Ethical and Legal Issues in Bounty Programs: A Case Study of Power Ledger

This paper analyzes the ethical and legal issues involved in the bounty programs which are increasingly becoming popular in ICO and crypto currency businesses. It examines the decision making process which are often employed by the marketers of such programs while launching such progress. The paper also highlights the need for transparency in the social media marketing as a part of corporate responsibility towards its stakeholders.

Cryptocurrencies have always been under scrutiny from financial institutions and governments
across the globe for their regulatory and security issues. Recently, an Australian crypto-currency
startup Power ledger was in news for alleged payment to spruikers for promotion of its business.
The issue which was highlighted in the Australian Financial review last month has criticized the
Australian company for misleading consumers and using unethical promotional tactics. The
article has put question mark on the credibility of the success of business as well as highlights
the ethical concerns relating to the efforts put in by businesses for promotion of their products
and services (Patrick 2018).
The present paper tries to understand the issue in the light of various ethical arguments and
theories as well as the possible legal issues involved. The paper also analyses the response of the
business on the issue and tries to examine the same in the light of ethical expectations from the
business. The present paper analyses the ethical and legal issues involved in the bounty programs
which are increasingly becoming popular in ICO and crypto currency businesses and examine
the decision making process which are often employed by the marketers of such programs while
launching such progress. The paper also highlights the need for transparency in the social media
marketing as a part of corporate responsibility towards its stakeholders.
Power Ledger is an electricity trading platform which allows the users to make a choice of their
source of electricity among various renewable sources (Powerledger 2019). The company also
provides a cypto-currency trading platform and both the businesses are based on the
revolutionary technology of blockchain. The recent scandal revolves around a community
advocate program wherein the company has a system of selecting its advocates from amongst the
community to popularize its products. Some of these advocates went on to make misleading
remarks about the success of the company’s crypto-currency which is not only illegal but also
unethical according to many scholars. The term which is often used for such promotion is
spruiking, which is regulated by the ASIC (Putney 2019). The regulation prohibits the businesses
engaged in business of crypto-currencies to encourage any misleading promotions of their
products. Although the company has denied the allegation, the issue has raised serious questions
of the ethics of modern businesses in the sense that how far they can go to promote their
offerings.

Bounty program is a common practice in digital startups, especially in those dealing with ICO or
cryptocurrencies, wherein companies pay the participants to perform a series of tasks which
result in building of social media community of the brand in question (katalyse.io 2018). These
tasks may relate to bug finding, ethical hacking, promotion of products, social media marketing
etc. In the case of Power Ledger, the company launched a bounty program to encourage users to
promote its official social media posts in return of series of rewards on completion of the tasks
assigned. The company has denied the allegations saying that the said bounty program does not
exist anymore and the current community advocate program is run by the company just to stop
the false information being spread in the community by rewarding these community advocates
(Micky.com 2019). The company has also claimed to conduct the audit of the earlier bounty
program to ensure that proper legal and ethical standards were followed.
The company in question, Power Ledger has denied all the allegations of unethical conduct.
However, the issue itself raises a lot of questions on the ethical implications of social media
marketing in general and bounty programs in particular.
Bounty programs are often considered unethical as businesses often use these to manipulate the
customers and increase their market share. It is also ethically wrong to give financial incentives
or benefits to the bounty hunters to promote the products as it puts a question mark on the
authenticity of the claim made by the company even if it is true.
As per deontological school of thought of ethics, ends cannot justify the wrong actions done to
achieve them. For example, if the reward is given to achieve an end result, which is not morally
justified, the practice of reward itself cannot be justified (Jones & Hall 2006). Also extrinsic
rewards which are often associated with bounty programs might bring some change in consumer
behavior in the initial stages, but it will not result in long term consumer loyalty or sustainable
consumer base as the act is motivated by the reward or the promotion associated with it as
against the genuine appreciation of the product itself.
Even the principles of ethical justice are applicable in this case as it was the responsibility of the
spruikers to disclose that they were receiving monetary incentives from the Power Ledger. Not
doing so means that consumer actions were not based on the fair judgment based upon the true
and right information.

