Analysis of MGC Token
You might have noticed lately that the Ethereum network has been experiencing a bit of intermittent congestion. We noticed it too. So we did a little digging.
Referred to as MGC Token, More Gold Coin, or MGCCoin, this particular smart contract caught our eye over here at ETH Gas Station with its levels of gas consumption. In fact, it’s even topped ETH Gas Station’s new ETH25 Leaderboard for top gas spent for most of the past few months. Since the end of Q1 2019, the More Gold Coin contract has so far spent a total of more than $1.4M in gas and transacted over 9 million times.
Information about MGC Token can be hard to come by, but from what we gathered, it isn’t exactly clear how MGC Token works. On what seems to be the project’s primary website – mgctoken.io – MGC Token’s product is described as a multi-currency smart wallet featuring “ATS High Frequency Quantitative Trading.” Supposedly, the ATS system utilizes “ATS intelligent brick moving” and “quantitative trading.” And there’s a claim that “the maximum daily arbitrage gain of more than 10% can be obtained.”
The system described in the whitepaper seems complex and rather confusing. But the general idea seems to be that users deposit other cryptocurrencies (such as BTC, ETH, EOS, etc) and can lock them into MGC Token to earn “steady profits.”
We’re not in a position to go so far as to declare MGC Token to be a scam (for one, we haven’t invested in the project and have no intention of ever doing so). However, in our opinion, MGC Token does seem to exhibit some of the warning signs listed in the SEC’s common characteristics found in Ponzi schemes.
High investment returns with little or no risk
MCG Token’s concept page claims that the income generated by its arbitrage system is “stable, safe, and reliable.” And further down, it even states that “[t]he digital assets we entrusted are completely immune to price fluctuations and solve various drawbacks and risks of manual arbitrage.”
As their whitepaper puts it:
“Storing digital assets in MGC Token’s smart wallet and launching ATS smart financing function is equivalent to buying a money-making machine for free. Smart trading robot will track and capture large data and efficient market analysis of major trading platforms in real time, carry out smart arbitrage transactions in real time, and participate in dividend distribution by the whole people.”
MCG Token whitepaper, p. 18.
More apparent promises are found in two recent announcements (1 and 2) on the project’s website that detail an update to MGC Token named M Tokens. This update generates 300 million Aone Gold Coin tokens (AGC), to be released in the new system. MGC Token users’ positions would be released, and in this new system, their “Release credit is calculated as 5 times as positions value.” It sounds like this could cause MGC Token holders to believe that their money quintupled overnight.
Overly consistent returns
As previously stated, MGC Token seems to suggest that 10% daily returns can be expected on its ATS arbitrage system, and there’s an implication that users can count on these returns (“MGC Token . . . opens up smart profit income at zero risk, bringing steady profits for millions of coins.” Whitepaper, p. 16.)
There’s also the claim that, with the new M Tokens system, depositing ETH, BTC, LTC, DOGE, and BCH (min. $100) entitles users to five times their initial value in release credit. Users can use this release credit to redeem revenue from the ATS system. However, users can only redeem a limited portion of their release credit daily. And that limit is dependent on the user’s VIP status, achieved by referring new users.
Unregistered investments
We’ve seen no indication that MCG Token has registered with the SEC. Of course, US securities laws might not apply, especially if the project excludes US investors. But if that’s the project’s intent, nothing we’ve seen makes that intent clear. The whitepaper does assert that MGC Token is not a security (whitepaper, p. 75), but we’re guessing that that assertion wouldn’t necessarily end the analysis if a regulator were to look into the issue.
Unlicensed sellers
We were unable to find any licenses or registrations for the sale of securities for the company behind MGC Token BG-MF INVESTMENTS GP LIMITED, its owner Moorfield Group Limited, or any of the involved individuals in either the SEC or Financial Conduct Authority (FCA) in the UK where the companies are based. Of course, it’s not for us to determine whether such licenses or registrations would be required here.
Secretive and/or complex strategies
MGC Token strikes us as a highly complex arbitrage system. Despite this complexity, the press releases, interviews, and product descriptions we found were generally vague and lacking in substantive explanations of technical details. While MGC Token touts its innovations, nowhere were we able to find a clear description of how or where the arbitrage takes place. Take for example this interview with MGC Token developer Faye Smith, where MGC Token’s innovation is highlighted but its technical details aren’t explained.
And then there’s the office tour and interview found under the MGC Token site’s content section, which, if it’s an effort to increase transparency around the project, seems to us to have the opposite effect. In their words: “in the face of market rumors the MGC TOKEN AONE technical team invited the media to have interview.” That webpage includes many photos with the team, but there are few captions, and the descriptions provided seem to be lacking in detail. Not to mention, the reporter’s name or affiliation is never revealed; he (or she) is simply labelled “Reporter,” and states, “I have been a reporter in the UK for many years.”
As you’ve likely gathered from the descriptions so far, it isn’t easy to understand the full scope of MGC Token’s functions. One of the few aspects of MGC Token’s strategy that we left feeling somewhat certain about is that the benefits received by investors depend on things like VIP status levels earned through referrals and further investment in MGC Token.
Issues with paperwork and difficulty receiving payments
We cannot speak to this point, as we have not invested – and will not invest – in MGC Token. However, the project’s website’s content section includes an entry from May 2019 that may indicate that investors have been experiencing such problems:
“Since the 23rd of this month, there have been a small number of users with ATS revenue and hierarchical incentives failing to arrive in time and so on. Please don’t worry, the MGC Token AONE team is stepping up its improvement, and we apologize for the inconvenience.”
Additionally, it’s worth noting the inclusion of daily limits for AGC token “release credit” in the new M Token system. As stated in the M Tokens Systems announcement:
“If a user takes a position of 10 ETH, he or she will get positions value amounting to US$2,000, based on current price of US$200/ ETH.
Given quintupled positions value, user’s available credit will reach US$10,000(US$2,000X5), equivalent to user’s release credit.
The credit is decreased by release.
Daily release rate of available credit is US$33(current credit plus 0.33%).”
If we’re understanding the system correctly, deposited credit (of cryptocurrency) translates to 5 times its value in release credit, but investors can only withdraw a small portion of their deposit daily. If that’s the case, the investor might see what looks on paper like a significant return in release credit, but in reality, the bulk of that return couldn’t be immediately realized, and full access to even the investor’s initial investment would be limited.
Conclusion
To us, it looks like MGC Token (or More Gold Coin) is making promises that bring to mind popular scams of the past, and, from our perspective, the project raises a number of red flags. We encourage you to do your own research and reach your own conclusions, but, as we said above, we have no intention of ever investing in this project.
