Kodak delays launch of cryptocurrency after questions arise over vetting process

Kodak has delayed the initial offering for its new cryptocurrency.

The KodakCoin venture was announced three weeks ago, with the company saying investors could start buying in on January 31.

A statement posted at the KodakCoin website said more than 40,000 investors had signed up to participate in the initial coin offering, which was expected to raise as much as $20 million.

"Given the large interest in the KODAKCoin ICO and the steps we need to take to verify the 'accredited investor' status of each interested investor, we expect this process to take several weeks," the statement said.

The announcement comes a day after a New York Times report raised questions about how closely Kodak vetted its cryptocurrency partners. It described Kodak's partners in the venture as "a paparazzi photo agency, a penny-stock promoter and a company offering what has been called a 'magic money making machine.'"

The report raised questions about the background of Cameron Chell, a lead consultant to the KodakCoin project. According to the Times, he agreed to a five-year ban from the Alberta Stock Exchange in Canada in 1998 and paid a $25,000 fine after rules violations. A company that bore Chell's name "ended in ignominy" after its chairman was charged with fraud.

Times technology columnist Kevin Roose also described a technical document explaining how Kodak's cryptocurrency would work as "a 40-page mishmash of marketing buzzwords and vague diagrams."

Prices for shares of Kodak stock soared when Kodak announced this bold new venture, rising from $3.10 the morning before the announcement to a high of 13.28 the next day in heavy trading.  When the market closed Tuesday afternoon, shares were trading at $9.15.

But skeptics seem to outnumber enthusiasts. According to Bloomberg News, about one-third of Kodak’s shares are traded as short positions, investors who are betting the stock price is going to fall.

In an initial announcement, the company said the KODAKOne platform will be an encrypted, digital ledger of rights ownership for photographers to register both new and archival work that they can then license for use.

The company described KODAKCoin as "a new economy for photography," which will allow photographers to receive payment for licensing their work immediately upon sale, sell their work confidently on a secure blockchain platform. 

The system will be open to both professional and amateur photographers.

More:Investors are bullish on Kodak's cryptocurrency venture

More:Andreatta: How long can this Kodak moment last for company after cryptocurrency hype?

More:Kodak shares soar on news of cryptocurrency venture

"Engaging with a new platform, it is critical photographers know their work and their income is handled securely and with trust, which is exactly what we did with KODAKCoin," said CEO Jeff Clarke.

The 130-year old company emerged from bankruptcy in 2013 with a new focus on digital printing and consumer packaging. But revenues have fallen each year, from $2.4 billion in 2013 to $1.5 billion in 2016. Quarterly reports for 2017 continued to show year-over-year declines.

Tech investors have been driving up stock prices for companies involved with digital currency or blockchain technology, even in cases where the link is tenuous.

Recently, Long Island Iced Tea Corp. said it plans to change its name to Long Blockchain Corp., as it wants to focus more on blockchain technology, while continuing to make beverages.  

Chanticleer Holdings, which operates restaurant chains like Hooters and American Burger Co.announced last week it would use cryptocurrency for its customer loyalty programs.

Both companies saw share prices rise dramatically as a result. 

Clarke acknowledged the buzz around these technologies but dismissed skeptics who said the KODAKOne announcement was a ploy aimed at giving the stock a short-term boost. Rather, he explained, it was the next step in what has always been part of the company's key mission: empowering photographers.

"For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem," Clarke said. 

SLAHMAN@Gannett.com