Substratum’s second ICO for its Amplify Exchange started over two months ago on October 1, 2018. Two days ago, I noticed the whitepaper link was no longer working on Amplify’s website. Since then, the 404 error has been fixed with a link to a newer version of the whitepaper. The original whitepaper was marked V5.12, while the new whitepaper reads V7. It’s strange for a project to swap out its whitepaper during an ICO process (before or after is okay), so let’s take a look at the changes that Substratum made mid-ICO.

To compile the information below, I ran a diff between the two PDF files. The text from each whitepaper is highlighted by individual blockquotes (V5.12 comes first, V7 comes second), and the changed text between the two versions is bolded and italicized.

Whitepaper V5.12 has no legal designation in the page footer, while every page in whitepaper V7 is marked with Legal — 14656769.1. This isn’t necessarily suspicious, but it’s just something I noticed.

Phase two will allow the Amplify Exchange to be entirely decentralized. In this phase, a consensus model will be used where nodes will stake the AMPX coin in order to be selected for placing a block on the blockchain. (p.28)

Phase two will allow the Amplify Exchange to be entirely decentralized. In this phase, a consensus model will be used where nodes will stake the AMPX token in order to be selected for placing a block on the blockchain. (p.28)

##6. Company structure

Amplify Exchange Limited is a Bermuda exempt corporation formed for the purpose of conducting the ICO. It is wholly-owned subsidiary of Amplify Exchange LLC, a Delaware limited liability company and jointly owned by Justin and Kelly Tabb. Upon the conclusion of the ICO, Amplify Exchange Limited will be group parent company, and will form an operating company (“OpCo”) that will engage in the conduct of the Amplify Exchange business operations as described above. The location and structure of OpCo will be determined after the ICO based on a number of factors, including the applicable regulatory landscape, the business-favorable conditions in the chosen location, and technological capacity in the chosen location to accommodate the expected scaling up of the Amplify operations. (p.32)

6. Group structure

AmplifyX Limited is a business company limited by shares incorporated in the British Virgin Islands on 9 November 2018 and formed for the sole purpose of conducting the ICO. It is wholly-owned (indirectly) by**** Amplify Exchange LLC, a Delaware limited liability company****, which is**** jointly owned by Justin and Kelly Tabb. The company’s registered office is at Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola, VG1110, British Virgin Islands.

Upon the conclusion of the ICO, Amplify Exchange LLC will be group parent company, and will form (directly or indirectly) an operating subsidiary (“OpCo”) that will engage in the conduct of the Amplify Exchange business operations as described above. The location and structure of OpCo will be determined after the ICO based on a number of factors, including the applicable regulatory landscape, the business-favorable conditions in the chosen location, and technological capacity in the chosen location to accommodate the expected scaling up of the Amplify operations. (p.32)

Token purchaser’s information will not be used in any way outside of the legal acquisition of digital assets. (p.34)

Token purchaser’s information will not be used in any way outside of the legal acquisition of digital assets or as may be required by applicable law. (p.34)

There are two phases of compliance and security. The phases are the ICO and operational phases that address KYC & AML requirements, information security, and eligibility. Amplify Exchange is utilizing KYC & AML services through a third-party provider that is an industry leader in this field. Token purchaser’s information will not be used in any way outside of the legal acquisition of digital assets. KYC will be necessary once funds are deposited into the crowdsale wallet. Token purchasers will be notified to provide the necessary verification information prior to distribution of the tokens. (p.34)

There are two phases of compliance and security. The phases are the ICO and operational phases that address KYC & AML requirements, information security, and eligibility. Amplify Exchange is utilizing KYC & AML services through a third-party provider that is an industry leader in this field. Token purchaser’s information will not be used in any way outside of the legal acquisition of digital assets or as may be required by applicable law. KYC will be necessary once funds are deposited into the crowdsale wallet. Token purchasers will be notified to provide the necessary verification information prior to distribution of the tokens. Anti-Money Laundering (AML) checks are required if the purchaser provides more than $15,000 USD worth of cryptocurrency. Your information will be securely checked against the required AML checklists. Required information for contributions less than $15,000USD — First Name, Last Name, Country of Residence, Birth Date ****Required information for contributions greater than $15,000USD — First Name, Last Name, Country of Residence, Birthdate, Government Issued ID, Verification of Address (ex: Utility Bill) ****(p.34)

Page 37 of whitepaper V7 contains the following statement, which cannot be found in whitepaper V5.12.

