It was always going to be a tough innings but the raising ran into a newly vigorous corporate regulator and the money was never raised. And who wouldn’t want to conduct an ICO? The crypto crash has not erased the memory of billionaires being created at a pace that was unseemly even by the standards of the tech sector as both issuers and holders on crypto coins piled into the phenomenon. Illustration: Joe Benke Credit: And as Forbes magazine said: "Anyone with an entrepreneurial idea could float a token and invite people to invest." ICOs are a novel new way for companies to raise money from the public without the costs and regulatory red tape associated with traditional options, like the stock market.

Cryptocurrency fans describe ICOs as a cross between a crowd-funding campaign and the traditional finance option of an initial public offering (IPO), which companies use to raise money from the public ahead of floating on a stock exchange. A big difference is that an IPO offers you a share of a company. Shareholders end up with something tangible. In a regulation-free ICO environment, investors - who are often referred to as token holders - end up with a virtual coin, or token, with no underlying value or rights. A case in point is Block.one, a blockchain startup which raised $US4 billion in a year-long auction process, and also recruited former Commonwealth Bank chief financial officer Rob Jesudason. Rob Jesudason left Commonwealth Bank. Credit:Jessica Schapiro It told potential investors its "tokens do not have any rights, uses, purposes, attributes, functionalities or features, expressed or implied, including, without limitation, any uses, purposes, attributes, functionalities or features on the EOS Platform."

But this is not top of mind in a gold rush. Especially when US crypto players looked to celebrities like Paris Hilton, and boxer Floyd Mayweather, to sell their ICOs last year. GlobalTech wanted $50 million, and it took a punt on Clarke. “I am really excited to be involved with GlobalTech. Their ambition and drive is something that I resonated with straight away and I can’t wait to learn more about blockchain technologies,” said Clarke in the stage managed Tweet that Wednesday evening in August. If there’s one thing that Clarke has now learnt about blockchain and the cryptocurrency gold rush, it’s that making money in this space is harder than it looks. And it has not done his image any good.

Soon after the tweet, the respected fund manager, Bronte Capital founder John Hempton, wrote: "You are tossing your reputation just as surely as if you used sandpaper on the ball." Another Hempton statement proved prescient. “Whether Michael Clarke is breaking Australian law regarding advertising investments with this tweet I will leave for ASIC and their lawyers to decide.” The high profile tweet did indeed get the attention of the Australian Securities and Investments Commission (ASIC), which came knocking on the door of the GlobalTech founders Andrew Mclean and Marlon Donaire. The corporate watchdog had already issued warnings about the unregulated ICO market, which had raised tens of millions from the public with none of the safeguards of the regulated capital markets.

GlobalTech folded within two months. Not that it had much to close. The formation of its actual business was dependant on GlobalTech completing its ICO which never succeeded. Loading Replay Replay video Play video Play video “Global Tech Exchange’s Initial Coin Offering (ICO) has now ceased in accordance with ASIC requirements,” the company said on its website last month. “As a result of this Global Tech has issued full refunds to all investors.”

Any chance that Clarke had of cashing in on what insiders describe as a lucrative gig, disappeared with it. "We would also like to inform you that Michael Clarke is no longer associated with Global Tech Exchange and the Global Tech Exchange Blockchain education and awareness program," said the notice on the company's website. Michael Clarke was contacted for comment. Global Tech’s scalp was the most public declaration of intent by ASIC to join the global crackdown on a market described as the “wild west”. “There is a certain level of opportunism – including businesses or people looking to undertake an ICO because it is seen as an easy, low-regulation and low-cost option to bring an immature business to market,” ASIC commissioner John Price tells Fairfax Media.

He expressed concern about the “negative impact” this is having on investor confidence for the rest of the sector. “If you are acting with someone else’s money, selling something to someone, or seeking to raise funds by issuing digital tokens or coins, this comes with certain obligations,” he says. “The bottom-line is clear: there is a fundamental obligation, whatever the structure, not to mislead or deceive through any offers or marketing.” It isn't just ASIC which has woken up to the issue. “The development of ICOs has exposed a regulatory loophole that is being exploited to the detriment of ordinary investors,” said a report to the UK parliament in September calling for regulation of the sector.

It might not be a coincidence that ASIC launched its most vocal warning to the crypto sector the day after the British report was made public. ASIC has stopped as many as five ICOs since April to stop them raising money from the public “without the appropriate investor protections.” And the ICO crackdown comes on top of some particularly scathing verdicts on the cryptocurrencies these public cash raisings spawn at a prodigious rate. Nouriel Roubini, the economist who famously predicted the global financial crisis, described these virtual currencies as “the mother of all scams and (now busted) bubbles,” in a submission to the US senate in October.

