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CINDX Rating Review

Risky

Investment Rating

Expiry date : Expired 25 Jan 2019

Rating report

Disclaimer: we have updated CINDX report on December 19, 2018, based on the STO Prospectus and relevant documentation which has been provided to us by the team, accordingly. Rating score has been revised to “Risky” on December 19, 2018. Previous rating score was “Stable”.

 

Based on the analysis performed and issues identified we have assigned the CINDX project a “Risky” rating. At the time of writing, the testnet (MVP) was already available, which is a possible indicator of the team’s serious intentions.

The project has the following strengths worth noting:

  • Availability of a testnet (MVP).

  • Participation in a significant, fast-growing market (the blockchain industry in general).

  • Highly skilled and vastly experienced founders, advisors and team.

  • An ambitious idea.

However, there are also a number of risks associated with this project:

Legal risks

Our legal experts have reviewed project’s available documentation and STO prospectus and identified several significant legal issues, e.g. insufficiency of information, probable non-meeting of legal requirements from the regulator, controversial statements in the prospectus and other

Financial forecasts are not sufficient

We note the inconsistent quality of financial forecasts provided in the documents. None of the underlying assumptions is disclosed, not all financial indicators are disclosed, financial model is not presented, there is no information if the model was audited by an independent auditor, and overall modeling results seem overstated with no information available to corroborate that

Team composition risk

The developers are mostly young specialists, with no experience in the blockchain industry; the tech lead lacks work experience previous to the CINDX project according to the information obtained online. This could be a potential risk for the development process and the quality of the final product. Besides, we note that some members of the team do not state affiliation to the project on their official LinkedIn profiles.

Non-comprehensive roadmap

A disadvantage of the roadmap is that it only covers the technical aspects of the project and does not lay out the business development process.

Non-comprehensive whitepaper

The whitepaper does not include competitor analysis, forecasts of marketing activities or plans for product promotion.

Token price decrease

We note that according to the project whitepaper, 6% of tokens will be allocated for a bounty campaign. Considering that 6% is half the amount of tokens allocated to the team and is a substantial amount of tokens, to be unlocked after 2 months, these factors may have an impact on the token price.

Based on the analysis performed and taking into consideration all of the risks associated with the CINDX project as of October 2018, we assign the CINDX project a “Risky” rating. This rating may need to be reassessed once further versions of the product are released and feedback on the first testnet is received.

 

Project & STO information

CINDX is an ecosystem enabling any investor without specialized skills to securely trade crypto funds for a reasonable success fee, by choosing a manager for their portfolio. An investor can refer to transparent, verifiable statistics on traders and managers to find a suitable trading strategy. Such statistics include performance history, risk level and type of cryptocurrency.

Information regarding the CINDX token distribution can be found in the table below.

Website

Whitepaper

Medium

MVP (testnet)

Telegram

Twitter

Facebook

Bitcointalk

YouTube

GitHub

 

 

SALE

(PUBLIC SALE)

Start date

August 26th, 2018

October 8th, 2018

End date

October 7th, 2018

December 26th, 2018

Stage cap

No data

No data

Ticker

CINXO, CINX

Token

ERC-20

Token supply (for sale/total)

26,265,000 / 51,500,000

Soft cap

USD 3,800,000

Hard cap

USD 21,000,000

Estimated valuation at STO price

USD 41,176,470

 

 

PRIVATE SALE

STO (PUBLIC SALE)

Token price

USD 1 = 1CINX

USD 1 = 1CINX

Bonus

August 26th, 2018 - September 16th, 2018 - 25%,

September 17th, 2018 - October 7th, 2018 - 20%,

October 8th, 2018 - October 21th, 2018 - 17%,

October 22th, 2018 - November 4th, 2018 - 15%,

November 5th, 2018 - November 18th, 2018 - 13%,

November 19th, 2018 - December 2nd, 2018 - 10%,

December 3d, 2018 - December 16th, 2018 - 5%,

December 17th, 2018 - December 26th, 2018 - 0%.