Another issue relating to digital and social media marketing highlighted by the case is the need
for increasing the social responsibility of the marketers to maintain the trust of the consumers.
With the increasing use of social media and other digital marketing techniques, the element of
trust has become more important in marketing. The consumer is already vulnerable to a lot of
security and privacy issues while using such media. As a result, it is all the more important for
the marketers to make all the efforts to retain the trust of the consumers. Anonymity provided by
the social networks makes it easier for the users to pass on false information (Lipschultz 2014) and
rumors about any business to the consumers and it is the social responsibility of the company to
keep a check on such practices (Sharma & Baoku 2012). In current case, the response of Power
Ledger that it was beyond its scope to keep a check on these false rumors being spread about the
company does not indicate a responsible attitude on the part of the management.
Bounty programs have been in trouble for their ethical concerns in the past as well. Recently
Uber was put in question for unethical cover up of the data breach of the details of thousands of
driver licenses of its users being compromised in a bug bounty program. The company instead of
alerting the authorities resorted to paying the hacker and did not even inform the affected
customers of the breach (Ellis 2018). Such incidents highlight the unethical behavior associated
with the bounty programs which was originally designed to increase the safety of digital
businesses. ASIC has also regulated bounty hunting or Spruiking in order to keep the customers
safe as these spruikers were causing the false increase in the country’s real estate prices thereby
leading to the losses of genuine consumers.
In a recent case of spruiking, Australian court fined a real estate company, We Buy Houses for
$18 million on the allegations of false claims. The company was allegedly claiming that
customers could buy houses for as low as $1 and thereby misleading them (Propertyupdate.com
2018).
It is very important for the social media promotion campaigns to be transparent as it is very
difficult for the consumers to make out authentic from fake promotions. Majority of the
advertising codes insist upon the marketers to clearly indicate that the promotions are paid to
help the consumers (Teffer 2013).

The case of Power Ledger also highlights the issues in the corporate leadership and governance
in case of ethical dilemmas. When businesses are faced with ethical dilemmas, it falls upon the
leadership of the organization to take and ethical decision. An ethical decision is not just taken
by considering the applicable law of land, but it is also a moral decision which results in the
greater good of the organization at large (Selart & Johansen 2011). In such cases, it is the
responsibility of the organizational leader to consider the magnitude of the ethical harm involved
and take the decision best suited in the interest of all the stakeholders.
As far as corporate governance is concerned, there is no clear demarcation of its efficiency in the
given case. The company followed the law while launching a bounty programs and it conducted
an audit on its completion to check whether the program followed all the required legal and
ethical guidelines or not. However, while launching the community advocate program, the
company did not keep a close watch on the information being shared within the community and
did not take any actions on the false rumors of Tesla being interested in the company products.
This is in consistence with the teleological ethical school which believes that it is ethical to
achieve the desired end result (Svensson & Wood 2011). This news resulted in the increase in the
sales of the company which was its ultimate objective. However, while doing so, company ended
up in ethical and legal trouble as it did not exercise control over the actions taken by the
participants of the program.
The company broke the most important code of advertising ethics which prohibits marketers
from making false claims (Munjal 2016). The company chose and egoist decision making process;
wherein it took decision which suited its interests and not that those of consumers and other ICO
businesses. Company had set aside millions of dollars worth of tokens for the bounty hunters and
community advocates and ii is still engaged in the practice of awarding such tokens. This means
that the company has not realized the consequences of its earlier faulty practice and does not
consider anything wrong with the same.
Startups like power ledger have the capacity to add sustainability to the environment with their
revolutionary business ideas like blockchain. However, the same businesses push the interests of
the stakeholders, especially consumers out of the window while using unethical practices like
bounty hunter programs. These programs take advantage of lack of transparency in existing

social media marketing landscape in order to serve the interests of the consumers to give them
more consumers for the bounty received from the companies behind them.
Such bounty programs and spruiking activities raise serious ethical questions on the marketers
and their intentions and as such are regulated by majority of the countries. It is important that the
businesses should pay attention towards the legal and ethical compliance while launching the
marketing programs and make all the efforts to restore the trust of the customers in place.
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