I'm really sorry for creating a new account to stay anonymous. Feel free to ban this one if it is considered misbehavior.
Having that said, you can read the full story on my first comment below.
#1, if you think the company is going to go ahead with something fraudulent, leave. This has nothing to do with your CTO role -- applies to any job at any company.
#2: is it fraudulent? Some people think all ICOs are fraudulent, some reasonable people may disagree. If you think all ICOs are fraudulent, see #1 above. Or if you think they are legit but this one has fraud in it, ditto. But (not knowing the situation) you may be overreacting.
#3: Sticking tokens into the app may simply be a dumb business decision, but not actual fraud. It's OK for you to disagree with a business decision, but if you don't agree with the direction, at the end of the day too bad. "CTO" can mean a lot of things but it's rarely an executional job -- most often it's "chief talking officer". So your opinion counts, but shouldn't be decisive. If you decide "well, OK it's not fraud, just bogus" you have to stop complaining about it OR leave.
Finally...lots of good ideas look weird from a technical basis. I thought YouTube was weird: why sort content by media type -- shouldn't a video about X be part of a web page about X? I thought the Apple II was weird: who wants a home computer you didn't design and build yourself? Clearly I was wrong!
But if actual bad behaviour is the plan, do leave, even if you think they will get away with it.
I and fellow colleagues had to do this once. As a founder I gave up 7 years of building that company due to some really unethical moves by the CEO.
At the end of the day, as a c-suite officer, I would have been liable by being complicit.
Once I stated my objection, I and my fellow c-suite colleagues went to the board with our objection, and CEO decided to continue executing the unethical behavior, I and a few of my c-suite colleagues all bailed. That sucked hard.
PS. That signal from us leaving ended up preventing the securities fraud that was about to happen.
I'm in my late 20s. It's been almost 4 years since we founded our startup company. We pitched for a year and eventually gathered enough investment to give it a go. The initial plan was to release our app in the local market (middle east) and aim for more users. At the end of first year, with the approval of the board, we decided to delay marketing spending for more development to polish existing features as well as to add more ones. We revoked one feature (not ads) which would provide early cash flow as it turned out to be too ambitious and rash.
We pivoted and decided to go global with our proven to be fun features highlighted. It went smooth and retention rates grew tremendously until finally the day for series A arrived. The lead investor (the one with the most equity) already hinted that he would be willing to invest, some others followed as well. They are all angels btw.
Mails exchanged, meetings happened, places were visited and it turned out what we can gather is not enough to handle marketing costs for aimed growth. We contacted people from crowd equity funding companies. Apparently, none of them is currently accepting applicants from our country.
During our last meeting, the board discussed the idea of an initial coin offering. Some of our investors are crypto enthusiasts and many of them think it is a good idea to fund a project publicly with tokens. The thing is, our product doesn't resemble anything like a currency, not even a commodity in my opinion. It sounds unnaturally arbitrary to have tokens inside our app, or a token with our app's branding on top. Moreover, as someone who is the most technically proficient person in the board, I can easily deduce that all the proposals about hows and whys of the ICO resembles an obfuscated fraud. I couldn't believe what I heard that day and it seems I am the only one who thinks that way.
I plan to spend my all remaining days until the next meeting to prepare the hugest report ever written, hoping it will prove that it is the worst idea we ever discussed. As my voting rights being limited, I have no idea what to do if my report doesn't stop its happening. I still need to work for a year to permanently gain rights on my own equity. If I quit now, I'll lose everything except the lessons learned during these 4 years.
My question is, what would you do?
Being a corporate officer means getting-the-fuck-out-of-Dodge the moment things get questionable.
Check out "STRICT LIABILITY FOR CORPORATE EXECUTIVES" on page 3: http://www.nortonrosefulbright.com/files/20160801-criminal-a...
My .02 on this:
You've already lost. The decision has been made, they're moving ahead, and it's clear (a) you can't change their minds and (b) you aren't onboard with it.
You should treat this as a learning experience about decision-making and corporate politics.
Put aside the technical issues and take some time to consider the people issues. Who is the decision-maker? What is his/her motivations? How are decisions made in your organization - top-down, consensus, debate, face-to-face, etc? What role did you think you should have in making this decision, and how did that differ from the role you actually had? How do you feel about all of this?
Maybe you felt this was your decision to make, or should've been given more weight/input on the decision. This is a relationship problem. You don't have the role you want with the others.
Another view might be, you were consulted but ultimately you weren't the top decision-maker in the org, the decision didn't go your way, and you need to either (A) get onboard with it or (b) leave.
It's very reasonable to want out at times like this. Don't do anything rash, but if you can't get onboard with this decision and really do object to it, leaving this organization might be your best bet.
It's important to realize, when you aren't the head person, there are some things that aren't going to go your way. You can argue and fight and debate, but ultimately, a decision has to be made, and it might not be the one you want, but you have to either tow the line, or leave, doubly so as an executive. As bad as this situation is, it's way worse to have a bunch of people who can't agree, and decisions not getting made, than MADE decisions that don't go your way.