Lock-ups

Team tokens are blocked for 1 year, with a release of 25% every quarter.

Bounty tokens are frozen for 2 months.

Reserve fund - tokens not sold in the token sale phase are frozen for 2 years with a 25%

unlock every 6 months.

Team tokens are blocked for 1 year with a release of 25% every quarter.

Bounty tokens are frozen for 2 months.

Reserve fund - tokens not sold in the token sale phase are frozen for 2 years with a 25%

unlock every 6 months.

Minimum investment

USD 50 (paid in an equivalent amount of BTC, ETH, BCH, LTC, USD or EUR)

USD 50 (paid in an equivalent amount of BTC, ETH, BCH, LTC, USD or EUR)

Maximum investment

Not specified

Not specified

Currencies accepted

BTC, ETH, BCH, LTC, USD, EUR.

Restricted list

Afghanistan, Angola, Antigua and Barbuda, Bahamas, Barbados, Belize, Bosnia and Herzegovina, Burundi, Central African Republic, Comoros, Republic of Congo, Côte d'Ivoire, Cuba, Dominican Republic, Ethiopia, Grenada, Guyana, Haiti, Iran, Iraq, Jamaica, Kongo, North Korea, Lebanon, Liberia, Libya, Macedonia, Mali, Marshall Islands, Mauritius, Myanmar, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, El Salvador, Serbia, Seychelles, Sierra Leone, Somalia, Sri Lanka, Sudan, Suriname, Syria, Tanzania, Trinidad and Tobago, Tunisia, Uganda, Vanuatu, Venezuela, Yemen, Zimbabwe.

 

KYC procedures

yes

Country of legislation

Estonia

Legal entity

AS Cindx Investkapital

         

 

CINDX is selling tokens valued at USD 21,000,000. All unsold tokens will be placed in a reserve fund. Moreover, CINDX provides bonuses for the token pre-sale (for a 25% bonus), and for the public sale (as presented in the table above).

During the token sale, investors purchase utility tokens – options called CINXO (with the same amounbt of emission - 26,265,000, as CINX), which confer the right to receive security tokens, CINX, in the future. A holder of CINXO tokens has the right but no obligation to exchange options for security tokens at a ratio of 1:1 after completing the KYC procedure.

 

CINX security tokens will be issued and distributed following the publication of the document ‘Prospect of Emission’ after the end of the token sale, but no later than Q1 2019, and CINXO will be burned after release of CINX security tokens.

 

All generated tokens will be distributed within the categories shown below. Tokens reserved for the team and advisors are vested for over a period of one year (The team plans to unlock 25% per quarter).

The team forecasts the use of proceeds from the STO in Soft Cap and Hard Cap scenarios as follows:

The team’s and advisors’ tokens are locked for a year after the STO.

 

We note that the intended distribution of funds is healthy, taking into account the project’s nature, its key features and current stage of development, with the exception of the fact that the team plans to allocate only 16% of proceeds in the Soft Cap scenario for Research and Development. This could create the additional risk that the final product will not be well-enough developed.

We believe that the whitepaper has the following issue:

  • Forecasts of marketing activities and plans for product promotion are not covered, so it is impossible to analyze or draw relevant conclusions regarding potential market exposure without such information.

Legal matters

 

The team has provided us with the prospectus which they have prepared for CINDX STO. Based on the review of the prospectus we have concluded the following:

1. Overall legal compliance

A comparison of the registration data of the prospectus and the data of the register of companies did not reveal any contradictions.

2. The legal nature of the token

According to the information from the Prospectus, the issuer (CINDX) issues two tokens: CINXO (utility token) and CINX (security token). Upon issuance of tokens, it is possible to purchase a CINX security token. In accordance with the explanations of the Estonian Financial Supervision Authority, tokens (although it is not specified  which tokens are in question - specific or in general) can be considered as a bond, but later on in the prospectus it is mentioned that buyers of the security token CINX acquire the participation in profit sharing and decision making, which is not consistent with the debt nature of the bond.

