Blockchain venture capital fund NextBlock Global has announced that it will step down from a planned public offering due to false claims about the company which may have misled investors.
The news is a blow to NextBlock founder and rising star of the blockchain space, Canadian Alex Tapscott, but it’s also a warning to potential investors about the perils of investing in hot money situations like blockchain.
“As a young company, we have stumbled in our efforts to take our company public and we will work hard to rebuild the trust of those we have disappointed,” reads a statement released yesterday by NextBlock. “Going forward, we remain as confident and excited as ever about the promise of blockchain technology.”
The revelations stem from a report last week by Forbes which found that the company had sent out an investor document that spoke of four individuals that it said were working as advisors for NextBlock, although when questioned none of them said they were acting in that capacity. The four are all said to be high-profile members of the blockchain community, including entrepreneur Vinny Lingham and Dmitry Buterin, father of Ethereum co-founder Vitalik Buterin.
As a result, the public offering’s two major underwriters, CIBC and Canaccord Genuity, haveboth pulled out from the deal, through which NextBlock was hoping to raise $100 million for acquiring blockchain related assets.
In response to the allegations, Tapscott is reported to have claimed that the four names had been added to an early draft of the investor deck which was erroneously sent out by brokers to prospective investors before getting confirmation about the advisor’s list.
When pressed on the issue by Forbes, Tapscott —who with his father Don Tapscott wrote the influential book, “Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World,” and founded earlier this year the Blockchain Research Institute in Toronto— seemed to downplay the situation.
“This is all so ridiculous, because I’m not raising money on the back of these advisors,” said Tapscott. “I currently have an order book for this financing of $250 million. To me that’s really the big story. None of the folks have invested based on the people who are in the deck, including obviously the ones who agreed to be advisors to the company.”
The misrepresentation may not be the first for Tapscott, says the Forbes story, as the initial announcement for the Blockchain Research Institute reportedly contained the claim that blockchain specialist Andreas Antonopoulos was a “proposed faculty” member at the Institute, something which Antonopoulos has said is false.
The newly developing field of blockchain technology — of which Bitcoin and othercryptocurrencies are but one application — has unlimited potential, say its proponents, to change not just banking and commerce but other fields such as insurance in which trust and authentication require, under traditional structures, a centralized authority such as a bank or monetary system. Blockchain aims to do away with the proverbial middleman and allow for more decentralized, more efficient transactions, creating a new Internet of Value. That promise has led to a gold rush-like wave of investment in the space, where currently there are more than 120 cryptocurrency hedge funds, for example.
Last week, news broke that a class-action lawsuit had been filed in a California state court against the founders of Tezos, a blockchain venture which raised $232 million this past July in one of the largest initial coin offerings (ICO) ever recorded. The suit claims that Tezos violated United States securities laws and defrauded participants, in part by not issuing any digital coins through its ICO.