Spotcoin- The Story of Their Cryptocurrency Long Scam.



RBYSC



Taken from a community Telegram group created after an 18 month wait for any progress from Spotcoin.





The story starts with a highly publicised and heavily marketed cryptocurrency initial coin offering (ICO) on the NEO blockchain back in early 2018 (if you don't know what blockchain or an ICO is see here - https://icotokennews.com/blockchain-applications/)

The name of said project is Spotcoin and their token Ticker is SPOT. To briefly summarise Spotcoin and their objectives - They're based in Georgia (not the US one) in Tbilisi and advertise themselves as follows.

"Spotcoin, an Estonia licensed digital currency exchange is set out to be the leader in the digital to fiat exchange and digital based merchant service industry. In doing so, Spotcoin has developed several unique products and services" https://spotcoin.com/

Here they all are in all their glory shown in the initial marketing materials:

The Spotcoin Team.

Their objectives at the ICO were to release a token running on NEO (If you don't know what a token is or a smart contract, see here - https://www.google.com/amp/s/www.computerworld.com/article/3412140/whats-a-smart-contract-and-how-does-it-work.amp.html)

This was intended to be a token that entitled the holder to dividends from a variety of revenue streams that were yet to be developed. The description of the token use case is as follows:

"Spot Token was developed specifically as a security token allowing token holders to participate in Spotcoin’s dividends distributions and enjoy the upside potential of a true dividend token." https://spotcoin.com/solutions#spotToken

For more information on Security tokens see here - https://blockgeeks.com/guides/security-tokens/ (please bear in mind when reading the above link that the definition of what a security token is, and what crypto securities actually are, is based on jurisdictional laws and may be regulated differently by different nations in respect of trading cryptocurrency and contributing to ICO)

The revenue streams and technology due to be developed post sale and funded by the ICO were as follows:

Over the Counter Marketplace (OTC) - "Spotcoin’s OTC marketplace was established in November 2016 to provide digital to fiat currency trading services for clients worldwide. The fragmented global OTC marketplace for digital asset trading is estimated to be greater than $20B per year. Spotcoin intends to become a market leader for trusted OTC trades in all major digital currencies. Spotcoin is developing an automated marketplace and will obtain all necessary licenses to increase our global trading capabilities."

Exchange - "Our digital asset exchange will focus on a simple user-interface providing global and regional fiat currency trading pairs with four core digital currencies: GAS, BTC, ETH and SIB. Spotcore, our proprietary order matching engine, will provide centralized liquidity between our digital asset exchange, mining operation, over-the-counter marketplace (OTC), and our Spotpay payment system."

Mining Operations - "Through our formal partnership agreement with Georgian Mining Company, Spotcoin has designed and initiated an environmentally friendly $3.25M facility utilizing hydroelectric power scalable up to 25MW. Our new facility will house 2,250 GPU miners with the capacity to host up to 9,000 additional units on behalf of clients."

Spot Pay - "Spotcoin’s innovative Spotpay payment system is a key aspect of our “simple liquidity” ethos. Spotpay will provide a secure payment widget, an API and app-based digital wallets that will provide consumers with fast, low-cost, and secure point of sale transactions. Spotpay will integrate with Spotcore to provide instantaneous payouts in the merchant’s desired currency with transactions occurring at the current market price. Spotcoin intends to capture $1M per month of the estimated $100M existing retail digital currency marketplace by Q4 2020." White Paper V1.2.2 - https://web.archive.org/web/20180426052858if_/https://www.spotcoin.com/whitepaper.pdf

The project looked extremely promising with a large and seemingly strong team with good connections in the right sectors. The CEO Tim Gick was upfront, communicated very regularly and the marketing and ICO team were making all the right moves to hype the sale. Spotcoin were heavily promoted by YouTube influencers, bounty hunters paid to spread the word about the upcoming sale, and by themselves via their own medium channel and a variety of other social media platforms.

I've been involved in a lot of ICO and Spotcoin was probably one of the most slickly marketed ones I've seen, if not the most. A lot tend to be haphazard affairs at best, especially at the pre ICO stage I was interested in contributing to, but this appeared professional for want of a better word.

They got themselves involved in developing partnerships within the NEO eco system, primarily with other digital application platforms (DApps) also developing on NEO and generally made a lot of noise about how they were going to run their ICO to a to a set of guidelines that at the time had recently been released by one of the NEO blockchains most prominent developers. These guidelines and Spotcoin's own rating of themselves can be seen in the following screenshot:

Extract from white paper V1.2.2

Spotcoin provided encouraging forward looking statements (accompanied by the appropriate risk warnings) - I can no longer find sources of this information however due to the ICO website no longer being active and it being missed by the Way back internet archive. They also had a basic working viable product (OTC) with a turnover of around 10 million USD over their trade desk. Talk of achieving several million in equity seed funding already was also thrown around in their marketing materials.