If you truly have ethical or legal issues, you should get out. You're young and will move on to something else quickly. But I think this stuff (ICOs and coins in general) is grayer than you might think. There's a lot of gray between 100% upright business practices and fraud, and you're somewhere in the middle.
If you don't believe in the technology that you're developing; run. A company should never develop technology against the better judgement of its CTO.
That being said: Using things like blockchain to represent stock ownership; and using crowdfunding, are great ideas. They just don't replace the fact that your company needs a viable business plan, paying customers, and actual investment.
Things like an ICO are like the old story from the 1990s about a lumber company changing its name to "lumbar.com" because there were plenty of fools trying to invest in anything related to the internet.
So, even though this is new technology, how is it relevant for your business? Crowdfunding is great for funding artists, and great for swindling unsavy suckers. Blockchain technology is still too primitive to represent ownership for a run-of-the-mill company; even for a run-of-the-mill "tech" company. Why? Because the tech of blockchain will be too much of a distraction from building your real business.
Anyway, when I read your details, I see a startup that's not going anywhere, and is considering an ICO out of desperation. It's probably time to assess if your company is viable or not.
If you're going to leave, don't try to be too diplomatic. Be frank with your board, "I am leaving because I do not believe that our company is viable. An ICO is a distraction from finding a viable business model and savvy investors. Blockchain / ICO will be a useful technology in the future, but at this time it's too immature and will be a distraction from building our business and product. I recommend that you concentrate on the shortcomings of the business and its product."
I would collect a list of every ICO fraud story in the press, and just ask if your board wants to be added to the list (whether officially or in the social zeitgeist).
I would also ask the board how many examples they can find of companies who did an ICO, and were later successful.
Also, I'd be looking for a new job... Even if they listen now, it doesn't sound like good leadership.
Edit to add: Your equity is only worth something if the ICO works. If there's no ICO and you still can't find investors, your equity is also worth nothing. I wouldn't even consider it...
Most ICOs are deeply unethical in the sense that they exist only to circumvent traditional funding regulations, and not because they actually utilize cypto-tokens for their business. If you feel that this describes the plan, I would absolutely back out. It may not currently be illegal, but chances are it will be. It certainly does not reflect well on the business.
ICOs are only fraudulent if you make them so. We don't know if you're based in the US either, which matters quite a bit since even the most well-intentioned ICOs constitute the sale of unregistered securities under US law. If you are, and since they're going ahead with it anyway, you might take a look at the SAFT Project , which is a legal framework for ICOs in the US created by the Cooley law firm.
In short, leave if you believe they are doing something illegal, and then sue them for creating a situation where you had no choice but to leave your job. But not all ICOs are, by default, illegal.
Life is too short to waste on other people’s shifty ideas. The investors have a portfolio, so they think a 1 in 10 chance of a quick 100x is a great idea. But you’re the one who has to build it and live it every day.
Decide where you draw the line, and tell them. Don’t try too hard to fight the idea or persuade them, just make your case calmly and if their decision is over your line, walk away. And wish them well as you walk away, no reason to burn bridges.
But first go get a good lawyer.
I'm guessing there is a playbook for "fundamental disagreement among execs/founders in a startup" and a chapter in said playbook for "CEO doing questionably ethical stuff".
Are you sure your company is not planning to use this as a utility token. Several companies ICO with this promise. For example Binance (a crypto-exchange) introduced BNB tokens. You can pay with Bitcoin but if you pay for your trades with BNB tokens then your trades cost 50%.
If this is fraudulent or not is of course very, very important. But from reading your comment I feel there are some weird trust dynamics at play here. My view is that for a company to work you need to have people working in the same direction with a large amount of trust. That means that if you are a specialist in your are I will trust your judgement. I need not understand how you came to that decision. If I do not trust you to make decisions in your area or if you are not aligned with the goals of the company I would find someone else for your role. That's how I think trust should work.
That also means that if my judgement in my area of expertise is not trusted I will quickly start looking for something else to do. "If you don't trust me to do what I'm good at I'll go somewhere else or do something else".
If I were in your shoes I would not feel trusted anymore and look for something else. You also mentioned that all your shares are vested. I'm more used to schemes where you shares vest over time e.g. you receive 33% of your shares per year worked so you will own all your shares after three years. If this is how your vesting works consequences for leaving should not be that bad.
However if none of the shares have vested you should thread carefully. Having been part of a similar situation with vested shares and leaving I know there are compromises to be made. All parts have a lot to earn from an amicable deal that let's you and the company part ways without any bad blood.
"No matter how much you try, you can’t stop people from sticking beans up their nose."
Go on, take the money and run.
ICOs are not necessarily fraud - are they outlawed in your country? Do you simply need to register them properly with any countries you decide to release your app in?
Trust your gut
You're on the right path, drafting a well rationed argument as to why its not a good idea. If they decide to move forward, you should quit.
I'd seek good legal council regardless of what happens.