Blackmoon Rating Review
|Start ICO||10 Sep 2017|
|End ICO||11 Sep 2017|
We have reviewed project's progress as of December 2018 and indentified that the legal risks related to EU token legislation appeared for the project. We note, however, that the team intends to obtain necessary licences in 2019. Therefore, investment score has been decreased to "Stable"
We rate the Blackmoon project at “Stable”.
The Blackmoon Crypto project could change the market in cryptocurrency investments. The staff is experts; the documentation is executed clearly, accurately and orderly.
The company states that they cooperate with one of the Big Four companies. Despite this, we do not exclude a risk of certification of the platform’s tokens as securities by the regulatory authorities. However, in our opinion, the probability of this occurring is minimal.
It troubles us that the founders plan to announce the intended amount to be raised, so close to the ICO date.
We cannot rate the project at a higher level because we question whether there will be a high demand for the platform’s services. The project’s activity is sector-specific, and the service charge is high in comparison with the traditional market.
About the Project and ICO
Blackmoon Crypto is a platform assisting in the creation and management of tokenized funds dealing with investments in FIAT and cryptocurrency assets. It provides legal and technological infrastructure.
The ICO is being carried out to raise capital for the platform’s development until the point it is self-sufficient. ICO participants take proceeds in the form of tokens adopted within the platform.
ICO start: September 12, 2017 at 01:00 pm UTC
ICO period: 30 days, or until the cap on fundraising is reached
Target cap on crowdsale: TBA 24 hours before the ICO Start Date based on market situation and pre-order demand.
- At pre-order and during the first 48 hours of the ICO the price of one BMC token will be $1.00
- From 3rd to 7th day (both including) of the ICO the price of one BMC will be $1.05
- After the 7th day of the ICO until the End Date the price of one BMC will be $1.10
Bonuses: Questions about bonuses are reviewed on an individual basis by the leadership team (enquire at email@example.com)
Currency: ETH and other major cryptocurrencies
Total issue amount: The total number of BMC to be issued will be calculated at the end of the ICO according to the formula: amount of BMC sold during the ICO multiplied by 2:
- 50% of the BMCs will be allocated to the ICO contributors including promo campaign bonuses
- 30% of the BMCs will be allocated to the company reserve and locked for a minimum of 36 months. This reserve is a necessary foundation for sustainable future development of the Blackmoon Crypto platform.
- 20% of the BMCs will be allocated to the founding Blackmoon Crypto team and advisors, locked in a smart contract with a 24-month vesting period and a six-month cliff. Some BMCs from this pool (but not more than 5% of all BMCs) will be allocated to non-operational advisors and will be locked with a six-month cliff without vesting. Up to 3% will go to subcontractors and bounty campaign members without vesting.
Distribution: The total cost of Blackmoon Crypto Platform development is estimated by the team to be about US$33.5M over the next five years. This amount will be covered by the proceeds from the ICO and the income from retained BMC tokens, since these tokens will receive part of the revenue from the platform. The diagram shown below shows the cumulative projected costs of Blackmoon Crypto platform development:
30% of the proceeds from the ICO within the designated period will be reserved for a guaranteed buyback of BMC tokens at 80% of the token sale rate nominated in USD. The reserve will be stored in the form of a differentiated portfolio of major cryptocurrencies. Information on the structure of the reserve and its status will be publicly available; this facility will last for 24 months. After that, the funds will be returned back to the company. All purchased tokens, if any, become the property of the company.
Token Issue Date: BMCs received by contributors will be transferrable 7 days after the end of the ICO.
The Project’s Services and their Usage
The Blackmoon Crypto project is a subdivision of the Blackmoon Financial Group, a company registered in Ireland in 2014 as a financial and tech company. Company capital is $100 million. The Blackmoon Crypto project develops a platform enabling investment advisors to structure, maintain, and promote tokenized investment funds for the benefit of particular investors. The platform takes into account aspects of token investment products including technological matters, infrastructure components, legal compliance, and corporate structuring. It is considered to be a universal all-in-one solution to establish and manage tokenized funds. The platform’s architecture is as follows:
On the top of the system is the holding company that owns a management company, which is responsible for compliance, licensing, partnering with banks, and working with legal advisors. Investment advisors work alongside the management company. They incentivise and establish token funds on the basis of the Blackmoon Crypto platform. Every fund works with its own strategy. The advisors’ remuneration is of two kinds: management fee is 2% of the fund’s value per annum; performance fee is 20-25% of the fund’s profit.