It appeared at the time that Spotcoin had a vision, drive and were cementing their relationship with NEO based developers, with NEO through Spotcoin's 'Black Sea NEO iniative' and with the NEO community at large through constant engagement. Pretty much everything a potential retail ICO contributor wants to see and would check a lot of boxes for even the most seasoned ICO veteran during their due diligence.

Alas this was all just too good to be true but I'll get to that shortly....

Cracks began to show after the first round of the public pre ICO.

The beginning of the end.

The Pre ICO sale was marketed as a limited opportunity to purchase tokens ahead of the main public crowd sale at a rate of 0.4 USD, a 20% reduction on the upcoming sale. This was supposedly capped at 2.5 million SPOT tokens to the value of 1 million USD. https://web.archive.org/web/20180509012214/https://www.spotcoin.com/token

The presale took place in June of 2018 lasting only a two days until the cap was reached, which was pretty impressive and indicated a good level of demand for the token. A very good sign for the upcoming ICO.

https://youtu.be/OSSymeB6_F8

To give some context, the market climate at that time was in gradual decline and cryptocurrency prices in general had retraced significantly since the boom of 2017. Spotcoin took this opportunity to defer the public sale, the reasons for which seems hazy at best. To most it was pretty obvious they were hoping for a market uptrend.

https://medium.com/spotcoin/spotcoin-to-ico-after-summer-recess-7b6b99d7847a

During the interim period and amid much protestation over the delay Spotcoin went ahead full steam with their marketing, announcing a plethora of partnerships with exchange developers, DApp projects and banking entities in an effort to demonstrate their work ethic and ability to achieve their objectives laid out in the roadmap. The delay was little more than a hitch in their plan and would be used to their advantage, they had seed funding in equity and the pre ICO funds to hit the ground running. Or so it was marketed anyway.

The delay ended up lasting until October 22nd 2018 when there started to be signs of a market sentiment change and only then did the sale finally take place.

https://medium.com/spotcoin/the-spotcoin-ico-is-only-4-days-away-395a9d6d57cd

By this time all momentum within the NEO community had been lost to more interesting projects and a general stagnation in the wider crypto sphere. This could be attributed to both the significant bear market that people had just been through, an unwillingness from people to invest in ICO in general at that time and frustration at the delays in the sale actually taking place.

Despite this the Spotcoin marketing machine ploughed on, trying its best to solicit retail buyers into the sale. It became apparent to anyone who understands the hype needed to pull off a successful sale that this wasn't attracting as many contributors as it needed to anymore in order to be a big success. Coincidentally or not, around this time Spotcoin made a surprise announcement which indicated their digital exchange was running 9 months ahead of schedule. Now this is something virtually unheard of in the crypto space, DApp projects virtually never lead a project roadmap. Lag in the delivery and expected delivery date is the inevitable trend in my experience.

https://medium.com/spotcoin/spotcoins-digital-exchange-to-launch-in-december-46db43c74721?fbclid=IwAR1r8D7b6yDPsXay9ljy7Y5ygI1bRtQZ8_sENeFyci7_kdIeD5BW7dwfaTw

On The 27th October 2018 Spotcoin closed their sale declaring a roaring success with what was advertised as a 14.5 million USD unaudited total. A seemingly unbelievable amount given the lack of attention the eventual crowd sale appeared to have received.

At this point the existing cracks in Spotcoins gleaming facade turned to gaping holes and a rapid collapse of the trust between retail contributors and the Spotcoin team began to occur.

The Spotcoin Facade.

From the beginning of the marketing campaign it had been made clear that unsold tokens would be burned (a term used to indicate unsold tokens would be destroyed) - This is good for contributors especially if the amount burned is high as it effectively reduces the total supply metric and can in some cases dramatically increases a tokens worth through this increased scarcity) Spotcoin went on to announce that the total to be burned was around 1% of the total supply, this was significantly less than expected by the sale contributors given they had only achieved around half of their hard cap (the total amount raised if everything sells at the prices they were advertised at in the distribution policy) and was quickly questioned by those with even the most basic maths skills.

By simply averaging the price per token (total income/total issued supply) it showed an average of around 0.14 - 0.15 USD per token, way way below either pre sale or Crowd sale price. Given the token supply metrics and the token distribution policy it is clear to see that somewhere along the line Spotcoin began unloading huge amounts of their tokens to buyers who paid significantly less than the advertised pricing scheme and outside the scope of the 'fair' distribution policy they made such a big deal about having. It's important to understand at this point the significance of this about turn.