3. Prospectus

In accordance with the legislation of Estonia (Securities Market Act), by default, the offer to purchase securities is public and requires the preparation and subsequent registration of the prospectus by the Regulator. There are a number of exceptions (clause 2, article 12 of the SMA), in the presence of which, the offer of securities is not considered public, for example, the offer to purchase securities is intended only for qualified investors, or the minimum possible investment amount is 100,000 EUR, or the minimum the nominal value of the security is 100,000 EUR and others. We note that the CINDX Prospectus does not contain information that the offered securities satisfy any of the specified criteria, as a result of which they may not be considered public and do not require registration actions established by law. At the same time, there is conflicting information in different parts of the CINDX Prospectus text: that the prospectus has already been registered (p. 22, 39), that the prospectus must be registered in the future (p. 41), that the prospectus with this issue of securities must not be registered .

The Estonian Regulator's website does not contain information on the registration of the CINDX securities prospectus, the presented CINDX Prospectus does not contain specific information on the registration or the reasons (exceptions, application of other rules) for which the offer to purchase securities was not registered by the Estonian Regulator. At the same time, the information of the CINDX Prospectus could potentially mislead investors in connection with the use of the word Prospectus, references to European and Estonian legislation.

The CINDX Prospectus does not contain information that should be included in the Prospectus of Securities in accordance with applicable law:

  1. ISIN (unique registration number) of the security;
  2. LEI number of the issuer (it is not in the database of registered legal entities);
  3. Registration data of the prospectus (including the date of registration, the regulator);
  4. Financial statements of the issuer;
  5. Rights that are granted to holders of securities, including information regarding dividend payments (Distribution of platform profits among owners of tokens is described on page 17 as a loyalty program, voting rights are mentioned on page 32, but this description cannot be considered sufficient because of the absence of a list of questions on which voting is carried out, the voting procedure, the necessary quorum and other procedural issues);
  6. Priority of holders’ rights in the capital structure (in case of bankruptcy);
  7. Restrictions on the circulation of securities;
  8. Provisions on circulation on the organized securities market or alternative platforms, specifying the markets in which the securities will circulate;
  9. The procedure for the termination of securities rights; and other conditions.

4. Token acquisition procedure

CINDX Prospectus contains conflicting information on how to acquire security tokens. Thus, p. 16 provides that the acquisition is carried out from January 14, 2019 by investor via sending an offer to purchase. At the same time, on page 17 there is a reference to the option agreement on the acquisition of tokens, which provides other conditions of token acquisition.

The procedure for acquiring tokens by US citizens and legal entities is more controversial.  For the purpose of acquiring the company's instruments by US citizens, CINDX Prospectus offers an option agreement similar to investors from other countries; at the end of the document, there is a link to SAFT, but it is impossible to identify which tokens are in question. SAFT contains a reference to Reg. D (an exception that allows tokens to be bought by accredited investors), but according to the prospectus there are no restrictions on the category of investors or the amount of the acquisition.

5. Document text

The text of the document is not structured, there are provisions that overlap, there are provisions that contradict each other, there are terms that are not defined in the glossary.

 

Description of services and their applicability

CINDX is a platform based on smart contracts, includes APIs and the use of blockchain technology; it provides transparency, immutability, and censorship resistance for all information stored. All processes are thus transparent. The CINDX platform is extremely valuable for asset managers, who have an opportunity to attract more investors than is feasible outside of the ecosystem, which will be fully automated and secure.

The architecture of CINDX consists of:

  • CINDX.core.
  • CINDX.trade.
  • CINDX.market.
  • CINDX.hub.
  • CINDX.talk.
  • CINDX.dao.

 

CINDX.core consists of replication services, activity-tracking algorithms, a KYC/AML module, an API gateway for connection to exchanges and blockchain architecture services.

 

CINDX.trade includes a trading terminal and an internal marketplace where traders can source different products: Applications, scripts and analytics.

