This post is not about legal framework or tokenomics or feasibility of a particular project as such. It’s about customer relations, really, and I am writing it upon request from a really small group of the Ties ICO participants who want to make sure they get a refund. Well, there is a bit of legal nitpickery in the first part of the post (of course!), but bear with me — things will get a lot merrier when you get to part two.
So, imagine there is this hot ICO you have just invested into and they have passed their soft cap of $3mln and kept on going until they collected about 2.2 times as much. Somewhere along the way you and the other guys who were buying their tokens persuaded the team to promise to burn the unsold amount. And that was going to be a LOT of tokens, since the hard cap was set at $33 mln. So, the token sale has just ended and your are thinking about your lambo when the team suddenly tells you they are “pausing” the ICO. And they are going to start it again! Just two more weeks, nothing to worry about, right?
“What in the name of (insert your favourite word here) is going on?!” That’s what you would probably be thinking at that moment.
Kowalski, status report!
What they say
“Here is our official position:
- Do we have a right to extend the token sale? In fact yes, because according to our terms&conditions (that have always been public) we have a right to extend or shorten the period of the token sale. “Ties reserves the right to shorten, extend, postpone or change the timing or duration of the TGE.”
- Why did we extend the token sale? Because there are VCs and crypto funds that ask us for more time to take a decision and they want to support the Ties.Network Database, which can be the next serious innovation since Oracle.
- Why didn’t we tell you before? Because we understand that it’s not a good idea to extend the token sale, and we can see it by your comments. We hoped that all funds would have had the time to make their decision. Unfortunately, they ask for more time, so we had to make a decision to give them a chance.
- Will we refund? Since we didn’t break any rules and acted according to our terms&conditions, there are no precedents for a refund. However, we respect your opinion and we want to do good for the community, and now we are accepting applications for a refund. Please send your applications to this email — support@ties.network. We will review all of them after the token sale is over, i.e. after October 26. Right now it is technically impossible to do a refund, because we can’t touch the funds until the official end of the token sale.
- Will we extend the token sale again? No, October 26 is the deadline. We can assure you that we will close the sale on October 26 or if we raise the cap (whatever happens earlier). If we break this promise, we will refund everyone, and everyone will get their contribution back.
- If the token sale is officially open again, it would be a discrimination to restrict some people from contributing. Why some can participate and some not? So we are officially opening it for everyone until Oct 26.
- What if big whales buy our tokens now? Will it affect the token price? Will they dump them? No, we negotiate only with strategic partners and funds who believe in the product and want to support the development of the database. They are not going to dump the tokens the next day after the token sale. Such are our agreements with them. If we make the project happen, this will result in the growth of TIE token, which is good for everyone. Imagine you’re a serious fund. Would you drop the price of your asset? Probably not, because it will negatively affect your own situation. Big investors suffer more from this than small ones. That is why serious partners on board are a guarantee that the token will get stronger.”
What their small print says
“According to terms and conditions (that have always been public)”, right? Okay. Found the link in the FAQ section of the ties.network website. Let’s have a closer look.
This is what is written on the very first page of the terms and conditions:
These terms and conditions (hereafter “the Terms”) and the Privacy Policy constitute the legal relationship and agreement between You and Ties in respect of your participation in the Token Generation Event, receiving and holding tokens, as well your use of the Website. All information provided on the Website, the Whitepaper, the Business Overview and the various communication channels apart from these Terms, is not binding and is of descriptive nature only.
Now, let’s keep this in mind: whatever anyone says elsewhere doesn’t really count.
Refunds
And here is what this very same ultimate ruling document says about refunds (page 6, section 5, article 17):
The Purchaser understands and accepts that all purchases of TIE Tokens are final and may not be reversed. A Purchase is non-refundable, the only exception is in the event the Minimum Cap has not been met as explicitly laid down in article 5.10 above of these Terms.
Section 8, article o.
Purchaser explicitly declares that it understands the fact that there is no, under the conditions set in the Terms, refund or recourse on Ties and any of its affiliates, its past, present or future officers, directors, employees, agents, consultants, advisors, predecessors, successors, equity holders, founders, assigns, affiliates, parent companies, subsidiaries, vendors, distributors, suppliers and contractors in relation to the Purchase of TIE Tokens.
Hence the carefully chosen wording of the official statement: “we didn’t break any rules and acted according to our terms&conditions”, “we are accepting applications for a refund”, “we will review all of them”. No one actually said there will be refunds. But even if someone said that, it would not be binding legal-wise.
