Why ICO Initiators Need Good Lawyers in Their Team

Johnny Walker
Chief Editor
1 May 2018 Updated on  Обновлено   15 June 2024

As regulators become more interested in the cryptocurrency industry, the first bills and decrees start to appear. Now, even projects with the Initial Coin Offering (ICO) are different. In many countries, clarity about the legal side of such initiatives began to appear. And on the contrary, somewhere you need to be able to protect yourself from legal troubles.

lawyers for ICO

Why ICOs need lawyers

Brad Garlinghouse, the CEO of Ripple network, assures that for the sake of preserving the funds collected through the ICO, you should immediately invite a reliable lawyer to the team. They will be necessary in many cases:

  • If one of the partners disappeared with a profit, and the investors resent;
  • When some unscrupulous investors use lawsuits to claim compensation for contributions, playing on legal uncertainty against businessmen;
  • If tokens become worthless after their release and the contributors lost money.

Why ICOs are held

ICO projects are used by many entrepreneurs as a method of raising funds for business development. The head of the Ripple company that developed the third largest cryptocurrency believes that among all the surviving startups of this kind, the winners will be those who have collected a strong legal team.

Usually, new tokens are issued within the ICO projects, they are exchanged for top cryptocoins (generally, ethers or bitcoins). Often they can be purchased for fiat money. Unlike stocks, such tokens do not give you any right to participate in making decisions regarding the future of the company.

Tips for ICO initiators

Speaking on CNBC channel at the Money 20/20 conference in Singapore, Brad Garlinghouse advised entrepreneurs who decided to make an ICO without a lawyer to immediately create a reserve fund. It should be kept in case if someone from disgruntled investors decides to file a lawsuit that he has lost money on the purchase of new tokens. There have already been many such incidents. Garlinghouse explained:

Businessmen in such projects need to be alert and keep their ears open. The winners are often lawyers or those who have them in a team, because it is necessary to draw up a document regarding the token release correctly, and then competently defend the project. Sometimes it is better to focus on solving the real problems of real customers, rather than on launching an infrastructure for tokens as soon as possible, placing them on exchanges and other steps accompanying such projects.

The situation on the market of coin offering

The ICO market is rather big; last year, it raised about $3.8 billion, according to CoinSchedule. In many countries, this type of activity is not regulated at all. Neither investors nor entrepreneurs in this field are protected by the regulatory framework that exists in traditional financial markets.

According to the publication of ‘Bitcoin.com’, 46% of last year’s ICO projects were unsuccessful.

SEC regulates ICO

Brad Garlinghouse is positive about the fact that The US Securities and Exchange Commission has engaged in the cryptocurrency market. It invited all platforms trading such assets to register. Brad also added:

Many great things happen, the blockchain and digital assets can be used to solve real problems. I think most ICO projects we see in the market don’t imply the use of tokens really as digital coins. This is not money, but securities. I think organizations like the SEC should control this.

During the speech of the CEO of the Ripple network, XRP token cost $0.69 per unit. The company is actively developing a network of partnership with banks and is considered one of the most promising players in the market.


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