TickerBOND: LTC-ATF.B1
Moderator Score7 (7/0)
Moderator VotesYES 7 / 0 NO (1 ABSTAINING -- Users with 10 or more shares of LTC-GLOBAL are allowed to vote.)
oZoNo voted YES with comment: Note: Although this bond never matures, the issuer promises to redeem bonds at face value (or greater) under certain conditions, including canceling the bond. Note: This bond is callable.
BTCTRADINGPT voted YES with comment: BTC-TRADING-PT shareholders voted to approve: 749-31
SharesOutstanding 16037 / 100000 Issued
IssuerDEPRIVEDASSET <
[email protected]>
Forumhttps://bitcointalksearch.org/topic/ltc-global-ltc-atfb1-129985Issuer DetailThis bond is issued by the Fund operating under the ticker LTC-ATF on the
Litecoin Global Exchange. Further information about the issuer can be found at:
The listing for the fund at
https://www.litecoinglobal.com/security/LTC-ATFThe LitecoinTalk thread for the fund at
http://forum.litecoin.net/index.php/topic,657.0.htmlThe Bitcoin forums thread for the fund at
https://bitcointalksearch.org/topic/ltc-global-ltc-atf-112876The threads in the last two links contain pretty much identical information (I
post all significant updates to both) so there's no need to read both.
ContractDEFINITIONS
(The) Issuer / The fund trading with the ticker LTC-ATF on the Litecoin Global
Exchange.
(The) Manager : The individual controlling the user account
with the name "Deprived" on The bitcointalk forums.
The Bond : The security offered on Litecoin Global Exchange using the ticker
LTC-ATF.B1
OVERVIEW
LTC-ATF.B1 is a bond issued by the LTC-ATF. It is a sort of hybrid lieing
somewhere between a regular bond and a 'perpetual' bond. LTC-ATF is issuing
this bond rather than raising new capital via sale of additional units for two
primary reasons:
1. To allow LTC-ATF to trade in BTC-denominated securities without massive
exposure to the LTC/BTC exchange-rate.
2. To reduce the portion of future profits distributed to new investors - and
hence increase the profit retained by early investors. This increase in
retained profits comes with an associated increase in accepted risk (by existing
LTC-ATF investors, not bond holders).
The bond is primarily transacted in Litecoins (LTC) but has a face-value
denominated in BTC. Dividends are paid based upon this face-value. This means
that bond-holders are effectively making a BTC-denominated investment - with
transactions just happening to occur in LTC. This has advantages and
disadvantages for both investor and issuer - which should be carefully
considered before investing.
The bond pays a fixed-rate of interest weekly. This rate may be increased
without notice by the issuer but may not be reduced once increased. Bonds will
initially be offered paying a 0.6% per week dividend - then the rate will be
gradually increased as necessary until demand meets supply. Any such increases
apply to ALL outstanding bonds, not just to new ones sold after the date such
increase is announced.
FACE VALUE
Each bond will begin with a face value of 0.01 BTC. All Asks and Bids placed by
the issuer will be at approximately this face-value less (or plus in the case of
Asks) a 1% administration fee. The exchange-rate used by the issuer when
placing such orders will be the rate available for immediate conversion (i.e.
buying or selling into existing orders) on the BTC-E exchange.
In general the face value of bonds will not change. The exception to this is if
a platform on which LTC-ATF operates defaults, is hacked or otherwise loses
assets rightfully belonging to LTC-ATF. This is dealt with in more detail in a
later section of this contract.
REDEMPTION OF BONDS
The bonds have no expiry date - that is they are perpetual in nature. However
provision is made to allow redemption at any time (subject to certain
provisions) by holders.
Issuer undertakes to attempt to redeem at least 10% (or 1 BTC worth - whichever
is higher) of outstanding bonds on any calendar day on demand. This will be
conducted through two primary mechanisms:
1. Issuer will regularly check the LTC Global market for any Asks which are
priced at 99% of face value or less. Any such orders will be filled.
2. Any bond holder may directly redeem bonds provided at least 100 bonds are
redeemed in a batch. This is done by transferring the bonds to the manager
(DeprivedAsset). When manager notices such a transfer he will sell an amount of
BTC on BTC-E equivalent to the face value of the transferred bonds then transfer
99% of received funds (in LTC) to the holder.