When a tokenised project such as this conduct an ICO they publish 'token metrics' and 'distribution policies'. These are important tools for parties interested in contributing to estimate a potential opportunity for growth against their capital investment and their risk exposure against much bigger contributors than themselves. i.e. nobody would want to buy a token for 0.5 USD knowing that huge amounts of the supply have been bought at bargain basement prices that are almost 3 times lower. It makes it nigh on impossible to ever recover their own contribution capital let alone make increases on it if someone else can sell of huge amounts of the same token at much lower levels than your own entry price and flood the market. - Think about Walmart and a small local shop owner, the owner of the small shop has to be careful about the products they carry. If not, Walmart will just price him out of the market because they can buy and sell in bulk, sell at a huge discount compared to his own margins and still make good profits. Exactly the same applies here and that's what fair distribution policies protect the little guy from. It limits the number of tokens that can be sold in bulk at very cheap prices to stop large entities controlling the price. Spotcoin removing this 'protection' through dismissal of their own fair distribution policy exposed every single retail contributor from pre ICO and ICO sales to a huge risk they would be instantly priced out of the market, and by default create an instantaneous and significant loss to their token market value.

At the time this discrepancy in the tokens to be burnt was explained away using the oddest excuse I've ever come across in my crypto experience - That a mystery buyer had purchased huge amounts of unsold tokens and given them back to Spotcoin as a 'gift', bearing in mind that total individual purchases were supposedly capped at 1 million tokens it's difficult to understand exactly how that happened, either Spotcoin went against their own 'fair' distribution policy and sold well above 1 million tokens to one individual or their was no individual and it was simply a way to manipulate the numbers - unfortunately we'll never know. The fact they ignored their own fair distribution policy was dismissed as it being a forecast, not a binding document. In all my history with ICO I've never heard such a poor excuse and one that immediately blackened their reputation significantly among the NEO community.

If they were prepared to go against their own key principles, what else could we expect......

Their own internal audit indicated everything was as it should be despite a growing amount of dissent from the retail contributors at the results and the lack of detail it contained.

Spotcoin's view of their audit results.

Things at this point went from bad to worse between community and project now that the integrity of Spotcoin had come under scrutiny. There was the inevitable rumblings in the NEO community of Spotcoin being a scam, and a huge change in the tone of the Spotcoin telegram channel with allegations of fraud being thrown left right and centre at the Spotcoin team.

Talk then began circulating that a number of the Spotcoin team had been fired immediately post ICO. This was addressed by the Spotcoin team, or what remained after the cull. The reason given was that the ICO was over, and the business was moving into its next phase and that included a new CEO and a cull of the management. This was a contradictory explanantion to what the actual team members who 'left' were saying in private. I have zero doubt that they were somehow gagged by non disclosure or leveraged by withholding salaries to stop them from making more public statements but to that end I cannot provide any substantive evidence, only anecdotal and what was passed around at the time within the Spotcoin Telegram. At best they were undoubtedly left with tarnished reputations in the crypto space because of how their departure was described by Spotcoin.

The thanks the ICO team and Tim Gick CEO received after their 'successful' sale.

https://medium.com/spotcoin/spotcoin-introduces-the-new-ceo-to-its-stakeholders-ccbbd4f925ad?source=collection_home---4------0-----------------------

Things began to seriously unravel for Spotcoin rapidly from here, token distribution was delayed by several months with quite a lot of technical glitches and was finally completed around Christmas 2018, it was very clear that they were having troubles with a simple token distribution, let alone development of the fairly advanced technology they marketed.

Spotcoin's Development Lead struggling with a complex computing issue.

Token holders were beginning to get very very frustrated. To add fuel to the fire, arguments then arose around payment terms between Spotcoin and the business known as G0blin which manages bounty campaigns for ICO based projects due to what was according to the Spotcoin founder 'Goblins poor performance'. According to G0blin they weren't responsible for issues with low uptake during the ICO, only delivery of a bounty campaign and these were contractual obligations, non negotiable and were not being fulfilled. After some time, maybe a month or so, bounty hunters were finally paid when G0blin gave in to what they say was effectively blackmail - 'take payment in Spotcoin or don't get paid'. - The bounty channel can be found here for further details.

https://t.me/g0blinbounties/2708

Bearing in mind payment had very likely been agreed in fiat or more established digital currencies, that left G0blin holding large amounts of SPOT and nothing to pay their own staff. The fact a large amount of the arguing between G0blin and Spotcoin was done via public channels did nothing to help Spotcoin's dwindling reputation. I really feel for G0blin, they do a good job and have been involved with a huge amount of ICO campaigns and Spotcoin decided to break contractual agreements that could have potentially damaged G0blins reputation as trusted business and their finances. To Spotcoin they were just acceptable collateral damage.

