IEO platform ExMarkets failed to perform as contracted on Veserus IEO
Tl;dr: ExMarkets runs token sale based on marketing expertise, but provides no marketing at all; offers refund, fails to provide refund.
Veserus is a nascent licenced and regulatory-compliant crypto exchange. We are in a soft launch marketing state but are running on full production code and are ready for trading right now. As a new company that has spent the last 18 months in heavy development in “silent mode”, our core competencies do not include marketing, and we know it.
After completing development, we decided to run a utility token sale to raise funds for market making and to establish a relationship with a professional marketing services firm to attract new traders and grow the platform user base.
We approached ExMarkets at the end of August to run a first round token sale based on their promise of “full marketing” support. We explicitly advised them that we are a technical team and we chose them based on their claim to handle full marketing campaigns.
They also provided us with a slide deck that placed emphasis on their marketing support.
During this pre-launch due-diligence phase, we asked (multiple times) for references, and after some time we were eventually told to contact two of their former IEO customers. We followed up. We heard from one but not from the other. The one that did return our reference request was short but positive. We were not surprised that the other reference did not get back to us given the nature of fundraising, but we took the lack of response as an indication that they did not feel it necessary to warn us about ExMarkets. We were satisfied that their past performance was adequate, but we overlooked a key aspect in our line of questioning, and failed to ask specifically whether the marketing support that was provided was adequate or if the former customers ran their own marketing. This oversight was accidental, and in hindsight asking the more direct questions might have saved us several weeks of time in our token sale that we wasted with ExMarkets.
ExMarkets had offered to run their “IEO” campaign package for us in exchange for a small up-front fee (0.5 BTC up front, 0.5 BTC at the conclusion of the sale) plus 5% of the back end proceeds. Since this fee structure ensured they would only get paid a meaningful amount based on successful execution of their marketing package, it would be a strong incentive to sell as many tokens as possible. We agreed to the offer and followed the information protocol they gave us. We provided detailed information about the Veserus project so they could market the token sale effectively. We received an invoice listing marketing in the form of long form articles, advertising, and mailing list promotions.
Again, we explicitly stated that we are not strong in marketing. The conversations were cordial, and lines of communication appeared unrestricted and open. We felt the partnership was the right one for us based on the way they spoke about their campaigns, their subscriber base, their website unique visitor stats, etc. As an act of after-the-fact due diligence, we discreetly registered several retail accounts with ExMarkets using gmail and other services in order to follow along and watch the newsletters, social media posts, email blasts, and other “full marketing support” efforts as they were published.
Conversation turned to strategy for discounts on token sale rounds, timing, and the like. The starting day of the sale was set, and everyone had a goal for completing the agreed prerequisites. Many of the questions they asked of us were duplicative and they insisted on having different spreadsheets filled out with the same information included in multiple places. This was annoying and a warning sign of disorganisation, but we dismissed it as their workflow being adjusted due to their growth as a company. The token sale was scheduled for 10 days out.
Then, without warning, the subtle switch happened, and most of us missed the significance. They started to push the responsibility of marketing onto us. We responded that what they were asking for from us would not fit the timeline, but we were willing to do things like sit down for an interview that they directed.
Mixed in with the promises of marketing support were expectations that we would perform the bulk of the work for them. They used terms like “we” that gradually morphed into what we eventually understood as “the Veserus team”, and suggested we make our own videos, which were impossible given the timeline and our own lack of marketing experience. We asked for a set of questions that would be good in an AMA-style video, since that would probably take the least amount of post-processing and could possibly fit in the deadline, but we were already having internal discussions about how much ExMarkets seemed to want us to do on their behalf. We were told we needed to do fruitless things like securing an Instagram account, Facebook, etc., even though our business model would not benefit from those social media accounts. We looked into professional film production services, which all required a month or more to supply a high quality product from preproduction through the final edit. They requested over and over again that we completely fill out the multiple spreadsheets of project information with the duplicate data instead of assembling the various forms all into one, so we just copied and pasted from the other sources for them, which they finally accepted without comment.