Amplify Exchange will be raising (indirectly via the ICO by AmplifyX Limited) a maximum total contribution of no more than $57 million. That amount will be received exclusively in BTC or ETH.

In order to provide incentive for ICO participants Amplify Exchange will be implementing a token repurchasing plan. At the beginning of each quarter Amplify will use 20% of our profits to buy back AMPX Tokens. Private token sale holders will have first right of refusal on 80% of the buyback allocation. 20% of the allocated amount will be available to the outstanding supply. Tokens repurchased from this program will be burned and publicly available for validation on the blockchain. This program will continue until 50% of circulating supply has been repurchased and burned. (p.40)

In order to provide incentive for ICO participants Amplify Exchange will be implementing a token repurchasing plan. At the beginning of each quarter Amplify Exchange will use 20% of its profits to buy back AMPX Tokens. Private token sale holders will have first right of refusal on 80% of the buyback allocation. 20% of the allocated amount will be available to the outstanding supply. Tokens repurchased from this program will be burned and publicly available for validation on the blockchain. This program will continue until 50% of circulating supply has been repurchased and burned. ****However, notwithstanding the foregoing, Amplify Exchange reserves the right in its discretion to suspend or cancel this program at any time and from time to time on advice of its legal counsel that the program may necessitate a regulatory license, registration or other approval or may otherwise result in a significant regulatory, legal or taxation problem or burden in any jurisdiction. ****(p.39)

Nothing in this whitepaper constitutes legal, financial, business, or tax advice. You should consult your own legal, financial, business, tax, or any other professional adviser before engaging in any activities mentioned or in connection with this white paper.This white paper is intended for general informational purposes only and does not constitute a prospectus, an offer document, an offer of securities, a solicitation for investment, or any offer to sell any product, item or asset (whether digital or otherwise). You should thoroughly review the complete offering materials for any purchase of digital assets, particularly all risk factors, prior to participating in any offering, become familiar with the requirements, and your ability to receive a return on any such purchase of tokens.

Legal – 14656769.14114. Disclaimers and Risks Purchasing digital assets issued by the Company involves certain considerations. Primarily, there can be no assurance that the Company and/or the Exchange will achieve its objectives. There is a chance that any purchase or investment, as the case may be, of the Company’s digital assets could mean that the value of the digital assets purchased may diminish or the investment in the Company’s digital assets with not realize any profits. Accordingly, the Company is only suitable for purchasers of digital assets or by investors who understand the potential risks involved and who are able and willing to withstand the total loss of their purchase or investment.A purchase or investment of digital assets issued by the Company should not constitute a substantial proportion of any savings or investment portfolio and may not be appropriate for all purchasers or investors.In particular, purchasers or investors of the Company’s digital assets should note that (A) information relating to known or foreseeable substantial risks relating to the Company’s proposed projected can be found in section 14 starting on page42of this offer document, (B) information regarding the rights or options proposed purchasers or investors may have should the project not go ahead can be found in section 14 on page 46, (C) a description of the rights in relation to the digital assets being offered can be found in section 14 on page 47 and (D) all information relating to any disclaimers in respect of guarantees or warranties in relation to this project to be developed on any other related ICO asset can be found on in section 14 on page 47.

