#Trading Blackout for relevant Council & Team Members

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frank void
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@void kindle brought up an idea about imposing a trading blackout to council members and team members days leading up to an event or announcement that may affect the token or NFT price of Illuvium. This stemmed from a discussion between Blickter & @desert bison from last epoch. This draft was made with inputs from Blickter.

Summary
Public scrutiny plays a crucial role in ensuring the credibility and legitimacy of decentralized autonomous organizations (DAO). Any perceived unfair advantage or conflicts of interest can significantly undermine public trust, potentially leading to negative consequences for the DAO and its community.

In order to uphold transparency, fairness, and mitigate potential conflicts of interest, it is essential to establish a trading blackout period for our DAO council members and Illuvium Labs (Labs) team members in anticipation of major events, announcements, launches, or any other activities that may significantly impact token and NFT prices. This proposal aims to outline the framework of a trading blackout period to maintain the integrity of our DAO, promote trust among community members, and to avoid any public or regulatory scrutiny.

Objective:
The primary objective of this proposal is to implement a trading blackout period for a duration of three days prior to major events, announcements, launches, or any other activities that may have a substantial impact on token and NFT prices. During this period, any person or group from the DAO council members and Labs team members who may have access to information not available to the public will be prohibited from engaging in any trading activities related to the DAO's assets which includes, but not limited to, $ILV token or any Illuvium NFTs such as Illuvials, Land, Illuvitars, etc.

Framework:

*Definition of Events: *A broad but clear and comprehensive definition of major events, announcements, launches, and other significant activities that may influence token and NFT prices will be established. This will ensure a common understanding of the events covered by the trading blackout.

Communication and Notification: An internal discord channel will be established to notify DAO council members and Labs team members about upcoming events that trigger the trading blackout. The timing of the blackout should not be shared to the public to prevent front-running and protect confidential information. Communication of the blackout notification is covered by a NDA.

Duration of the Blackout: The trading blackout period will be set at three (3) calendar days preceding the identified events. This duration allows sufficient time for information dissemination and prevents the potential misuse of insider knowledge. A shorter or longer duration may be applied depending on the circumstances surrounding the confidential information and its possible effect on the DAO’s assets as may be deemed by the Illuvium Main Council.

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Rationale:

Enhanced Transparency: Implementing a trading blackout period demonstrates the DAO's commitment to transparency and equal access to information. It promotes trust among community members by ensuring that trading decisions are not influenced by insider knowledge or unfair advantages.

Prevention of Market Manipulation: The trading blackout mitigates the risk of market manipulation by preventing council members and team members from capitalizing on confidential information that could impact token and NFT prices. This protects the integrity of the market and fosters a level playing field for all participants.

Compliance with Current or Future Regulatory Requirements: By implementing a trading blackout, the DAO aligns with existing regulatory frameworks and insider trading regulations, reducing the risk of legal consequences. This adherence to regulatory requirements enhances the DAO's reputation and minimizes reputational and financial risks.

Conclusion:

In light of public scrutiny and regulatory requirements, implementing a trading blackout for DAO council members and Labs team members in Web 3.0 is a crucial step to safeguard transparency, integrity, and investor trust. By doing so, the DAO can demonstrate its commitment to fair practices, regulatory compliance, and the long-term sustainability of its operations. By proactively preventing potential conflicts of interest and market manipulation, we can foster a stronger and more sustainable ecosystem for our community.

Test Cases:

Web 2.0 Publicly Listed Corporations. Ex-OpenSea manager convicted in NFT insider trading. Former Coinbase Insider Sentenced In First Ever Cryptocurrency Insider Trading Case.

Link to full text of proposal: https://docs.google.com/document/d/10SkIGAVa86hM2_Dt7zxz7SbsgNk9b8VeJ7u8nZ7RnJQ/edit?usp=sharing

Google Docs
[Public] Trading Blackout IIP

Summary Public scrutiny plays a crucial role in ensuring the credibility and legitimacy of decentralized autonomous organizations (DAO). Any perceived unfair advantage or conflicts of interest can significantly undermine public trust, potentially leading to negative consequences for the DAO and ...

snow terrace
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I like the rule, but I am generally opposed to implementing rules that isn’t easily upheld. I think this falls in that category

void kindle
# snow terrace I like the rule, but I am generally opposed to implementing rules that isn’t eas...

It's truly challenging to robustly enforce any kinds of rules like this in Web3, but I do still think having a policy in place is preferable to not addressing the risk.