After some time, they provided a list of questions for a potential AMA video, but the questions had very little to do with the project itself. Even with our limited marketing knowledge, we knew that such a video would have been a complete waste of time and effort.
Again we were told that we should write our own articles on Medium, even though they had not written any on our behalf.
They finally drafted a press release and asked for our input and approval – this was the only marketing piece to be submitted for our approval in over a month.
They asked us to provide “valuable material” that they could use, without defining what that material should be, even after we asked for clarification. It was starting to become obvious they were not going to guide us through the marketing aspect of the token sale as we had agreed. The Veserus team started discussing in private what we could possibly do to help them, and we came to the conclusion that we were not expert enough to help them with marketing, because that’s what we had contracted with them to provide.
Then the IEO launch day arrived.
None of our registered accounts received any marketing materials related to our token sale. We asked about this, and we were told that our token sale came too fast and they were not prepared.
Again, we clarified that their primary job was to market the token sale. They scrambled with other ExMarkets team members to ensure the first email went out.
An advisor we had brought in for the token sale gave a rebuke to ExMarkets, which was met with contrition and an implied acceptance – but, again, no clarification of “full marketing support” was given.
Almost immediately, they began telling us to come up with marketing content and “redesign [our] website” in order to funnel visitors of our website to their IEO platform. This was sudden, unexpected, and nothing like the conversation until that point. We were blindsided with comments blaming us for not doing any marketing for the IEO. We responded that our position had been explicit and consistent: that ExMarkets would be handling the marketing for their own platform, and that it was not our responsibility to market their platform for them.
Internally, we discussed this and decided it was probably due to a miscommunication between their internal negotiator, who we had been dealing with, and the actual team doing the actual work – and that internally, ExMarkets was unable to actually fulfill what we expected of them. We discreetly began looking again at alternative service providers.
At this point, days after the token sale was supposed to begin, we had still not received any marketing emails on our stealth accounts that had subscribed to their newsletter email list. They replied it was an oversight and again said that the newsletter would be sent the next day.
In the meantime, we asked for an explicit set of steps to ensure we could do whatever it took to get the gears moving.
Instead of replying, they started telling us that our website needed to highlight a demo version of our “minimum viable product” – despite that we were already in full production. This was a startling indication that they didn’t even know enough about our project to know we were already a fully viable service. We could not believe that we had been spending weeks going back and forth with their team with such lackluster enthusiasm from their side.
Regardless, even if we created a demonstration of the production trading engine, it would still take several weeks to produce a professional level video, and they should have brought this up well before agreeing to start the token sale. The guidance we received from ExMarkets prior to the start of the token sale should have been to line up all of these marketing assets well before the token sale – instead, they took the deposit, started their IEO listing, and then finally began looking at our website…even though we were explicit on many occasions well before paying the prelaunch invoice that we had no real marketing in place beforehand.
So by September 28, we finally received the initial token sale launch announcement email. But it only came to the @veserus.com email address that they were aware of, not to any of our other registered emails we had registered without their knowledge. This suggested that they were trying to deceive us and claim that the email was sent out to their entire list, but it also suggested that in reality they sent it only to us. When we confronted them with this, they offered to refund our initial deposit. We agreed, and intended to walk away in favor of another marketing partner.
At this point, our internal team chat was flabbergasted – we had intended to cancel the agreement due to their material breach, and here is their Chief Marketing Officer telling us to continue uploading photos (of what, we could only guess) while he’s naked and drunk in a hotel room. I mean, it was the weekend, but this was not so urgent that we required a drunken response.
We sent a more formal demand asking for specific deliverables or a refund, in order to give them a final opportunity to fulfill their obligations.
Several weeks after the launch, there has not been a single token sold other than by a test purchase we made to ensure purchases were being handled properly on their back end, and they have not done any additional work to leverage their platform at all.
At this point, we are just asking for the refund to be honored out of the sheer principle of the matter, but failing that, the actions of ExMarket’s senior leadership needed to be exposed for the sake of anyone else wanting to use their services.
They promise “full marketing” but deliver only what you give them. That may work for some projects, but not ours. They were completely unable to perform on their promises to Veserus.
