I got it right now.

Hmm, as an investor, I can't say I'm a fan of this structure. It has equity-like risks, but without the upside potential gains that equity usually has.

I would be more interested in a fixed interest bond.

A bond cannot be used for company valuation any more than a bank loan made to an individual can, even if the bank bases the max amount to loan as a percentage of profits the individual earns. I'm not implying valuation of Kronos by offering this bond. The bonds have been issued purely for short-term fund-raising. If there's enough demand, however, these bonds may pay a fixed percentage in case of future offerings once Kronos launches publicly and has solid numbers to discover what would be a reasonable price for them to pay.

That said, investor docs will very likely be released within a few days and I'll post them here ASAP.


ETA: I have about 30 minutes of feistiness left in me before I take a nap. It's a great time for a discussion if anyone has additional challenging questions.

Fwiw, almost all BTC-denominated bonds are issued below buyback value. However, none are being issued below face value. This is, after all, a loan, and even in a worst-case scenario, IOU is liable to pay bondholders the "interest" the bond is accruing between time of issuance and time of buyback. Profit estimations will be released by Kronos within a few days. As soon as I have them and give a look-through, I will post. I'm not really asking potential investors to invest in something which they don't have profit estimations on -- I think that'd take people familiar with both I & JRO -- but I believe it's time to make an announcement, because we really don't have much time to raise the necessary funds.

Again though, it should be mentioned that this bond is not being offered by Kronos, but by IOU (INAU and myself). The bond is based on a bond Kronos was sold to us (IOU) for which we're paying with by using payments from Kronos to IOU. Thus, payments from IOU to GLBSE bond-holders also rely on Kronos paying as their contract with us dictates, but ultimately, we (IOU) are liable to bondholders, not Kronos (though they're liable to us). I will insist on Kronos opening their books while the bond is active, but if I were in their shoes, I would be uncomfortable with that and the precedent it sets, though I'm also a fan of transparency simply for the sake of fund-raising, even if it may become regrettable once Kronos is able to self-fund. This is largely a reputation-based bond. You'll have to trust me. While I have a relationship with JRO & Icehill's (effectively, the successor to Ringcoin) projects, I have a reputation to uphold with the community which I believe will net me much more than this single offering.

OK got it now. It is good to be wrong.

Now, would you care to justify your valuation of Kronos at 17500 BTC * 5 * 5 = 437500 USD i.e. half a million USD ?

There is now a requirement in place that purchasers must pay within 7 days of making the reservation (or on June 14th, whichever is earliest). Those who have already purchased are not bound by this rule, but it'd be appreciated if they honored it. Anyone who does not pay within that time (excluding previous bond-reservers) will have their reservation invalidated. We're on a fairly tight time schedule to pay Kronos.


No.

You've read it wrong, Vlad. .0011428571% of Kronos' net profit, not of face value. As is stated, the 175k bonds, in total, pay 20% of Kronos' monthly net profit. There is no guarantee of dividends. Investor documents with profit estimates will be provided within a few days.

We all don't like to think that, so we don't. But the truth is uninformed people are everywhere, and the Bitcoin community, as cool as it is, is not an elite group

paying .00011428571% bi-weekly,

Does this mean that investor will double their money (with reinvestment i.e. with compounding) in about 72/.00011428571 * 14 = 8820000 days or 24500 years?

Please tell me some number here is badly wrong, by four orders of magnitude or so.

What is wrong with all the GLBSE assets on one side there 10% per week ponzi's by proxy, on the other side there are investments that allow one to double his money in only 25 millennia.

Is Bitcoin really such a collection of gullible suckers?

I find the high discounts in the beginning (below buyback value!) for people with lots of BTC kinda disencouraging personally. Do you have profit estimations already or is this part of the to be released investor information?

All in all you want to borrow ~20k BTC (will be probably a bit less, due to rebates), but you don't pay back a fixed percentage (say 2%/month or so) - only a percentage of profits (which can be 0 as well).
Will you open your books and publish audits, so your claimed profit is actually verifiable or do investors have to trust you that you really earned XXX BTC in the last 2 weeks and not more/less?

Subscribed. Are you reserving a certain number of bonds for the GLBSE open market IPO?

A bond can't be used to valuate a company. This is a temporary fund-raising solution until it becomes preferable for Kronos to buy back the bond.

IPO has been given greenlight by GLBSE and can be viewed on their service @ https://glbse.com/ipo/84

ETA: profit % is correct on description in IPO page (was originally correct), but incorrect in the contract. Only GLBSE team can edit those. Total Kronos net profits being split among 175k shares is 20%.

My mistake -- forgot to convert to percentage. The actual percentage is .0001142571% -- in reality, it's something more like .00011428571428571428571428571428571%, or precisely (((1/5)*(1/175000))*100)

Fwiw - This bond is not offered by Kronos. IOU has purchased a bond from Kronos in a private contract and is using funds raised from this offering to pay Kronos.

I don't get it. You want to raise around ~20k BTC (175000*~0.112 BTC) but you're willing to only pay ~0.20% dividend (175000*0.000001142571%) of your every 14day profits, well that and ~1500 BTC with a buy back? Am I missing something?