“We did not break any rules”
The “token sale extension” was announced 1:30–2:00 pm GMT on Thursday, October 12, 2017 and it was presented as a decision made at the very last day. The original token sale counter on the ICO website stopped on October 12. Then how come the very first page of the terms and conditions contains this:
The provision gets repeated in section 5, article 6:
The period that Purchasers may purchase TIE Tokens starts September, 21th, 12:00 PM UTC and will last for 35 days, ending on October 26 th , 12:00 PM UTC, or it will end when all TIE Tokens have been purchased, whatever occurs earlier.
So, the ICO extension is hard-wired in the terms. But how come no one noticed that before? Elementary, my dear Watson. The secret lies in section 4, article 15:
We may amend the Terms at any time by posting a revised version on the Website. The revised version will be effective at the time we post it. We will also communicate amended Terms through the various communication channels we use.
So, the terms and conditions have been changed at some point to accommodate the burning of the tokens and the new ICO end date. Let’s take a look at the document title and the creation date of the terms and conditions I downloaded on October 13:
But the terms and conditions ended with this: “Last updated: October 10 th , 2017, version 1.2". I guess that means that the team had known about the “sudden” ICO extension for at least two days prior to the announcement.
Section 20. Modification of the Terms
Ties may modify the Terms at any time by posting a revised version on the Website. The amended Terms will become valid upon placing on the Website. You have the responsibility to check the Website regularly for modifications. You will be deemed to have accepted such changes.
Section 5, article 18:
By participating in the TGE, the Purchaser expressly acknowledges and represents that the Purchaser carefully reviewed and understood the Terms, the most recent version of the White Paper, the most recent version of the Business Overview and fully understands risks, costs and benefits associated with TIE Tokens and the Purchaser agrees to be bound by these Terms.
Section 7, article 1:
You fully agree to be bound by the Terms.
Unless I am mistaken, when you’ve already bought something it’s too late for you to read the terms that were revised (and can be revised again and again) after your purchase. You buy under the old terms, then they get revised, the new terms are binding and there is no refund? Tough luck, happens all the time.
Upd: I forgot to add *sarcasm* to the previous phrase when I wrote it. And that was good because this initiated a discussion on twitter regarding the legality of such changes. The consensus was: it depends.
Section 14. Jurisdiction:
The laws of the Netherlands are applicable to the Terms.
Section 15. Disputes:
- You and Ties shall cooperate in good faith to resolve any dispute, controversy or claim arising out of, relating to or in connection with the Terms and the Purchase of TIE Tokens. If such attempt to amicably resolve does not succeed, any dispute, as well as controversy or claim arising out of or relating to these Terms, the purchasing, holding, using or selling of TIE Tokens , or the breach, termination or invalidity thereof shall be finally settled by arbitration in accordance with the arbitration rules of the International Arbitration and Cryptography Centre (“IACC”), available at https://github.com/Cryptonomica/arbitration-rules/tree/master/Arbitration_Rules/IACC, in effect at the time of the filing of the claim, except as they may be modified herein or by mutual agreement of You and Ties.
- You hereby waive the right to any form of recourse against any award to any court or other competent authority, insofar as such waiver can validly be made under the applicable law.
IACC’s arbitration rules seem a little peculiar. If, for whatever reason, you really want to try arbitration make sure you’ve checked everything out first or just hit me up on twitter.
I think that under article 1 of section 15 the Ties team are ought to talk to the participants who requested their refunds again and provide them with precise information about when and how they will get their funds back. Or set up a special form for refunds. I believe that the total amount of requested refunds at this point is inconsequential to the project and the community members are entitled to be able to reverse their individual investment decisions, notwithstanding the strict no-refund policy stated in the ICO terms and conditions. The official statement about refunds seems to be a little vague, especially when one takes into account the fact that it directly contradicts the main legal document of the ICO.
Enough of legal skullduggery. Let’s check out part two of the post, which illustrates the importance of proper customer relations.
Disclaimer: I am not a Ties investor, not a member of their team and I have no connection to the project. I had a brief history with SONM after their ICO (and there is a post about it), but I was not on the team there.
This is all I have time for now. I hope this helps. Make sure you have read and understood the disclaimer at the bottom. If you come across any factual mistakes or faulty grammar you are welcome to point them out in your comments. To get updates or PM me you can always follow me on Twitter.
Virtually nobody seemed to get that IBO and IEO hint. It’s a tip jar, okay? Do you want me to put the “please donate” picture of Jimmy Wells here?
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