The report to the UK parliament in September was not favourable either. “Currencies act as a medium of exchange, a store of value, or a unit of account. There are currently no cryptocurrencies that perform these functions.” And in the words of British MP Nicky Morgan, Chair of the Treasury Committee which produced the report: "Bitcoin and other crypto-assets exist in the Wild West industry of crypto-assets. This unregulated industry leaves investors facing numerous risks.” Surprisingly, there are ICO hopefuls in Australia who would agree with this assessment. “We were a little aghast at the beginning at the way that the ICO markets were being run, and to us it was only a matter of time before regulators stepped in,” said Ian Jones the executive director of NaturesCoin.

Jones and his fellow directors are veterans of traditional capital markets - with all the regulation that goes with it. They are not pursuing an ICO of NaturesCoin next year for the lax regulatory environment that these markets have enjoyed. Like other believers, he sees the focus on the cryptocurrency itself as putting the cart before the horse. It’s really about blockchain and the potential this has to unleash what is commonly described as Version 2.0 of the internet. For players like NaturesCoin, blockchain and the cryptocurrency the company will offer, are just the mechanism for linking its investor clients with the sustainable development projects it champions.

“We are using blockchain to solve the real world problem which is how do we attract businesses to sustainable causes,” he says. The company is targeting large corporations, fund managers and retail investors. The key to its business plan is the role played by blockchain in converting the corporate environmental, social and corporate governance (ESG) spend of big corporations from a cost on the balance sheet to an asset. Instead of the corporate ESG spend disappearing into a black hole, the company could track where the money is going with complete transparency via the token generated from their spend on sustainable development. So can the company's shareholders. These tokens can then be donated, or traded, at a future date.

Jones describes the cryptocurrency market itself as the “frothy story” that has created a lot of money for some. “We could see it was a replay of the dotcom boom in the 90s.” Power Ledger co-founder Jemma Green also sees an analogy with the dotcom boom, but is more upbeat about the collision of funding and ideas. Jemma Green, chair of Power Ledger. Credit:TREVOR COLLENS While some of them "will turn to dust," she says,"the validation of some of the ideas will be tested over the next three to five years." Green was more sanguine about the ups and downs of the crypto rollercoaster but also a believer in the transformative power of blockchain.

Power Ledger, a Perth-based peer-to-peer energy start-up, is a veteran of the sector having raised $US27 million in Australia’s first ICO way back in October last year. "It was quite a challenge because a lot of people because a lot of people hadn't heard of cryptocurrencies before," she says. But Power Ledger was not just another Bitcoin peddler. The company promises to deliver the “democratisation of power” by using blockchain to enable neighbouring homes, and businesses, to trade surplus energy they generate rather than selling it off cheaply to their local energy supplier. "The work we're doing is really mission focussed. I think that is why people have responded to us," she says.

But Green is seeing the promise of of blockchain developing in all sorts of areas. "Buying fractionalised assets is a big area of opportunity." Imagine millennials buying into a house in fractional increments, much like Power Ledger's corporate cousins at BitCar. It is offering the ownership of luxury cars in micro increments via its virtual coins. "We effectively are tokenising the car," said Bitcar's William Foster. He says this is only possible because blockchain provides that "high level of security and transparency" need for this to work.

"It's effectively a ledger which can be read by everyone." Ironically, for a business that sells its digital currency/tokens on the fact it is anchored to valuable real world assets - like luxury cars - Bitcar has run into financial trouble due to the fall in the price of Ethereum the popular cryptocurrency it received from some subscribers to its ICO. But the growth of ICOs from companies offering asset-backed coins/tokens with a focus outside of the cryptocurrency market might explain why the money raised from ICOs has defied the crypto downturn. The amount of money raised from ICOs is now starting to rival the amounts raised on Wall Street. According to research site CoinDesk, $US20 billion was raised in the 18 months ending August this year.

But an ICO is not for everyone. Cryptocurrency mining company Bitmain Technologies surprised the financial markets by announcing plans for a multi billion dollar listing on the Hong Kong stock exchange via an IPO. "For a company of this size like Bitmain, it's probably going to get a better valuation on a huge deal like this in the traditional markets than in an ICO, especially in today's market," Blockforce Capital chief executive Eric Ervin told the Wall Street Journal when Bitmain's plans were announced. What is blockchain? What is blockchain: If Bitcoin crashes and burns, it will still have an enduring legacy through blockchain technology that provides the virtual currency’s digital magic. Blockchain is a database that is replicated across the internet. This means its records are public, easily verifiable and - so far - impossible to corrupt.

It allows anonymous parties to operate with the trust that is usually provided by a trusted middleman - along with the costs of employing this third party. The nature of blockchain is to remove this third party. For Bitcoin the blockchain has provided a record of each transaction for each coin which ensures the integrity of the currency. Buyers do not need to know the seller, or rely on a middleman, to ensure they get what they paid for. The next wave of blockchain uses has been dubbed Internet 2.0, which gives an idea of the hype surrounding its potential. This includes "tokenising" commodities. One recent example used was wrapping a gold bar in an electronically tagged, tamper proof case so you can track that particular gold bar from its mine of origin. The Australian Securities Exchange (ASX) is planning to use blockchain technology for its settlements system which will allow trades to settle instantly rather than the traditional two day wait.