Unfortunately, due to the bonds being valued in BTC but transacted in LTC it is
not possible for issuer to leave standing bids up on LTC Global in the manner
that is used to provide liquidity for LTC-ATF.
At his discretion manager may agree to redeem bonds by means of a transfer of
BTC on the BTC.CO exchange. Where this occurs, such redemption will be made at
99% of face value (with no exchange-rate relevant). This would need to be
arranged in advance and it established beyond doubt that the nominated BTC.CO
receiving account is indeed controlled by the same indivual as transferred the
bonds on LTC Global.
Manager may at his discretion sell bonds at below face value to existing bids on
the market. This would only be done if there were a specific very profitable
(and with short-term availability) opportunity available.
DIVIDENDS
Dividend payments are due at a nominal time of 23:59:59 GMT each Saturday. In
practice the dividend payment will be made at some time on either Saturday or
Sunday - typically just before weekly results for LTC-ATF are published. It is
not possible to schedule dividends in advance as the amount of the dividend (in
LTC) cannot be calculated without knowing the exact exchange-rate available at
the time of payment.
Dividend will be a fixed percentage each week. This percentage will be set at
0.6% per week when the bond is first placed for sale. Thereafter the rate may
be increased at any time without ntoice by the issuer. The rate may never be
decreased by the issuer whilst there are any outstanding bonds. Changes to the
interest rate will be published in the official threads for this security and in
the LTC-ATF threads. Any increases in interest rate apply to all oustanding
bonds, not just to ones sold after such increases.
When a dividend is paid the following procedure will be used to calculate the
amount to be dividended:
1. The BTC value of the dividend will be calculated - the number of outstanding
bonds multiplied by their individual face value multiplied by the current
interest rate paid.
2. a) If the issuer does NOT need to convert BTC into LTC to pay the dividend
then the exchange-rate used to calculate the LTC to pay will be the mid-point
between highest bid and lowest ask on the BTC-E LTC/BTC trade list.
b) If the issuer DOES need to convert BTC into LTC to pay the dividend then
an amount of BTC equal to the due dividend will be used to purchase LTC on
BTC-E. The LTC received from this transaction(s) will be the amount dividended.
3. The full amount of LTC calculated (or obtained) will then be dividended out.
No admin fees or transfer fees will be deducted from it.
MANAGEMENT FEE
No management fee is taken for maintaining operation of these bonds. The
manager expects to gain his reward from increased profits from his personal
LTC-ATF units and his 10% fee on LTC-ATF earnings.
The admin fees charged on purchases and sales are to cover (or reduce) the
various transfer and exchange-use fees necessary to conduct such actions.
RISK EXPOSURE AND MITIGATION
In general bond holders have senior claim against all assets of LTC-ATF (up to
face value of the bond). Most risks associated with LTC-ATF's operations are
carried by LTC-ATF rather than this bond. There is one specific risk which is
shared with bond-holders - the full or partial default of a platform (e.g.
exchange) on which LTC-ATF holds funds. This particular risk is share with
bond-holders for two reasons:
1. There is nothing LTC-ATF can practically do to mitigate this risk.
2. Bond-holders already accepted this risk when they deposited funds to LTC
Global to invest.
In the event that a platform on which LTC-ATF trades (or holds funds) loses (or
ceases to make available for use) assets belonging to the fund then the face
value of bonds shall (at the discretion of manager) be reduced by a percentage
equal to the percentage of asset value controlled by LTC-ATF lost (or made
unusable).
So if (for example) BTC-E vanished with all our funds on there, and those funds
amounted to 10% of the total assets managed by LTC-ATF then the face value of
all bonds would be reduced by 10% to 0.009 BTC.
If such a reduction occurs and LTC-ATF continues trading (rather than closes
down) then half of all future profits made (after payment of bond dividends and
before management fee is taken) would be applied to increasing bond face value
back up towards its initial value of 0.01 BTC.
Other than the above, all risks associated with trading (prices crashing, typoed
orders that lose money, investments that turn out to be scams etc) are carried
by LTC-ATF and do not affect the face value of bonds or the dividend payments
due on them.