Token funds’ assets are charged by Blackmoon Crypto. More information is given in the Project Economics section of this review. Raised fees are distributed among BMC token holders. There is additional information in the Token Investment Highlights section as well.
BMC token holders should meet the following requirements to receive the remuneration described:
- They should store their tokens in special wallets on the Blackmoon Crypto platform, linked to the holder’s account;
- to be registered on the platform as a Continuous Contributor and choose his duty.
So, if the BMC tokens are stored in the stock exchanges or other wallets they are not liable to performance bonuses.
The list of duties will be published on blackmooncrypto.com and will be updated regularly according to system needs. The duties are the services of promoters, investments analysts, legal advisors, public auditors, and investment advisors; they are the key function of the platform.
BMC token holders should keep a certain amount of their tokens in their wallet on the platform to fulfil the chosen duty. Most duties are not liable for a minimum deposit amount of tokens. Regarding the investment advisor, he needs to deposit between 10,000 and 10,000,000 BMC tokens. Only after the satisfaction of this requirement can they manage a token fund. This should strengthen the partnership responsibility of the advisors and incentivise advisors to manage assets better.
Continuous Contributors have to confirm fulfillment of their duties. If Continuous Contributors do not fulfill their duties properly, or breach the provisions, the duty can be terminated. Their deposit wallet would be locked and BMC tokens are transferred to another account’s wallet without the right of dividends accrual.
Every investment fund is registered as a Limited Partnership or given another legal status according to its purposes. The Singapore Fund Tokenizer is the only limited fund partner. It will issue tokens to raise FIAT or crypto investments and transfer them to the fund for further management. This scheme demonstrates the process:
The founders state that tokenization of the fund share makes the investment process and its results transparent and auditable. The tokenized funds are more profitable thanks to minimal costs for the arranging and support of infrastructure. Received profit will increase the investors’ income. We do not agree with this point of view, because the expenses of the tokenized fund investors are more than those of traditional funds. You may read more information on this matter below.
An advantage of tokenized funds is their potential for liquidity within a short period and the opportunity to trade with participants worldwide.
Functioning of the tokenized fund:
The Blackmoon Crypto platform will be very easy to use. The BMC token holders will be provided with the following services:
- analysis and selection of financial instruments available on the platform;
- structuring an investment portfolio and allocation of capital to the chosen assets;
- portfolio efficiency monitoring;
- analysis and verification of results;
- Uploading of BMC tokens to participate in buyback during fund profit distribution;
- Uploading of reports and receipt of analytical information.
Investment advisors will be provided with the following services:
- selection of the legal status of the platform including assistance in its registration, bank settlements, account opening and others;
- definition of the structure of smart contracts of the fund token including profit distribution and methods of exit;
- distribution of fund tokens;
- monitoring and provision of reports on investment results;
- income distribution among fund token holders;
- uploading of necessary instruments, reports and other data.
Competitors and the Project's Competitive Strengths
In the white paper, the founders compare the Blackmoon Crypto projects with their competitors using the following chart:
The founders believe they can influence the development of crypto funds all over the world and provide the most diversified funds for users. Regarding diversification of the investment portfolio, we question Blockchain Capital’s position in the diagram above. We do not exclude the fact that Blackmoon’s technological solutions can provide investors with a large diversification both in the form of crypto and FIAT currency.
In the white paper there is a table comparing Blackmoon Crypto’s services and those of ICONOMI and Melonport:
Regarding tokenized funds in the market, the project has to compete with both crypto and FIAT funds. There are reliable participators in the current market, namely Satoshi and AMF. ETF funds are trying to enter the cryptocurrency market; at time of writing, VanEck and REX sent files to SEC for registration of crypto ETFs. Now it is not clear what the Blackmoon Crypto project’s advantages over the above mentioned companies are; in addition Blackmoon’s charges will be higher than other funds’.
Staff and Partners
The founders state that the staff are qualified specialists with much experience in the establishment and management of investment funds, and in the field of development of automated investment ecosystems and instruments for management of assets. They are also experienced in dealing with regulators effectively.
The leaders of the team are Russian. The Blackmoon Crypto website provides information on six members; all of them have experience in venture investment funds, large scale IT projects and start-up companies. The best-known names are VK.com, Coca-Cola, Qiwi, Carprice, and Flint Capital.
