Japanese YouTube personality Hikaru netted nearly $500,000 from the digital trading card pump and dump he participated in on the Valu platform last month, according to an updated report.
As CCN.com reported earlier this month, Hikaru and his friends allegedly manipulated the Valu trading platform to rake in hundreds of thousands of dollars. Valu is a type of crowdfunding marketplace that allows YouTubers and other public personalities to issue digital tokens. Although the English-language version of the company website compares the tokens to company stock and token holders to shareholders, the Valu tokens function more like digital trading cards.
The tokens are issued through the Open Assets Protocol and can be exchanged for bitcoin. Tokens do not entitle shareholders to dividends or voting rights, but they may give them access to incentives such as shareholder-only events or early access to new content. Valu advertises that both token creators and investors can realize profits from using the platform:
“Getting started with VALU is simple. Make your own [Valu token] with just a little investment and basic knowledge. Like trading cards, when you trade with others, you gain profit.”
Shortly after joining Valu, Hikaru told his social media followers that he wanted to do something interesting to “move his Value shares in one moment.” Following the announcement, speculators began gobbling up the tokens, causing his share price to soar. The next day, Hikaru and a small group of his friends sold the shares they controlled, maximizing their profits and causing the share price to crash. According to an updated report from Bloomberg, they netted the equivalent of $490,000 from the scheme.
His shareholders accused him of market manipulation, but the Japanese Financial Services Agency (FSA) said that Valu tokens did not fall under FSA authority according to current securities regulations. Bloomberg quotes a lawyer who says the scandal is evidence that Japan’s recently-implemented financial services law has created a “relatively easy environment for a new FinTech startup.”
Indeed, the U.S. SEC already shuttered an initial coin offering similar to Valu. Like its Japanese counterpart, Protostarr offered users the opportunity to invest in the careers of YouTube celebrities, although it promised them dividends from advertising revenue raised by the celebrity’s channel. Nevertheless, it is hard to believe the SEC would allow a platform like Valu to operate apart from extreme regulatory scrutiny.
In any case, the scandal exposed how easily the Valu token exchange could be manipulated, so the company has updated its terms of service in response. Now, share sales can only amount to 10% of a stock’s market cap in a single day. Transactions are also limited to 30 per user per day, and the platform automatically caps single-day price swings when they reach a decline of 50% or an increase of 200%.
Featured image from YouTube/Hikaru.
Last modified: May 21, 2020 9:13 AM UTC