One of the main talking points in articles around the OpenSea case in media was the fact that OpenSea didn't even have a policy in place to say that people weren't allowed to engage in insider trading. I think this is more about clearly indicating that such behavior won't be tolerated, and is grounds for action if caught, and less about doing something that guarantees it can never happen.

In web2 or traditional business, insider trading does sometimes happen, but it's clear that it's not allowed, and people are punished if caught. That's kind of how I view this proposal. It's more about policy than it is about implementing something that guarantees it cannot happen.

desert bison
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Agreed. As council members (and particularly those on the gaming sub-council), it would be helpful to clarify what we do and do not consider appropriate activities as well. If I sell a single Atlas that I had listed for 3 months that happens to get bought 2 days before a balance announcement is that insider trading? What if I go on Dyve and short-sell 100 Rhamphyres 24 hours before we announce it’s going to get nerfed and make $2M? Both of those are intentionally extreme examples that I think most folks would agree are 1) Perfectly fine and 2) Not ok at all. Guidelines promote good behavior.

quasi nexus
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I 100 percent agree with this.
A in the know member from another community encouraged me to sell before an announcement and the price pumped after. I'd been a member for a long time and it left a bitter taste in my mouth. I was only selling due to financial reasons.
They brought and were able to make profit.
While I take responsibility for my decisions. I was personally in contact with the person and they did not divulge the knowledge they had.

quasi nexus
frank void
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The idea proposes a framework. As mentioned by Blickter, it's to establish a policy first. We're entering a different space. In publicly listed corporations it can be clear cut. Prior to release of financial reports or declaration of dividends. Woth our ecosystem it's harder to define and a one size fits all will be too restrictive.

There has to be a natural evolution of applicable guidelines per category. And I'm confident that we will be able to identify, tackle, and build the guidelines as we go. This will need a collaborative effort from all facets of our protocol. The council, community, and from the team. I expect several ICCPs (if this idea gets passed) to build on thr framework inching closer to a more robust guideline.

marble maple
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I like it. Establishing guidelines is often the first step in prevention.

One thing that came to mind was that there could easily be team or council members that regularly and frequently engage in trading, especially of game assets. While a policy that only applied to changes in trading habits might maintain the status quo, it would be drastically more difficult to monitor.

vague crypt
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This is a good practice.
Hard to enforce/detect, but it's a good precedence.
The practice of insider trading in ILV and sILV2 is so obvious to me.
One thing to add, can we announce the black out period so the community can be on the look out?

dry basin
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We'd need some smart people to layout the terms/parameters fairly and clearly but I'm 100% in favour. I kind of assumed we already had something like this tbh

frank void
vague crypt
frank void
# vague crypt Having a blackout imposed to the team/council means giving them a head start too...

Why would it give them a headstart? Its only applied to people who actually have the privilege information so they know already and were stopping them from trading. Ex. IMC knows about an event that can potentially affect ILV price. So Admin and IMC would have a blackout and maybe anyone else in the team who may know. The rest of the subcouncils wont know about the blackout cause they dont have any info as well.

And another layer would be that those who might know or figure out that theres a blackout wouldnt know if its token related or NFT related and which one specifically. Information wont be shared.

devout pumice
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3 day it's not enough ,maybe half of month

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they should focus on the development of project in long period but not short time trading and some special events

void kindle
# devout pumice 3 day it's not enough ,maybe half of month

The last line of the proposal should cover this, if your main concern is that 3 days might not cover every scenario.

"A shorter or longer duration may be applied depending on the circumstances surrounding the confidential information and its possible effect on the DAO’s assets as may be deemed by the Illuvium Main Council."

lean nimbus
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This is an interesting idea. It's intention is positive and could offer helpful guidance as to what is and isn't appropriate trading behaviour for team/councillors.

Enforcement is an obvious concern. Who would have the authority to be judge, jury and executioner in an investigation of a team/council member potentially falling foul of this policy?

void kindle
# lean nimbus This is an interesting idea. It's intention is positive and could offer helpful ...

For the council, anyone has the authority to start a Vote of No Confidence based on presented evidence (can be initiated by the IMC or by a community member), and the decision to remove a council member lies with token holders (through a Snapshot vote, as defined in Gov V2).

The team is free to determine their own policy and repercussions, but dismissal for egregious offences is an obvious option.

vague crypt
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anyone frontrun the raise? aggressivelaugh

frank void
marble maple
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Jaganite has claimed to not bother with looking at actual blockchain transactions