So there are precisely two risks bond-holders have (other than that the issuer
scams them) :
1. Losses caused by default/theft from an exchange used,
2. That the value of LTC-ATF assets falls to a level such that the total assets
of LTC-ATF are less than the face value of issued bonds.
Here are specific risks associated with point 2 - and how they are addressed:
Exchange-rate changes : If all of LTC-ATF's investments were in LTC-denominated
securities and LTC suddenly tanked against BTC then LTC-ATF could end up with
insufficient funds to cover the face value of outstanding bonds. To counter
this the fund must maintain BTC-denominated assets such that outstanding bonds
amount to a liability of no more than 90% of such assets. So if we have 90 BTC
face-value of outstanding bonds then we must hold at least 100 BTC of
BTC-denominated assets. Funds will be exchanged between currencies as needed to
maintain this minimum ratio. This percentage will be included in LTC-ATF's
regular reports (usually, but not always, produced weekly).
Trading Losses : It is possible for LTC-ATF to accumulate trading losses such
that it no longer holds sufficient assets to cover outstanding bonds at face
value. This cannot be totally removed as a risk (as exchange-rate could) but is
very heavily mitigated through a few methods:
1. Every effort is taken to spread exposure rather than allow a single point of
failure (one asset issuer) to be able to cause massive losses to LTC-ATF. As
LTC-ATF expands back into BTC-denominated investment the range of securities we
can trade grows - and we can reduce exposure per security. Prior to bond launch
LTC-ATF has targetted a maximum exposure of 20% of assets to a single issuer.
After significant bond sales this target will fall to 10% (until a significant
number of bnds have sold this risk is irrelevant unless every investment
collapses at once). That's a target - not a firm commitment - but one taken
very seriously. Exposure to a single asset issuer includes indirect as well as
direct exposure - so holdings of investment companies traded ARE taken into
account. LTC-ATF never trades securities of investment companies that don't
disclose their holdings.
2. A limit is placed on the number of bonds that LTC-ATF may have outstanding.
This limit is defined as bonds with a total face value of 150% of LTC-ATF's own
NAV. So if LTC-ATF had 100 BTC of assets without any bonds then maximum bonds
it could issue would be 150 BTC worth. This ratio will also be included in all
regular reports of LTC-ATF. If this ratio ever rises above 150% then manager
will promptly ensure that it is reduced below 150% by either issuing more units
of LTC-ATF and/or repurchasing bonds from the market.
In practice there is no plan to ever intentionally get close to the two limits
defined above. However the first likely will on occasion need to be corrected
(if a few BTC investments suddenly fall heavily in value). The second is only
likely to need adjustment if LTC falls very heavily against BTC.
Despite the above mitigating actions risk cannot be totally eliminated. To
claim otherwise would be ignorant and/or deceitful. Investors should always
consider potential risks before investing - that is the case here as it is
everywhere else.
BOND RECALL
The issuer has the right to forcibly recall all outstanding bonds at will. This
must be done at 105% of face value - with the LTC payment made defined as the
LTC obtained by selling 105% of total bond face value (in BTC) on BTC-E. No
admin fee or transfer fees may be deducted from this.
Whilst there's no intention to ever do this, this right has to be reserved in
case trading conditions become such that supporting outstanding bonds can no
longer be justified. An example would be if BTC-denominated exchanges closed
down but LTC Global remained open - where LTC-ATF could continue but there'd be
no need or use for BTC-denominated capital.
FUND CLOSURE
In the event of LTC-ATF closing operations all outstandings bonds will be
redeemed at 100% of face value - with the LTC payment made defined as the LTC
obtained by selling the total bond face value (in BTC) on BTC-E. No admin fee
or transfer fees may be deducted from this.
Dividends remain due every week until such time as LTC-ATF is able to make such
a final payment.
If fund closure is announced then LTC-ATF may not repurchase any units or make
any payments of settlement to LTC-ATF investors until all bonds have been fully
redeemed. Bond holders have absolute seniority over LTC-ATF unit holders in all
claims on LTC-ATF assets in such a circumstance.
