Cryptocurrency Securities and Initial Coin Offerings (ICO’s)

Guest Post by Laura Anthony, Esq., Founding Partner, Legal & Compliance, LLC

The Financial Action Task Force defines a “virtual currency” as:

a digital representation of value that can be digitally traded and functions as: (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction. It is not issued or guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the virtual currency. Virtual currency is distinguished from fiat currency (a.k.a. “real currency,” “real money,” or “national currency”), which is the coin and paper money of a country that is designated as its legal tender; circulates; and is customarily used and accepted as a medium of exchange in the issuing country. It is distinct from e-money, which is a digital representation of fiat currency used to electronically transfer value denominated in fiat currency.

All offers and sales of securities must either be registered with the SEC or there must be an available exemption from such registration. This statement applies to cryptocurrency securities in the same manner it applies to all other securities. In addition, participants in ICO’s are subject to federal securities laws to the same extent they are in other securities offerings, including broker-dealer registration requirements. Securities exchanges providing for trading must register unless an exemption applies.

What is a blockchain?

blockchain is an electronic distributed ledger or list of entries – much like a stock ledger – that is maintained by various participants in a network of computers. Blockchains use cryptography to process and verify transactions on the ledger, providing comfort to users and potential users of the blockchain that entries are secure. Some examples of blockchain are the Bitcoin and Ethereum blockchains, which are used to create and track transactions in Bitcoin and Ether, respectively.

What is a virtual currency or virtual token or coin?

virtual currency is a digital representation of value that can be digitally traded and functions as a medium of exchange, unit of account, or store of value.  Virtual tokens or coins may represent other rights, as well. Accordingly, in certain cases, the tokens or coins will be securities and may not be lawfully sold without registration with the SEC or pursuant to an exemption from registration.

What is a virtual currency exchange?

A virtual currency exchange is a person or entity that exchanges virtual currency for fiat currency, funds, or other forms of virtual currency. Virtual currency exchanges typically charge fees for these services. Secondary market trading of virtual tokens or coins may also occur on an exchange. These exchanges may not be registered securities exchanges or alternative trading systems regulated under the federal securities laws. Accordingly, in purchasing and selling virtual coins and tokens, you may not have the same protections that would apply in the case of stocks listed on an exchange.

Who issues virtual tokens or coins?

Virtual tokens or coins may be issued by a virtual organization or other capital-raising entity. A virtual organization is an organization embodied in computer code and executed on a distributed ledger or blockchain. The code, often called a “smart contract,” serves to automate certain functions of the organization, which may include the issuance of certain virtual coins or tokens. The DAO, which was a decentralized autonomous organization, is an example of a virtual organization.


Laura Anthony, Esq.,Founding Partner
Legal & Compliance LLC. 

LAnthony @ LegalAndCompliance.com

Blockchain Law: ICO Regulation and Other Legal Considerations in the Blockchain Ecosystem

Guest post by Dror Futter, Rimon PC

During 2017, blockchain and its progeny Bitcoin and initial coin offerings (ICOs) became “big news.” By the end of the year, news of new record highs for Bitcoin and eight- and nine-figure ICOs became almost daily events. As block-chain has entered the mainstream and the dollars at stake have exploded, it has become clear that this exciting technology has raised and will continue to raise issues across a broad range of legal disciplines.

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Prime Unicorn Index: Q2 Trend Report

Original Post By: Prime Unicorn Index

The Q2 2018 Prime Unicorn Index Trend Report is an analysis of 100 components that comprised the Index in the second quarter of 2018. The Index includes both unicorns and “approaching unicorns,” which are private companies with a valuation of at least $500 million. Valuations for individual components are determined by an analysis of various documents, such as: Certificates of Incorporation, Employee-Plan Exemption Notices, Limited-Offering Exemption Notices, Annual Report filings, Form Ds, bankruptcy filings, and many more sources. Utilizing all sources, we can extract key Deal Terms, such as: Round of Financing, Round Direction, Liquidation Preference, Liquidation Multiple and Dividend Rate. The report analyzes the different trending deal terms for a more granular picture of the capitalization structures surrounding the Q2 2018 Index components.

Q2 Trend Report 2018

Prime Unicorn Index: 9 New Components Added, Returns Skyrocket

Original post by: Prime Unicorn Index

The Prime Unicorn Index added nine constituents and dropped seven in its quarterly reconstitution, for a total of 102 index components as of Q3 2018.For 2018 (Q1& Q2) the return has increased 18.38%. Currently, we are tracking 102 U.S.-based private companies in the Index, with a median market cap of $991 million. The Index’s total market value has increased to $270 billion. Key upside drivers affecting Index performance include successful IPOs (Dropbox, Pivotal Software, Avalara, Docusign, Zuora, and Carbon Black) and primary funding rounds (including Bird Rides, Automation Anywhere, ezCater, Lyft, JUUL, and more).
Q3 Reconstitution Report 2018

As more high-performing companies defer or eliminate plans to go public, the demand for information and investment exposure to this growing portion of the American economy has soared. The Q3 Prime Unicorn Reconstitution Report provides more information on the new nine constituents and how they compare against the Index.

LimeBike Authorizes $300M at $1B Valuation

Original Post by Prime Unicorn Index

LimeBike filed an Amended and Restated Certificate of Incorporation on July 3, 2018 authorizing the sale of up to $300M shares of Series C Preferred Stock. If all shares are sold the company will have a post-money valuation north of $1B, making it the newest Unicorn.

Here’s a look at the Price Per Share increase from March of 2017 through July 3, 2018:

 

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Update: Bird Rides Files For Another $150M, 2 Weeks After Authorizing $200M

Original Post By: Prime Unicorn Index

Bird Rides, an electric scooter sharing service, filed another Amended and Restated Certificate of Incorporation on 6/15/2018 authorizing $150M of Series C-1 Preferred Stock. If all of the authorized shares are issued then the Post-Money Valuation would be north of $2B.

Funding began only a year ago for the scooter company with a Seed round investment of $4M, followed by Series A and B at $14.48M and $94.75M respectively. On June 1 Bird Rides Authorized $200M of Series C Preferred Stock, 2 weeks later they authorized $150M of Series C-1. Below is the share price analysis for the Preferred Stock.

 

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