Cryptocurrency Exchange ‘IEO’ Draws Suspicion for Plans to Sell Tokens Ahead of Launch
Bgogo intends to offer what are essentially IOUs on tokens from Algorand, a project only slated to launch in June.
This article has been updated to reflect that Algorand is not planning an ERC-20 token sale.
Algorand issued a formal warning about the plans, which Bgogo has since confirmed are genuine in a blog post.
Known as an “initial exchange offering” (IEO), the Algorand event notionally allows Bgogo traders to purchase exposure to the platform’s token, despite the fact that it does not yet exist.
Bgogo will set an arbitrary price for the tokens, essentially trading an IOU ahead of the official release.
According to Algorand, however, the exchange has not entered into any form of official agreement with the company, and its efforts are not condoned.
“To be clear: The (Algorand) Network has not yet launched and there are no token sales,” executives wrote on Twitter. The post continued:
“Any information to the contrary is false. We will be sure to keep our channels updated as soon as there are important announcements.”
In a subsequent post, Bgogo said it would now offer the tokens in the form of futures contracts, after being made aware of Algorand’s reservations.
The original plans had sparked suspicion among the cryptocurrency community, with Larry Cermak, head of research at industry news outlet The Block, uploading a message seemingly from Bgogo defending its decision to offer IOUs on nonexistent tokens.
“We are a marketplace to facilitate both parties,” part of the response read, likening the situation to Bitcoin (BTC) exchanges trading the cryptocurrency without the direct permission of creator Satoshi Nakamoto.
Cermak levelled public criticism at Bgogo, while others likened the sale to practices at fellow exchange HitBTC in 2017, when traders were able to bet on futures of altcoins, for example Bitcoin Cash (BCH), before they launched.