Exclusive: Initiative Q is not an ICO. It’s not a cryptocurrency. It went viral on Facebook. Tom Rodgers investigates just what it is…
Initiative Q. Something of a conundrum. The natural skeptic will find much to ridicule when he sees an advert that promises customers free money in exchange for zero investment at zero risk. To the seasoned scam hunter, it raises a lot of familiar red flags.
The countdown clock. The scarcity. Invite-only, and invite your friends to get access to what you signed up for. Alarm bells are ringing.
And it is not a cryptocurrency. As per its website, Initiative Q is at pains to explain how much it is not a cryptocurrency. And this giveaway of the Q currency is not an airdrop, and it is definitely not an ICO. So says Initiative Q, repeatedly.
Yet right there, on the front page of the website, this reservation at the simple cost of your email address is like “getting free Bitcoin seven years ago”. Why do they specifically mention Bitcoin if they don’t want people to think this is a cryptocurrency product? While they give detailed responses to our other questions, Initiative Q miss out this answer. Whether that’s by accident or design, we can’t be sure.
“We are of course well aware that the prospect of “free money” reminds people of well-known scams,” says an emailed response from founder Saar Wilf. “However, the only way we know to create a successful new payment network, is by coupling it with a new kind of money, and distribute that money for free to those promoting the network’s adoption.”
Just over 3,000Q, which the company says is 10% of the total supply reserved for each person, is put back for the post-registration period. You get 40% after inviting five friends to sign up. These look like classic Ponzi scheme tactics. Ones that get prosecuted by the US Securities and Exchange Commission, or highlighted by Action Fraud here in the UK every day.
The ‘estimated value’ of each invite spot has dropped from $50,000 last week to $30,000 this week. Who would turn down a guaranteed $30,000?
As the SEC’s official advice runs: “Guaranteed high investment returns are the hallmark of a Ponzi scheme. Every investment has risk, and the potential for high returns usually comes with high risk. If it sounds too good to be true, it probably is.”
And yet, as Initiative Q point out, they ask for no money up front. The founder can’t disappear with a suitcase full of cash if there’s no cash to fill a suitcase with.
Wilf told us that Initiative Q had signed up over three million people in the last three months. Three million. The snowball effect worked. Of that there’s no doubt. He should give his social media marketing person a pay rise.
There will eventually be two trillion Q in existence. 80% will be incentives, 10% go to the team behind Initiative Q, and 10% get put into reserves. This feels like the same deflationary artificial scarity model that cryptocurrencies employ. For comparison, the Bitcoin code states that there will only ever be 21 million Bitcoins. At time of writing, just over 17 million have been discovered.
Initiative Q is using the language of cryptocurrencies, but it is not a cryptocurrency. Yet it might use blockchain for dispute resolution. In some form. Or other. It’s pretty vague.
The Facebook advert
The real reason we’re talking about Initiative Q is because adverts went viral on Facebook over the past two weeks.
Why ask new signups to complete simple actions like sharing a pre-written Facebook post on their news feed? It adds legitimacy. It is more than an implicit ‘like’, it is an explicit endorsement of an unknown product, and one that potentially involves your friends or family’s money. Not to be trifled with.
Some shared posts included an actual hard cash amount you could earn, if only you offered your email address: “According to well-known economic models…the value of the reward would be around $130,000”.
Those sharing it aren’t dumb. The friends on my admittedly limited social list who clicked ‘share’ on this pre-written Facebook post were not the kind normally taken in by dopey scams. Among them were people with PhDs, scientists and natural cynics: those whom I thought would be the first to condemn an obvious fraud, who would normally greet the promise of free money with zero risk with at least a link to Snopes, if not outright hostility.
Who’s behind Initiative Q?
Saar Wilf is undoubtedly a very clever chap. A pro poker player who made $800,000 in winnings despite never placing in the top three in a competition? A tech entrepreneur who sold his Fraud Sciences business to Paypal for $169 million? Sure. He’s the main man behind this whole thing.
He’s also very willing to respond to critics.