Founder & CEO – Oleg Seydak – co-founder of Flint Capital, an international venture investment fund. It is favourite for its participation in the Lending Club project. In 2014 the Flint Capital acquired a share in the Lending Club. In December the Lending Club carried out its IPO at the NASDAQ stock exchange, when they raised $755 million. Its capital was evaluated at $5,4 billion. The diagram below demonstrates the results of the shares sale. It shows that the sale was successful, but does not show the entrance price of Flint Capital into the Lending Club nor the exit date.
CO-Founder Ilya Perekopsky, former CCO of VK.com. In 2014 he dealt with United Capital Partners – the fund of Ilya Scherbovich. It is one of the best-known and most successful hedge funds. The last well-known transaction of UCP was the purchase of Essar Oil shares in the Rosneft and Trafigura group of companies, as well as the transaction with preference shares of Transneft and the ordinary shares of Inter RAO UES.
Investment Director – Sergey Vasin, an approved CFA member. At the time of writing he is an analyst for Gazprombank. He is responsible for the consumer department, telecommunication, media, and IT. According to the Gazprombank website he has also worked for other Russian financial companies, MDM Bank and IFK Metropol.
In addition to the specialists in the team, there are well-known and respected advisors:
Oscar Hartmann – Founder of the KupiVIP, Aktivo, CarPrice, and Fastlane Ventures Fund companies. In June 2017 he became a member of the board of directors of the Alpha Bank in Russia – the second private bank in Russia with regards to assets valum. He is responsible for the development of the Bank’s strategy on the promotion of innovative banking technologies.
Vasil Latsanich – was Vice President of MTC marketing strategy until June 2017 2017. On January 01, 2018 he will be occupying the position of Head of the Russian Vympelcom, part of the VEON Group of Companies.
Among the advisors there is Sasha Ivanov (the Waves platform founder), Nicolas Tranter (Morgan Stanley, BNP Paribas, HSBC), and John Hyman (Ondra Partners, Renaissance Capital).
Among the project’s partners are Target Global and A&NN Investments, and Deloitte; the terms and conditions of their partnership agreement is a commercial secret.
The experience and reputation of the members of the team and that of the advisors means a lot. There are no risks connected with the Blackmoon personnel.
Development Strategy and Roadmap
According to the Whitepaper the platform commenced development in July, 2017. The current development stage of the platform is not assessed, and a platform launch date is not yet fixed. However a demonstrative version of the website is available. This version has been developed for institutional investors of the Blackmoon Financial Group. According to given information the ecosystem of the developing platform will be based on the same technology.
In January 2018 the Company plans to launch the first tokenized fund. The authors state that it will be a high-yield fixed income fund in alternative lending. Then in three months they intend to establish a fund focusing on less risky fixed income to provide more diversification and protection for investors seeking safe havens. In 2019 the project intends to add stock market fiat funds, actively managed crypto funds, and venture capital funds. Intended AUM in 2022 is about $1.8 billion.
The marketing strategy is not described in the white paper, but they fix the PR and Marketing Budget up to 2022 at $3,680,000. Felipe Lema Vorobey is manager of the PR and Marketing department; he has been working in the field of marketing for 10 years. He has been working as a manager in the Marketing Department of the CarPrice Company for 1.5 years.
We queried the name of the project on the search system and we obtained reference links on the Blackmoon Crypto project from almost all reliable sources. The team communicates on social networks and chats – Telegram, Slack, Bitcointalk (10 pages of discussion), Twitter, Medium, and Facebook.
Engineering Aspects of the Project
Blackmoon is an Ethereum blockchain-based platform under smart contracts. According to the white paper the code for smart contracts will be available on GitHub. At the time of writing, 28.08.2017, this information is not available.
The Blackmoon Crypto project intends to earn from charges paid by investment funds using the platform’s services. Types of fees:
- Structuring & promotion fee: about 2.5% to 10% of net fund assets;
- Maintenance fee: about 0.5% per annum paid daily.
- Transaction fee: charge for fund tokens transfer from one wallet to another; 0.25% of transaction value.
So the more net asset value of the funds using the platform’s services, the more revenue for the Blackmoon Crypto platform.
The founders’ forecast of funds’ assets value:
Platform revenue forecast = Structuring and promotion fee + Maintenance fee + Transaction fee, where structuring/promotion fee and transaction fee are paid once from a new amount. Transaction fee is taken into account one time if investors operate under a buy and hold strategy.
