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Bitcoin Exchange Bgogo Issuing IEO as IOU Without Approval

The exchange Bgogo reported an impressive $500+ million in the past 24 hours. It seems that this ICO based exchange decided to go full IEO, meaning the tokens are offered through a partnering exchange, rather than directly to investors.

Bgogo’s ICO resulted in the creation of some 10 billion tokens (BGG) currently worth about 0.003 USD each. The exchange does “transaction mining”, meaning, people get a rebate based on their token holdings and the number of trades conducted on the platform. Incidentally, this is why they’re not listed on CoinMarketCap’s “adjusted volume” rankings.

Now Bgogo is using its “Apollo” project to launch other tokens and exchange offerings – whether they like it or not. Bgogo Apollo said they will be releasing its second project, Algorand, on April 12th.

As they say from the company, Bgogo Apollo will offer allocations of Algorand token, ALGO, with limited price to project’s community, later multiple entities from the community will join as initial token traders, including but not limited to project early stage users and private investors, etc.

Founded by cryptography pioneer and Turing award winner, Silvio Micali, Algorand, says Bgogo, solves the “blockchain trilemma” with a platform that delivers decentralization, scalability and security.

Algorand provides a foundation for existing businesses and new projects to operate globally in the emerging decentralized economy. Algorand’s first-of-its-kind, permissionless, pure proof-of-stake protocol supports the scale, open participation, and transaction finality required to build systems for billions of users.

Bgogo set the opening price on ALGO tokens at 5 cents. The problem is that no such tokens yet exist, and Algorand has been clear about this in their tweet:

To be clear: The @Algorand Network has not yet launched and there are no token sales. Any information to the contrary is false. We will be sure to keep our channels updated as soon as there are important announcements.

— Algorand (@Algorand) April 8, 2019

This basically means Bgogo is issuing IOUs for Algo tokens. Anyone who participates in trading of the token won’t actually be able to withdraw it.

IOUs are tokens issued on the platform that are redeemable for a fungible asset such as USD, gold or crude oil. Anyone can issue IOUs, however, in order for someone to accept payment in IOUs they must trust that the person or organisation who issued them will be able to redeem the IOU for the underlying asset.

From Bgogo they said:

“ALGO tokens cannot be transferred until Algorand mainnet launches, which is expected to be in a few months. Therefore, deposits and withdrawals of ALGO will be disabled during this period. Once the Algorand mainnet launches, Bgogo will open deposits and withdrawals RIGHT AFTER the tokens are transferable.

Bgogo hopes to expand Algorand’s influence in the community and allow more users to participate in the Algorand project to jointly promote its decentralized economy.”

However, when they saw Algorand tweet they quickly responding saying:

“Earlier today, we’ve been informed by some of the early investors of the Algorand project that the Algorand team has warned them about breaching the terms in contract where the unvested ALGO tokens are not transferable, and a result in total token loss.

Here at Bgogo, our goal has always been to list the best quality projects to our members and promote a more decentralized token adoption.

We highly respect the Algorand team. We also respect the decision made by the early Algorand investors. But most of all, we respect our community. We will always keep our promises made to you.”

Therefore they’ve made the following decisions:

“1. Bgogo will keep our promise and continue with the announced ALGO trading event. The difference would be now you will be trading an ALGO futures token. The date of delivery of the futures will be 1 month after the Algorand mainnet launches.

2. Bgogo will purchase ALGO tokens directly from the market out of our own pocket after the mainnet launch, at whatever the cost would be. In this way, the ALGO tokens are no longer directly from any of the early investors of the Algorand project.

3. In case of failure in delivering the token, Bgogo will buy back ALGO futures token holders at 2x the Price Limit trading price.”

The fact is, Bgogo seems to like when things are complicated. For example, users must hold exchange-native tokens to participate in the trading, but they repeatedly inform the reader there is no need to “snap up.”

The whole thing seems counterproductive to the whole decentralization thing working under the “be your own bank” moto. Not only you should now trust Bgogo, but you must trust that Algorand will deliver a token worth whatever you decide to “invest” in this IOU trading.

Bgogo also “explains” that this situation is no different than exchanges trading Bitcoin without Satoshi Nakamoto’s permission.

Larry Cermak, head of analysis at The Block tweeted:

This is unbelievable. @BgogoExchange is running an IEO without the project's permission. But that's not the best part – Algorand (the project in question) won't launch for the next couple of months and there is no ERC20 token. So Bgogo is literally preselling an IOU. Dump 2.0 pic.twitter.com/2XZod8A2gM

— Larry Cermak (@lawmaster) April 8, 2019

Be it as it may, one thing is certain: this cannot be at all compared with other exchanges trading Bitcoin because it is presumed that they actually have possession of the coins being traded.

Bitcoin Exchange Bgogo Issuing IEO as IOU Without Approval

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