Bored Apes Yacht Club launches Apecoin. It looks like an unregistered penny stock offering  

The Bored Ape Yacht Club project now has a fungible token called Apecoin (APE), which officially launched today.

The announcement came from Apecoin itself, in the form of a Tweet thread and a post on the new APEcoin website. 

Yuga Labs, the startup behind Bored Apes Yacht Club, is trying to distance itself from its own coin — much in the same way that Ripple tried to distance itself from XRP.  

Apecoin is like a ventriloquist’s dummy on the lap of Yuga Labs. The dummy is doing all the talking, and we are supposed to pretend that we don’t see Yuga Lab’s lips moving. 

Yuga Labs developed its Ethereum-based ERC20 token with help from blockchain developer Horizen Labs, blockchain game company Animoca Brands, and law firm Fenwick & West.  

The goal here is to create a new magic bean that can be sold for real money, without having to register that magic bean with the Securities and Exchange Commission. Yuga Labs founders think all they have to do is make sure the coin is “decentralized” and has some sort of utility, outside of “number go up.”

Yuga Labs is calling its coin “a token for culture, gaming, and commerce.” Culture is a completely meaningless word here. And I’m not sure what commerce means either. I’m guessing it means you will be able to buy things, potentially even bored ape NFTs, with the token.

There will be 1 billion Apecoins, and 150 million will be airdropped to holders of bored ape or mutant ape NFTs. They can claim their coins on Apecoin.com for up to 90 days. 

Also, starting today, the coin will be listed on several major exchanges: Coinbase, FTX, Kraken, and Gemini, according to a tweet by Guy Oseary, who represents Yuga Labs in the entertainment sector. APE will also be listed on OKX, according to a tweet from the exchange. And Binance US.

Coins tend to shoot up in price as soon as they get listed on Coinbase. 

It’s decentralized, see?

Speaking through Apecoin, Yuga Labs also announced an Apecoin DAO, or decentralized autonomous organization. If you own APE, you are a member of a DAO, and you get to weigh in on important decisionmaking, probably things like what bands will play at the next warehouse party.

I won’t go into all the details, but if you are interested, an Apecoin forum addresses how the DAO works. 

In 2018, Bill Hinman, who was then the director of the SEC’s Division of Corporation Finance, stated that ether (ETH), the native crypto of Ethereum, was not a security because it was sufficiently decentralized. Ever since that time, token projects have been trying to copy Ethereum, and come out with something that is decentralized, even as the SEC tried to walk back how significant this statement was when Ripple tried to use it in the XRP case. 

However centralized the actual operations are, “decentralized” only ever meant “you can’t sue me, bro.”

DAOs are supposed to be decentralized, but they never are. Similarly, the Apecoin DAO will have its own central gatekeeper: the Ape Foundation.  

The Ape Foundation is based in the Cayman Islands, and it maintains the Apecoin.com website and the Apecoin Twitter account.

Members include Alexis Ohanian, founder of Reddit; Amy Wu, who leads a venture fund at crypto exchange FTX; Maaria Bajwa, a venture investor at Sound Ventures; Yat Siu, cofounder of Animoca Brands, and Dean Steinbeck, cofounder of Horizen Labs. 

All of these members own one or more bored ape NFTs. Advisors and contributors in token projects are generally paid in magic beans, so I suspect they got plenty of APE for their efforts, too.

Anyone who was around the crypto space in 2016 remembers the earliest DAO — called “The DAO.” After the project stupendously crashed and burned, the SEC came out with an investigative report, saying the DAO’s tokens were securities. Still, that hasn’t stopped thousands of DAOs from launching this year. There is even a website now that tracks DAOs.

In 2017, we had initial coin offerings. In 2022, DAO governance tokens are stepping in to take their place — and they resemble offerings of securities in all the same way ICO tokens do. 

Grasping for utility

Yuga Labs knows it is not enough for Apecoin to simply be a governance token. It needs more utility than that, so the coin will be incorporated in a game app — and that’s where Animoca Brands comes in. 

The game developer converted its mobile game Benji Bananas to play-to-earn for the occasion. The game is available on the App Store and Google Play. By playing Benji Bananas you earn tokens that can be swapped for ApeCoin starting in Q2 2022.

Benji Bananas is an action game, where you make Benji the monkey swing from vine to vine through the jungle, collecting bananas. If you want to play, you have to first buy a Benji Pass, which is an NFT. Animoca offers more details in a Medium post. 

How many people are going to play Benji Bananas? Somehow, I don’t think a banana game will be a big use case for Apecoins. Like most ERC20 tokens, the use case will be speculating on its price. That is,  buying APE and hoping it goes up in value.

One for you, three for me

Yuga is creating 1 billion APE. A portion will be unlocked over a period of four years, starting on March 17, 2022. The distribution looks like this: 

  • 470 million to the DAO treasury 
  • 150 million to bored/mutant ape holders 
  • 150 million to Yuga Labs 
  • 140 million to launch contributors
  • 80 million to Yuga Labs founders  
  • 10 million to charity 

Notice how many APE Yuga Labs is setting aside for itself, and for all its contributors. The firm is happy to distance itself from the Apecoin project, but not the piles of APE it is getting.

A few weeks ago, the Financial Times wrote that Andreessen Horowitz (a16z) was in investment talks with Yuga Labs, which was seeking to sell a multi-million dollar stake in a new funding round. 

We don’t know yet if that deal has gone through, but I suspect if and when it does, a16z will get a large allotment of Apecoin. The venture capital firm has two directors sitting on Coinbase’s board, so they likely played a key role in getting the token listed. (Note how a16z’s shitcoin bag gets listed on Coinbase routinely.)

This is a win-win deal for a16z. If the SEC steps in and deems Apecoin an unregistered security, which I can totally see happening, a16z is not assuming any risk. Yuga Labs is taking on all of the risks. A16z simply gets tokens they can dump on the general population — a quick return on their investment. 

The founders of Yuga Labs imagine they can create a token out of thin air, pay themselves 80 million APE — and another 150 million for their company — and regulators are going to sit back and not blink an eye.

I would be curious to know if Yuga Labs even reached out to the SEC before launching APE.

In 2019, the SEC published a framework for analyzing whether a digital asset is an investment contract and, therefore, a security. The “not a security” path for most tokens is a fraught one. 

We’ve already seen several ICO projects pay the price of selling unregistered securities. Telegram had to return $1.2 billion to investors and pay $18.5 million in penalties. Block.one had to pay a $24 million penalty. Similarly, these companies also argued their tokens were decentralized and had utility. 

Yuga Labs is unwilling to learn lessons from the past. They think they know better. And a16z encourages this stuff directly because they know the game is rigged in their favor.

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