 

CINDX.market consists of a marketplace for investment products created by managers. It includes user dashboards for investors and managers, and billing options for contracts.

 

CINDX.hub includes an editor for trading strategies for algorithmic trading - which has the ability to commit tests using historical data, to audit code for placing products on the internal marketplace, as well as the vendor's dashboard.

 

CINDX.talk is a component giving any user the ability to post trading ideas, insights, signals, as well as useful content.

 

CINDX.dao is a system enabling a user to implement a voting system for the community based on decentralised autonomous organisation rules.

CINDX users will have the following roles and functions:

  • Trader
  • Investor
  • Vendor
  • Manager

 

A trader plays one of the key roles on the platform. He/she is linked to the trading terminal through the API to conduct trading decisions and strategies and has a personal dashboard with a personal blog, where he can share expert opinion.

An investor can choose and connect various financial products for managers (private traders, robots, funds) presented on the marketplace. The CINDX ecosystem automatically copies the actions of the manager selected, and replicates them on the investor's accounts.

A vendor distributes analytical and trading bots, tools for social network analytics and technical analysis.

Manager. A trader obtains the status of "Manager" to build an investor following on the marketplace.

The MVP testnet for the platform has already been launched and is available along with a demo version for testing on the website.  A full version of the platform, “CINDX live”, is planned to be launched by the end of 2020, when all components will be integrated into the platform.

 

Roadmap

The team has provided the following project and legal roadmaps:

The team plans to provide the final product, “CINDX live”, by the end of 2020, but a testnet was already available at the time of review (August 2018), so the risk for potential investors is reduced when compared to projects without an MVP before/during their ICO.

A disadvantage of this roadmap is that it only covers technical aspects of the project, and does not lay out the business development process – e.g. when and how marketing activities will be performed.

 

Market outlook

Cryptocurrency users generally buy their crypto through an exchange. The transaction process usually starts with fiat to Bitcoin conversion. Then the Bitcoin can be traded for other crypto assets, which often requires sending it to a different exchange, incurring multiple commission payments. CINDX is offering users a chance to enter the cryptocurrency market and access a variety of services, including crypto asset management. CINDX customers can use their crypto assets to generate additional income within a single ecosystem for a reasonable success fee. We have prepared the following summary table:

Industry rivalry:

 

CINDX

MIDEX

Tradelize

Ticker

CINDX

MDX

TDZ

Key functions/
features

Proof of Data Authenticity and Provenance, Constellations for Disparate Data Sources, Fair Remuneration, and Incentive Sharing.

Open asset exchange and financial platform.

An ecosystem where pro traders gain a unique trading toolset and investors achieve investment results equal to those of the best ProTraders

Key users

Developers, enterprises, consumers, vendors, and security experts.

Businesses, traders, and consumers.

Traders and Investors.

Key products

Data Stamping Protocol, Stamp Verification, Open Constellations, Network Nodes and Clients, Data Enhancement by Elons, Public Chain Anchors.

Cryptocurrency financial platform, unified asset management center, connection of external accounts, aggregator of exchange quotations

Tradelize Terminal, Web and App.

Development stage

Testnet released.

Under development.

Trading terminal demo launched.

ICO/STO status

Main sale ongoing.

Ended.

Ended.

Funds collected as of ICO/STO date/Hard cap

Unknown/ USD 3.8m

USD 21m / USD 21m

Unknown / USD 21m

Percentage of tokens for sale

40%

85%

70%

Valuation on date of ICO/STO

USD 50m

USD 25.88m

USD 42.857m

Market capitalization

N/A

N/A

N/A

We should note here that there is still one issue with the whitepaper:

  • The absence of any deep competitor analysis, only high-level competitor analysis is performed.

 

Team

CINDX is a blockchain ecosystem for investors, traders, asset managers and vendors. It appears to be technically complex. If the testnet was not yet released, we would have doubted the sufficiency of the project team’s experience, as illustrated in the table below:

Yuriy Avdeev

Position

CEO

Total experience

8+ years

Relevant experience

Yes

Relevant education

Yes (Open University Business school)

Professional achievements

Co-founder of CryptoActive, Method Delphi investment company, EcoViileTrade Ltd.