Operating expenses and CAPEX Blackmoon Crypto are covered with the revenue and funds raised at the ICO. 30% of the revenue is spent on operating expenses. 20% is for the team and 50% is for the investors (continuous contributors.)
In the white paper there is information on team expenses:
The team does not disclose information on the capital raised at the token sale. We calculated the minimal raised capital under which the project is launched: $18-19 million. You should take this into account before participating in the Blackmoon Crypto ICO.
The first risk of the project is the demand for funds tokens that are adopted on the platform; it is difficult to forecast their success. The founders believe in their success and demonstrate it in the chart above. However the reality can differ.
We agree that asset management in the cryptocurrency market will increase. But it is not clear why assets managers should use the Blackmoon platform. The main negative point is the high price; advisor services are expensive under the scheme: 2+20. The investor must pay three additional fees to the tokenized funds. (You can read more on this in the Project Economics section above.) Thus to launch the tokenized fund the investor should pay 2.5%+0.5%+0.25%*2+2.0% = 5.5% from the asset + 20% from the profit. This is very expensive both for FIAT and cryptocurrency funds.
One more possible problem is that tokens of the tokenized funds could be considered as securities. The Blackmoon project’s members promise legal support for token holders. As we understand it however, the legal issue was being negotiated for USA jurisdiction only and it has not been resolved yet.
It is not clear either if there are qualified managers on the platform; the team has not yet set rules for selection of advisors.
A safety risk must also be considered. There is a requirement to store BMC tokens in the platform wallet to take proceeds. We contacted the representatives of the team about this, and they guarantee the safety of the wallets; however the wallet parameters are under development at the moment. There will be a decision at the end of the current year. Currently Blackmoon are negotiating with Group-IB.
Token Investment Highlights
Four investment highlights:
- The tokens are liable for payment of a proceeds percentage of the total token issue;
- The founders state that they have an SEC certificate proving the BMC tokens are not securities. They state that US residents can take part in the pre-ICO;
- The Blackmoon project guarantees the possibility of repurchasing tokens at 80% of the principal value within two years after the ICO in the case of low rates;
- BMC tokens give the right to become an Investment Advisor and receive management + success fees for tokenized funds’ assets management.
All revenues received by the platform are distributed among BMC token holders according to their share in the total token issue amount in accordance with the funds (FT1, FT2, … FTx). Blackmoon state that the opportunity to exchange tokens of one fund into another currency will be foreseen by the terms and conditions of particular funds and the current regulations of the platform. According to the BMC token regulations, 20% of the total revenue is distributed among the team’s token holders, 30% is for the company (operational expenses and CAPEX), and 50% is for minority investors.
It is very difficult to calculate the earnings of one token. We do not know the total amount of BMC tokens for issue. If the Blackmoon project raises about $30 million, where one token is $1 (price at pre-order and within 48 hours of the token sale):
Proceeds are accrued if the tokens are stored in special depository wallets linked to their account. From the legal point of view this is not a dividend but a salary for the fulfilled service/duty. There are different duties outlined in the white paper: promoters, investment analysts, legal advisors, public auditors, GR advisors, and so on.
2) BMC token is not a security
We examined the legal resolution made by Velton·Zegelman PC (www.vzfirm.com). According to the document they have proven that the BMC token is not a security, because the revenue accrued under the tokens is not a dividend or any other passive income. It is payment for the rendered services.
It is important that Velton·Zegelman PC disclaims liability on the given conclusion, because of uncertainty regarding token legalization.
3) repurchase opportunity for 8-% of the principal value
The buyback procedure is explained in detail on Medium.com: https://medium.com/blackmoon-crypto/what-is-the-downside-protection-752bec43e417
In short, if the token price is lower than 80% of the principal value, “Blackmoon Crypto will step in to buy back the tokens at $0.8 from anyone willing to sell”. For this purpose they reserve 30% of the raised capital from the ICO.
It is a good idea to support the BMC rates during low market volatility. But if the volatility of the cryptocurrency market is significant, this will not help. 30% of the raised capital during the ICO will cover only 30% of the free token float.
4) Investment Advisor and other duties
An additional fee is paid only to investment advisors. Other participants will get part of the revenue of Blackmoon Crypto. The investment advisor receives a management fee of 2% of the price of the net fund assets managed by him, and a success fee of 20% of the fund’s performance.