Yesterday, ARK.io Managing Director, Mike Doty, was posted on Reddit saying that an ICO by the name of Oxycoin had been cashing out ARK ($ARK.x) steadily for a month on Bittrex. While cashing out after an ICO is expected, the controversy arose from the coin disbursement model.
“Accepted tokens are: BTC, BCC, ETH, SHIFT, LISK, RISE and ARK. For those participants supporting with Altcoins rather than BTC, the value of the tokens used will be averaged across the period of August 15th to the end of the ICO Period. The average value will be calculated by picking the value of each Altcoin multiple times a day using the Coinmarketcap API functionalities.”
The part that stands out is the “the value of the tokens used will be averaged across the period of August 15th to the end of the ICO period”. There were two significant ARK transactions from the Oxycoin ICO contribution wallet to Bittrex that totaled just over 400,000 ARK (or around $1.25 million USD). These transactions were made on September 9th, 2017.
ARK was trading at 75,000 satoshi on September 9th. The price of ARK continued to rise (due to speculation of a community project launch) and on September 14th, it hit 120,000 satoshi (or just over $4.00USD). After this peak, massive sell walls began to pop up, and the price steadily declined down to sub-70,000 satoshi by September 30th.
The problem that this presents is that an investor into the Oxycoin ICO, who contributed at the peak, will see a lower OXY disbursement due to the average price over the contribution period. Oxycoin, by selling off their shares from the ICO contribution before the contribution period ended, effectively managed to manipulate the average value of ARK. While there’s no answer to the motive and could have been an unfortunate accident by the developers, the result still stands. If the developers had held their contributions to sell at the end of the contribution period, this ICO model would not have been a problem and controversy could have been avoided.
The Oxycoin ICO ended on September 30th, and while many investors are feeling burned and calling for refunds – situations like this will undoubtedly cause a larger call for regulations by the SEC.
You can read more about the Oxycoin distribution models here.
Update October 1, 2017 (2:59PM EST):
Since publishing this news, the developers have responded.
“We would like to address the current accusations that are circulating about ARK market manipulation by the OXYCOIN team. First of all, the only ARK sell orders we’ve placed occurred between Sept 7th- Sept 10th, which is when we had reached almost 3x our crowdfunding minimum goals. Knowing our project now had enough funding to continue development, our intention was to create some liquidity in converting to BTC (low risk approach) rather than wait and play the altcoin markets and potentially lose funds (high risk approach). As you can see here https://oxycoin.io/ark_orders.pdf , the sell orders were placed in varying sizes. Roughly 403k ARK was sold over the course of a few days, all while the price of ARK continued to grow steadily. We have never bought, sold, traded, or placed any other sell orders for ARK since Sept 10th. The ARK price after Sept 10th has in NO way been influenced by our team, thus the accusations of OXYCOIN currently and actively “suppressing” or “manipulating” the price of ARK are simply false. We are currently finalizing our official public statement regarding other ICO related concerns that the community has brought to our attention.”