GENERAL ISSUES / FINE PRINT
In various places this contract refers to BTC-E when discussing currency
exchange. Whilst at the time of making this contract that is the exchange used,
such use is not intended to restrict issuer from using other such exchanges.
All occurrences of "BTC-E" should thus be read as "BTC-E (or such other exchange
as the issuer chooses to use)".
Changes may only be made by issuer to this contract if either:
1. There are no outstanding bonds,
2. A vote is passed approving the changes with 100% of bond-holders voting yes.
LTC-ATF may not hold outstanding LTC-ATF.B1 bonds itself (this is impossible to
do without use of a proxy account anyway).
For the purpose of this offering, BTC and LTC are considered virtual currencies
with no intrinsic value (akin to currencies in online games). This fund is
being run for the entertainment of the manager and investors with no expectation
of financial gain or loss for either party.
Executive Summary This bond is a product - not a company. The business issuing the bond is
LTC-ATF - which I now give a brief rationale for.
WHAT IS LTC-ATF AND WHY DOES IT EVEN EXIST?
LTC-ATF is a small fund established to trade in securities denominated in
crypto-currencies. The fund's focus is very much on trading rather than
investment - it doesn't sit on investments waiting for them to (hopefully) make
a profit, rather it strives to buy and sell making profit in a much shorter
time-scale.
The obvious question to ask is "Why bother setting up a fund with such a small
amount of capital - couldn't you just use your own funds to trade?". There are
a range of reasons why the fund exists - hopefully the give some insight into
the rationale behind the fund and why it operates the way it does. In no
particular order :
Funding : Of course I have sufficient funds to use my own capital for an
operation this size. But if market conditions (range of securities and volume
traded) change such that a much larger operation is desirable then without a
track-record it would be hard to raise the funds to take advantage of that.
Fairness : I'm by no means shy about expressing criticism of other virtual
securities. It's therefore only fair that I run one myself and give opportunity
for those I criticise to reply in like manner. It's my hope (and expectation)
that my performance, fairness to investors, reporting standards and transparency
will make plain that - whatever else my faults may be - I'm no hypocrite when I
complain about others' lack of those same qualities.
Fun : It's far more enjoyable running the fund in public than it was when I just
invested my own funds in private.
Motivation : Having a responsibility to my investors causes me to put more
effort into my endeavours than I otherwise likely would. If I become lazy, lax
or careless then it will become a matter of public record - a great incentive to
do none of those.
Start Small : It's painful watching people attempt to create new companies in
areas they have no proven expertise in and trying to raise thousand or tens of
thousands BTC right from the start. I'm doing it (what I believe to be) the
right way - start small, prove you can do well whilst small, then and ONLY then
expand.
Business DescriptionThis bond is issued by LTC-ATF. I describe here the areas of business LTC-ATF
operates in. The capital raised from sale of bonds is used in the execution of
these business areas.
WHAT SECURITIES DOES LTC-ATF OFFER?
At present LTC-ATF offers two securities on LTC Global:
LTC-ATF - This is the parent fund. Investors in this purchase units of the fund
representing a portion of the assets owned by the fund. This fund does not pay
dividends - all profits (or losses) are reflected in a regularly updated and
published fund valuation. Liquidity is provided via a constantly maintained
bid-wall just below NAV/U. Units of LTC-ATF are valued and transacted in LTC.
LTC-ATF.B1 - This is a bond issued by LTC-ATF. The bond's purpose is two-fold -
to retain as much of profit as possible for LTC-ATF investors and to allow
trading in BTC-denominated securities with greatly reduced exposure to fund
value changes casued by exchange-rate movement. This bond has a face value (and
pays dividends) denominated in BTC but transacted in LTC. Dividends are paid
weekly at a fixed rate which can be raised by the fund manager at will (but
never lowered again). Liquidity is provided via buying back through the market
at just below face value and by facilitating sell-back of larger quantities of
bonds through direct transfer.
Definition of the MarketThe market for this bond broadly falls into three groups of investors. These
are now addressed in INCREASING order of importance :
1. Unsophisticated investors (mouthbreathers). These invest in anything which
pays dividends. They probably don't read contracts in full and definitely don't
do any analysis to determine whether an investment is likely to be profitable.
