Recently, Munchee, a startup company based in California was shut down by the U.S. Securities and Exchange Commission (SEC). Although the team consisted of bright individuals along with several well known advisors with previous experience in the blockchain industry, such as Loi Luu from Kyber, the team was unable to market their coin offering correctly to the investors. The company offered investors 'MUN' tokens in order to raise $15M for advancements proposed in the their whitepaper. (A whitepaper is a document which typically outlines future operations and development for the company, allowing investors to see how their money will be spent.)
Munchee Team
Chelsea Lam (Co-Founder) - Former Team Lead at Google
Sanjeev Verma, PhD (Co-Founder) - Blockchain Advisor at U.C. Berkeley
Nghi Bui (Co-Founder & CTO) - Formerly at Altassian
On December 11th, 2017 a Cease-And-Desist Order was issued to Munchee by the SEC as the MUN token was proposed as an utility coin but was advertised publicly towards investors as a security; meaning this should have been registered, regulated and documents such as profit-sharing agreements, certificates, investment contracts should have been provided to investors.
As defined in Section 2(a)(36) of the 1940 Act, a security is "any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security..."
So lets start with, what is (or was) Munchee?
Munchee was essentially known for combining food review websites such as yelp with a strong social media photography aspect. Don't get me wrong, the idea was amazing. Just how steemit was able change the conventional social media platform operations by redirecting 'value' (I am referring to Steem/Steem Power) to users, Munchee was an application which would provide value to the people reviewing restaurants by offering MUN tokens which in turn could be converted into Ether then fiat. These tokens would have also allowed restaurants to purchase advertisement spaces. There is obviously a bit more depth here but the model was great!
*One of Kyber's advisors is Vitalik, the main man who started Ethereum
What was the problem?
All marketing efforts were put towards informing potential investors how the value of the 'MUN token' would increase instead of focusing on the utility itself; the utility being the platform, the company itself and the application itself.y Although Munchee referred to the token as a utility coin, this was not marketed as a utility.
On the second day after the ICO was offered, SEC contacted Munchee regarding this issue. Munchee immediately put a stop to the offering and returned the investments back to appropriate users. The website shut down and no longer exists. There is a lesson to be learned from Munchee.
I have a lot more information on this topic but I am tired now. So if people want to discuss please do in the comments below and I will add the extras in throughout. I do not know everything and want to learn more as well. This was a quick summary of what happened and I want to make a video once I look deeper into this. #ignore grammar :)