To further escalate the community dissent the Spotcoin digital exchange which was '9 months ahead of schedule ' during the sale got 'delayed' and the mining facility was shown to be nothing more than an empty tin shed and a large cable running from a concrete hardstanding - this was followed with an indication from Spotcoin the mining facility was being deferred due to potential profitability issues. The new focus being the OTC as that was supposedly their most established and profitable business revenue stream (no mention was made of the state or future of SPOT pay) All of this was very bad news for the Spotcoin project. Any potential for the dividends that were the sole purpose of the token to start being paid by Christmas 2018 as indicated by the project founder Andrew Thornhill had slipped away.

Within several days of distribution a decentralised exchange listed SPOT, and the dump commenced.

Clearly nothing to worry about here (not actual chart data for SPOT)





Huge amounts of tokens in the millions were hitting the market at prices almost 10 - 20 times less than the sale price leaving retail contributors holding a huge loss from the outset. It came to light that several large holders were selling off tokens, when questioned Spotcoin indicated they were stolen in hack. At the time this was heavily questioned by the community and added more and more to the growing suspicion things were sinking quickly.

The Spotcoin ship.

It came to light that to make up the 14.5 million USD taken during the sale, several large scale token swaps were undertaken. This is effectively an underhand way for ICO projects to swap tokens between themselves using a crowdsale value and make it appear they've reached a softcap or create an appearance of demand during sale. By passing the softcap they are prevented from an obligation to refund contributors and by creating false demand it boosts interest on their token from retail investors. What it meant was Spotcoin ended up holding large amounts of tokens with zero value, not the fiat they needed to build the products they'd advertised. It was also far far more likely that it was the recipients of these token swaps that were unloading their SPOT tokens at absurdly cheap prices because the tokens they'd given in return literally had zero cost and zero value - so not the result of a hacked wallet at all. This was confirmed by one of the opposite parties of a token swap with Spotcoin who was in contact with someone known to me on Telegram, again I can only give anecdotal evidence so personal judgement is required here.

What followed were months of false promises, delivery dates far exceeded and never fulfilled, an allegation from Spotcoin that the exchange builder has run off with the funds and lies about the stage of development, leaving everyone holding a worthless token and little hope of ever recovering their capital.

Communication became less frequent as dissent grew on social media with the marketing team hiding behind the mantra of 'internal information only' when it came to queries around progress. This stonewalling went on for virtually all the latter half of 2019 and culminated in the founder Andrew Thornhill (the human thumb who told retail contributors to the Spotcoin ICO they were unimportant and bragged how the SPOT token would be worth 50 USD based on the roadmap) leaving the project.

Andrew Thornhill - Spotcoin founder & human thumb.

Despite this very significant loss to the team, no information was forthcoming from Spotcoin about how they would move forward, questions around the loss of the 'human thumbs' skills and connections in the electronic payment industry were ignored and the stone walling continued from the remaining team and New CEO Dennis Spencer.

Community made meme featuring Dennis Spencer Spotcoin CEO.

At new year 2020 Spotcoin contributors to their crowdsale were informed in the Spotcoin Telegram that they would have good news coming but to date nothing has been published by the Spotcoin team to that end. In fact since then Spotcoin have closed their Telegram, ironically citing trust issues. They continue to stonewall any queries via their remaining social media channels and block, ban or delete any comments that indicate the real state of the Spotcoin Project.

https://medium.com/spotcoin

https://facebook.com/spotcoin/

https://twitter.com/therealspotcoin?lang=en

https://www.linkedin.com/mwlite/company/spotcoin

A query around progress sent to their info@spotcoin.com email yielded a response indicating I should see the progress on their website here:

https://spotcoin.com/

After some digging around it can be seen it's essentially an empty website. Quite an achievement in nearly two years with a budget of 14.5 million USD.

Spotcoin as any entity claim to still be working to bring value to the project, realistically I think it's naive to believe that. In 2 years with 14.5 million they've achieved literally nothing except issue a token on a blockchain. There are templates available to copy on GitHub that mean even I could do it for the cost of around 750 USD equivalent in NEO GAS (NEO's native utility token)right this very moment with only moderate technical expertise.

With NEO 3.0 coming it's easy to see how SPOT and Spotcoin is very likely going to disappear into the blockchain digital graveyard along with it any hope of retail investors recouping their losses.

Whatever the outcome, and whatever products they may or may not launch in the future, I won't be trusting them with any of my funds, nor should anyone else either as far as I'm concerned.

The moral of the story - you can most certainly polish a turd to a shine if you put the effort in. But if you drill down past the veneer, it's still inevitably just a turd.

Thanks for reading.

RBYSC

Disclaimer - I hold a 6 figure amount of SPOT tokens which places me as a top 50 token holder.



