Despite the Amplify Exchange team’s best efforts, Amplify Exchange may not be able to execute or implement its goals, business plans, or strategies. To that effect, Amplify Exchange shall not be liable for any responsibility, liability, claims, demands and/or damages (actual and consequential) of every kind and nature, known and unknown (including, but not limited to, claims of negligence), arising out of or related to any acceptance or reliance on the information set forth in this document. The disclaimers set out in this document are not exhaustive, and a more comprehensive list may be set out in other documents to be published by Amplify Exchange from time to time. U.S. citizens, residents, or entities (“U.S. Persons”) are excluded from purchasing AMPX tokens during the “AMPLIFY EXCHANGE ICO” or signing on behalf of a U.S. Person. ****Chinese citizens, residents or entities are excluded from purchasing AMPX tokens during the “AMPLIFY EXCHANGE ICO” ****(p.45)

Despite the Amplify Exchange team’s best efforts, Amplify Exchange may not be able to execute or implement its goals, business plans, or strategies. To that effect, Amplify Exchange and its affiliates, principles, and team shall not be liable for any responsibility, liability, claims, demands and/or damages (actual and consequential) of every kind and nature, known and unknown (including, but not limited to, claims of negligence), arising out of or related to any acceptance or reliance on the information set forth in this document. The disclaimers set out in this document are not exhaustive, and a more comprehensive list may be set out in other documents to be published by Amplify Exchange from time to time. U.S. citizens, residents, or entities (“U.S. Persons”) are excluded from purchasing AMPX tokens during the “AMPLIFY EXCHANGE ICO” or signing on behalf of a U.S. Person. (p.45)

At the beginning of each quarter Amplify will use 20% of our profits to buy back AMPX Tokens. Private token sale holders will have first right of refusal on 80% of the buyback allocation. 20% of the allocated amount will be available to the outstanding supply. Tokens repurchased from this program will be burned and publicly available for validation on the blockchain. Program will continue until 50% of circulating supply has been repurchased and burned. (p.46)

At the beginning of each quarter Amplify Exchange will use 20% of its profits to buy back AMPX Tokens. Private token sale holders will have first right of refusal on 80% of the buyback allocation. 20% of the allocated amount will be available to the outstanding supply. Tokens repurchased from this program will be burned and publicly available for validation on the blockchain. Program will continue until 50% of circulating supply has been repurchased and burned. However, notwithstanding the foregoing, Amplify Exchange reserves the right in its discretion to suspend or cancel this program at any time and from time to time on advice of its legal counsel that the program may necessitate a regulatory license, registration or other approval or may otherwise result in a significant regulatory, legal or taxation problem or burden in any jurisdiction. The Token Buyback and Burn Plan, if implemented, shall be undertaken by the Amplify Exchange rather than AmplifyX Limited. ****AmplifyX Limited will be the issuer of the AMPX tokens. The AMPX tokens shall not be shares, debt obligations or other equity, debt or other securities or investments of any kind of AmplifyX Limited. The AMPX tokens do not carry any rights whatsoever to share or participate in any profits, income, capital or other assets of AmplifyX Limited, and AmplifyX Limited shall have no obligations of any kind whatsoever to holders of AMPX tokens following issuance of the AMPX tokens.The AMPX tokens do not carry any voting or other control rights whatsoever in respect of the governance, business, operations or affairs of AmplifyX Limited. The AMPX tokens are not currency. The utility (and therefore value) of the AMPX tokens is attributable to their potential use and functionality on the Amplify Exchange and is in no way derived from the financial performance or assets of or any returns from AmplifyX Limited. ****(p.45)

A few concluding thoughts.

  • Substratum previously announced the AMPX token sale would be run by a company in the British Virgin Islands, and this has been widely reported by ICObench, ICOmarks, ICOHOLDER, as well as Substratum’s own Telegram community. However, according to the original whitepaper, the sale was original to be held from a Bermuda-based entity. I don’t see this as huge red flag, but what’s the point of lying about something like this?
  • The updated whitepaper no longer forbids Chinese citizens from contributing to the AMPX ICO. Has something changed regarding the Chinese government’s stance towards ICOs?
  • Previously, one of Substratum’s biggest criticisms was not setting a hard cap for its second ICO. To remedy this, Substratum has now enforced a hard cap of $57 million. Honestly, I don’t think this matters anymore because the total contribution amount is currently 120 ETH (~$16,000). This is approximately 0.03% of the funding target. Sad, but expected.