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Val Jerdes

Position

Product Director

Total experience

20+ years

Relevant experience

Yes

Relevant education

Yes

Professional achievements

Co-founder of Streamlogic

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Mofassair Hossain

Position

CMO

Total experience

4+ years

Relevant experience

Yes

Relevant education

Yes (Chartered Institute of Management Accountants)

Professional achievements

Certified Member of Malta Blockchain Association, top expert at ICOBench

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Artur Shamalov

Position

Investment Director

Total experience

2 years

Relevant experience

Yes

Relevant education

No (Leningrad State University named after A.S. Pushkin)

Professional achievements

Private investor and Co-founder of several companies

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Denis Eskenazi

Position

Product Marketing Director

Total experience

10+ years

Relevant experience

Yes

Relevant education

Yes (St.Petersburg State University of Economics and Finance)

Professional achievements

Co-founder of Storypointer and startup Drop Up

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

 

Ibragim Haniev

 

Position

Tech Lead

Total experience

2+ years

Relevant experience

No

Relevant education

Yes (Pyatigorsk State University)

Professional achievements

-

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

Yes

     

The CINDX project team also involves the following members: Airat Shayhulov (Head of Quantitative Research), Sofja Pevzner (Personal Data Officer) and Jelena Karzetskaja (Compliance Advisor).

The project has a strong team; all the members can be contacted via social networks. The developers are mostly young specialists with no experience in the blockchain industry; the tech lead lacks work experience before the CINDX project, according to information obtained from social pages. This could be a potential risk for the development process and the quality of the final product. Besides, we note that some members of the team (Sofja Pevzner and Jelena Karzetskaja) do not state their affiliation with the project on their official LinkedIn profiles.

CINDX is supported by the following advisors: Keith Teare, Austin Kimm, Philip Staehelin, Amarpreet Singh, Motti Peer, Tyler Sanford, Bogdan Fiedur, Graham Doggart, Leonard Grayver, Jason King and Sadie Hutton. All advisors are highly experienced professionals in blockchain and consulting, business development, finance and investing. It should be noted here that Amarpreet Singh, Motti Peer and Leonard Grayver do not refer to the CINDX platform on their LinkedIn pages.

On the project website CINDX lists the following partners: TopICOList, Greenberg Whitcombe, Blonde 2.0, Yellow Door, Innov8 Global Advisery, Progressor, ICO Promo, Sum&Substance, Twiga Communication Group and TradingView. There is no information about what kinds of partnership they have with each of these companies.

Token analytics

CINX token is the security token of the CINDX platform. The emission of CINX is limited to 51,500,000 tokens; additional issuance is prohibited.

It is designed to enable users:

  • to pay for services within the ecosystem

  • to participate in revenue distribution with the bonus program lock-up and enable voting on the platform

  • to receive rewards for freezing tokens using smart contracts.

All investment and processing operations within the CINDX ecosystem will be implemented strictly in CINX tokens, whereas success fees can be paid either in CINX tokens or other cryptocurrencies.

For holders who “lock” their tokens in the platform with a smart contract, the CINDX project proposes a loyalty program. This is aimed at encouraging users to save their tokens in their portfolio; 30% of the revenue generated in CINX tokens will be distributed to a such holders.

 

According to the documentation, CINDX platform will generate revenue from the following sources:

  • Subscription fees

  • Success fees

  • Management fees

  • Sale of complementary products

  • Registration fees from new users

  • B2B services

Prospectus and other project’s documentation contain financial forecasts of the project. We have analyzed the provided information and would like to not the following:

  • Financial forecasts are vague and partial, cost side is not shown at all

  • There are no descriptions of underlying assumptions, rationale for calculations is unclear

  • Excel financial model has not been provided to us, and therefore we were not able to check accuracy and reasonableness for calculations

  • Description says that financial forecasts shown represent realistic scenario, however, there is no information of what the scenario is by substance

  • There is no sensitivity analysis provided for the model

  • There is no information on whether or not the financial model has been audited by independent qualified auditor

  • Revenue structure shows revenue flow from token sale, however, it should not, as token sale similar to equity/share issuance is not treated as revenue or income by any means

  • Overall, we believe that financial forecasts seem overstated for realistic scenario and insufficient for drawing conclusions. Further clarification from the team is required regarding unclear forecast points.