If they see this bond's price rise they'll assume it means LTC-ATF doing well,
if they see it falling they'll assume LTC-ATF is doing badly (price of this bond
is actually set 100% by exchange-rate and entirely unrelated to LTC-ATF's
performance). If you're reading this you probably aren't in this category.
2. Speculators. This bond provides a useful way to bet against LTC in the
medium term (short-term the admin fees wipe out gain, long-term you probably
shouldn't even be using this exchange). Speculators can also pick off orders
that aren't updated to reflect changes in the exchange-rate to make a fast profit.
3. More sophisticated investors. It's important at this point to consider WHY
people invest in specific securites. There are intangible reasons (want to
support community, think it's interesting etc) but one very tangible one which
applies to a lot of investors - to make profit.
But what does "profit" actually mean - and, more relevantly, how is it
calculated? Is an investor interested in increasing the number of LTC they own?
The number of BTC they can purchase? The purchasing power of their assets if
converted to fiat?
A more sophisticated investor may well opt not to put all their eggs in one
basket (for example investing/holding solely assets whose profitability is
determined in LTC). This is where these bonds fill a useful niche in the market
- they allow investors to effectively convert part of their LTC holdings into
BTC AND earn growth on them. That allows them to hedge against a total collapse
of LTC vs BTC. And they can do it without ever having to move any funds off of
LTC Global or use an exchange.
There's also two classes of investors for whom this bond is absolutely NOT suitable:
1. Ones who want to go "all-in" on LTC increasing in value faster than BTC in
the short to medium term (if they only want to gamble like that long-term than
the bond MAY make sense for them in the medium term).
2. Ones who want to hedge their investment portfolio against the devaluation of
BTC/LTC against fiat. This bond provides no such protection.
Products and Services This bond is, itself, a product of LTC-ATF - it pays a fixed rate of interest
and does not offer any products or services.
At present it is the only offering on LTC Global offering a reasonable rate of
interest with the bond value tied directly to BTC. As such, it has no direct
competitors.
Organization and ManagementThis bond is offered by LTC-ATF. LTC-ATF is a one-man operation running a
virtual security for educational/entertainment purposes. Accordingly, no
licences or permits are required or held.
More information about the operations of LTC-ATF can be found in its contract
and discussion threads.
Marketing StrategyOur target market is described in a previous section of this document.
Initially we are only releasing a very small number of bonds - so the
expectation is that little effort will be needed to sell them. Indeed our
requirement for funds isn't for all to sell at once anyway - so a slow pace of
sales is not some big disadvantage.
This bond has a fixed interest rate which can be raised at will by the issuer
(subject to a defined maximum rate). If our requirement for funds from bonds is
not being met then our marketting response is very simple - we raise the rate of
interest we offer until demand meets the supply we need to sell.
Financial Management There is no relevant financial management required for the operation of this
bond - beyond that detailed in the contract. As a bond, the profitability or
otherwise of the issuer (LTC-ATF) has no bearing on the face value of the bond
or the size of dividends paid.
The regular reports of LTC-ATF (published in its thread on LTC and BTC forums)
will (from launch of this bond) contain the two ratios relevant to operation of
this bond:
The ratio of outstanding bonds (total face value) to unencumbered LTC-ATF assets
- which determines whether more bonds may be sold.
The ratio of capital raised from bonds to total BTC-denominated assets held by
LTC-ATF - which ensures no exchange-rate swing can make LTC-ATF unable to
service outstanding bonds.
Financial ManagementThere is no relevant financial management required for the operation of this
bond - beyond that detailed in the contract. As a bond, the profitability or
otherwise of the issuer (LTC-ATF) has no bearing on the face value of the bond
or the size of dividends paid.
The regular reports of LTC-ATF (published in its thread on LTC and BTC forums)
will (from launch of this bond) contain the two ratios relevant to operation of
this bond:
The ratio of outstanding bonds (total face value) to unencumbered LTC-ATF assets
- which determines whether more bonds may be sold.
The ratio of capital raised from bonds to total BTC-denominated assets held by
LTC-ATF - which ensures no exchange-rate swing can make LTC-ATF unable to
service outstanding bonds.