David Gerard is one of the most respected and prominent tech journalists and a hardcore cryptocurrency sceptic. His book, Attack of the 50ft Blockchain, is a humorous look at the hype around the technology, along with a deep technical dive into Merkel trees, cryptography and databases. So when he says something is a ‘get rich quick scheme’, you tend to take notice. Mr Wilf takes Gerard to task for his criticisms, but he doesn’t shirk them either, in a detailed response here.
CryptoNewsReview gets the same treatment. We offer Initiative Q right of reply to our criticisms before we publish, and we get detailed responses direct from Mr Wilf.
The red flags
Initiative Q sounds too good to be true. That’s the heart of the reason why everyone is asking whether it’s a scam. The marketing tactics employed, the deliberate vagueness.
Journalists tend to be a cynical lot. The reason? We see the same scams, employing exactly the same psychological tactics, day in, day out. The fake scarcity, the hurried sign up, the ‘nothing ventured, nothing gained’ mentality.
Fear of missing out is a classic scam marketing tactic. If you missed out on Bitcoin seven years ago? Like 99.9% of people in the world?
Wilf’s entirely reasonable response is this: “Even from a cold business perspective, a database of merely names and emails may be worth a few tens of thousands of dollars at most. On the other hand, the fines and lawsuits we would incur will result in penalties hundreds of times bigger, and permanent damage to the team’s reputation. It makes no business sense to do so.”
The company has garnered a massive amount of free press from some of the world’s largest websites.
Digital Spy, Forbes, The Sun, The Financial Times’ Alphaville, all have published on Initiative Q. That’s what happens when something goes viral.
Wilf and I run through each one.
Digital Spy make a “get rich quick” claim but say nothing else negative, he counters. The Financial Times just repeat David Gerard’s claims. Forbes and Money Saving Expert are pretty positive, they say.
The one that gets under his skin is the oldest of the bunch, a Bitcoin Exchange Guide review from June 2018. It’s a “very superficial review”, says Wilf, “including making a false claim that Q is a cryptocurrency” which ends with a recommendation “not to invest in Initiative Q, as though this were an investment vehicle or something that required paying for”.
What does he say to the people who call Initiative Q a scam?
That’s certainly an unusual claim. If Q fails, your personal details won’t get leaked to the dark web for Troy Hunt to expose, because they’ll delete their entire database. What exactly would constitute a failure, and how long he would wait to make this decision, is not clear.
The payment system
There’s no whitepaper. There’s no upfront team of engineers as you might expect from a payment system that promises to change the world. There’s a sales pitch for a payment network, which describes the current problems with credit cards, and promises that Initiative Q is building something special, but there are no real details on how this might happen.
This strategy will be familiar to anyone who has looked at investing in an ICO. Is there really a product behind the fundraising?
What Initiative Q are doing is raising an audience before they have a product. As per their own response to our questions: “Attempts at creating a new popular payment method have not succeeded in the past because of the adoption barrier – regardless of how advanced a payment system’s technology may be, if it is not widely adopted by buyers and sellers it will only have limited success. We have decided to overcome this barrier before developing the system itself.”
Initiative Q are quite happy to reveal they don’t have a payment system yet. They want an audience first, and they are very up front about the fact that they don’t have anything else.
Can it really be a scam, if they are transparent about what they do and don’t have?
“The idea behind Initiative Q is to first create a critical mass of users, which can then be harnessed to create the world’s best payment network. Therefore, currently our primary focus is to get millions of Q members registered, after which we will recruit the world’s top professionals in the space.”
But at the same time, without a product, they are promising value. As per their website: “Q retail volume is thus projected at 5-20 trillion dollars, assuming successful worldwide adoption.” And the Facebook advert says there could be $130,000 in it for early adopters.
So, without a product, where is all this free money going to come from? Initiative Q say it’ll be years before the payment system makes a dime.
One of the people I respect the most on my Facebook friends list is my old college tutor Steve Rayner. He got his degree in physics from Oxford, and a PhD in Astronomy from Durham. He’s no fool.
As he posted: “Whilst I doubt this can be as good as it sounds, it also seems harmless since all you can give them is your email address and you can always invent one for the purpose if you wish. Of course, it may just be an experiment in network mapping.”
It all comes down to the same thing we would say for any other product. Do your own research, and most of all, only ever sign up at your own risk.