 

Token price factor analysis

FACTOR

DESCRIPTION

 

Development and release of new products according to the roadmap

The MVP (testnet) has already been released (on August 30th). A full version of the product will be released by the end of 2020. Whether or not the team meets this milestone, and the degree of product development at each stage, will drive the token price up or down.

⬆︎⬇︎

Demand for the platform

At the time of analysis (October 2018) it is hard to predict demand for the platform, as it is not due to be released until 2020.

⬆︎⬇︎

Sales of tokens by the team, crowd-sale, etc.

Since 12% of tokens may be unlocked during the 1st year after the STO, there is a risk that the team will trade them in.

⬆︎⬇︎⬇︎

Sales of tokens by private sale investors

Assuming that USD 3,800,000 has been raised during the private sale, there is some risk that when the token appears on exchanges, investors in the pre-sale will want to sell their tokens.

⬇︎   

Limited token supply

Assuming that the company develops as intended and demand for the solution is sufficient, a limited token supply could have an impact on the token price in the long-term.

⬆︎

Volatility of cryptomarket

Although the platform, token and product do not seem to have speculative purposes, the high volatility of cryptomarkets may cause traders and speculative investors to trade CINX, which may lead to price fluctuations for the token or even speculative activities (pump & dump, etc.).

⬆︎⬇︎

 

 

Investment risk analysis

RISK

DESCRIPTION

LEVEL

Legal risks

Our legal experts have reviewed project’s available documentation and STO prospectus and identified several significant legal issues, e.g. insufficiency of information, probable non-meeting of legal requirements from the regulator, controversial statements in the prospectus and other

High

Financial forecasts are insufficient

We note inconsistent quality of financial forecasts provided in the documents. None of the underlying assumptions is disclosed, not all financial indicators are disclosed, financial model is not presented, there is no information if the model was audited by independent auditor, and overall modelling results seem overstated with no information available to corroborate that

High

Team composition risk

The developers are mostly young specialists with no experience in the blockchain industry, and the lead developer lacks experience before CINDX, as previously noted. This could be a potential risk for the development process and the quality of the final product. Some members of the team do not state their affiliation to the project on their official LinkedIn profiles.

Medium

Incomprehensive whitepaper

We believe that the whitepaper has the following issues:

  • Absence of deep competitor analysis.

  • Forecasts of marketing activities and plans for product promotion are not covered in the whitepaper; it is impossible to analyze or draw relevant conclusions regarding potential market exposure without them.

Low

Incomprehensive roadmap

The roadmap only covers technical aspects of the project and does not lay out the business development process.

Medium

Token price decrease

We note that according to the project whitepaper, 6% of tokens will be allocated to the bounty campaign. Considering that 6% is half the amount allocated to the team, a substantial amount of tokens that will be unlocked after 2 months, this might have an impact on the token’s price.

Medium

 

 

The information contained in the document is for informational purposes only. ICORating received monetary compensation in the amount of $20000 from the entity rated in this report for completing the ratings report. However, the entity rated in this report did not have the opportunity to approve this rating report before the report was published, nor did the rated entity have the opportunity to edit or remove this report once it was published. The views expressed in this document are solely those of the ICORating Team, based on data obtained from open access and information that developers provided to the team through Skype, email or other means of communication. Our goal is to increase the transparency and reliability of the young ICO market and to minimize the risk of fraud. We appreciate feedback with constructive comments, suggestions and ideas on how to make the analysis more comprehensive and informative.