Reserved.

Bonds remaining: 126,000 of 175,000
GLBSE page: https://glbse.com/ipo/84

TL;DR
IPO date: June 15th
Face Value: .1BTC
Dividends: .00011428571% of Kronos net profit per bond unit paid every 14 days
Buyback Value: .115BTC, will be bought back by 12/12/12

Price per unit by order's unit volume
1500-7499 shares: .1125BTC/bond
7500-15000: .11BTC/bond
>15000: .105BTC/bond[/b]

----

Kronos. What is it?
Kronos is Bitcoinica on steroids - a leveraged trade platform built with security and urgency in mind. Kronos does not handle USD and leverages ZipConf for immediate deposits and GoxBTC withdrawals. That is, instead of waiting ~2h to be credited with BTC you deposit, you’ll be credited in 10-15 seconds. ZipConf has been extensively tested, and were a double-spend to successfully be executed, ZipConf is insuring the loss, so it wouldn’t affect Kronos. While it only uses BTC, you are still able to open positions shorting and going long with BTC due to the infrastructure behind Kronos.
 
You can take a look at Kronos by visiting Kronos.io – it’s currently “inner-circle, very early” beta, so very few people are being allowed to test. Large bond-buyers will be permitted an invite code for early use.
 
For investor information on Kronos, please see documentation at [ We'll be providing this as soon as we get it -- before June ]
 
Okay, so I know what Kronos is, now. What’s Kronos.BND and what’s its purpose?
Kronos.BND is a floating bond, paying .00011428571% of Kronos’ bi-weekly net profit per each bond every 14 days (thus, first dividends will be on June 29th), and is what will ensure Kronos has adequate funds to maintain operations (covering leveraged positions, for example) as well as for additional startup costs – paying the attorney, costs of getting everyone where they need to be, dedicated servers, getting the company publicly registered in Iceland, etc. In total, Kronos.BND will be paying out 20% of Kronos net profit. Dividends are not guaranteed, of course -- if Kronos operates at a net loss between last payment period and an upcoming payment period, then no dividends will be issued at the upcoming payment period.

It is likely that more bonds will be issued some time in the near-ish future (likely late June) at a price, date, and in an amount not yet determined.
 
Kronos.BND Buyback Provision
When Kronos management decides to buy back shares, they will pay a flat .115BTC per bond unit. An announcement will be made 15 days prior to the buyback actually happening.


I'm interested in buying pre-IPO. What's the price?
The minimum order is 1,500 shares. For orders with a purchase amount between 1500-7499 bonds, the price is .1125BTC/bond. For orders with an amount between 7500-15000 bonds, the price is .11BTC/bond. For orders with an amount greater than 15000 bonds, the price is .105BTC/bond. Orders of 7,500 bonds or more are welcome to a Kronos.io beta invite code.

Purchasers must pay within 7 days of making the reservation (or on June 14th, whichever is earliest). Those who have already purchased prior to this being implemented (07:30 UTC on 5/28) are not bound by this rule, but it'd be appreciated if they honored it. Anyone who does not pay within that time (excluding previous bond-reservers) will have their reservation invalidated.

There will be an IPO, where the minimum price will be .115BTC/bond. Because the IPO is done with an open-market order, there is no guarantee you will get bonds at the minimum price nor that you'll be able to purchase bonds if there are not enough available to fulfill your order.


Cheers,

IOU

GLBSE Contract:
"Introduction, Issuer, Bondholder, and Operator Liabilities" - 175,000 bonds ("Konos.BND") will be issued on June 15th, 2012. The Issuers of this bond are Ben Malec ("Kluge") and ineededausername, collectively known as "IOU," who are the final purchasers of the bonds hereby listed as part of a private contract between Kronos and IOU. The Issuer (IOU) of this security is not the Underlying Operator (Kronos) for which funds are being raised. Kronos Operators are NOT liable for this contract, the Issuers are. The Issuers are responsible for the entirety of this security's offering and purchasers of "secondary" bonds issued by the Issuer to investors. Investors must be accredited investors (self-certified or otherwise) to purchase this bond. By purchasing this bond and consequently agreeing to this contract, bondholders attest to being an accredited investor who is able to legally purchase this bond.

"Description, Dividends" - Kronos.BND is a floating bond, paying .0001142571% of Kronos’ bi-weekly profit per each bond every 14 days (thus, first dividend payment will be on June 29th). In total, these bonds represent 20% of Kronos' bi-weekly net profit which will be paid to bondholders. Each bond has a face value of .1BTC. These bonds ensure Kronos has adequate funds to maintain operations (providing credit for leveraged positions, for example) as well as for additional startup costs – paying the attorney, costs of getting everyone where they need to be, dedicated servers, getting the company publicly registered in Iceland, etc. Dividends rely on Kronos.io having a net profit. Dividends are not guaranteed. If Kronos operates at a loss during the span between payment periods, no dividends will be paid.

"Buyback" - A forced buyback will be initiated *BY* December 12th, 2012. A forced buyback may be initiated any time prior. The Issuer must publicly inform bondholders of a buyback 15 days in advance. At the time of buyback, the Issuer will pay bondholders .115BTC per bond unit.