12/12/20

Rule Crowdfunding Changes

The United States Securities and Exchange Commission recently announced some substantial changes to “harmonize and improve” what they called a “patchwork” of rules pertaining to how companies can raise funding from the public — both accredited and un-accredited investors.

This action did not get much play in the press, but I spotted it and read it carefully. There is a lot of good news, but for the entrepreneur set there is a real gem.

Here is a link to their press release (an extremely  difficult document to read and understand):

SEC Harmonizes and Improves

The bottom line is this: a company can now raise up to $5,000,000 (versus the prior $1,070,000) via a web based fundraising campaign with a registered firm without having to file the usual substantial SEC required registration filings. [You have to make prudent disclosures as you would in any offering, but this is a simpler, easier, bigger deal.]

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10/13/20

Kik Gets Poured Out v SEC

Two weeks ago, Judge Alvin Hellerstein, Federal District Judge of the Southern District of New York, ruled that Kik’s $100,000,000 token distribution event was an illegal issuance of a security — an unregistered securities offering — based upon his analysis of the Howey Test.

It is important to note that Judge Hellerstein’s ruling was on the SEC’s Motion for Summary Judgment, a preliminary action prior to the case being heard. A Motion for Summary Judgment requires there to be little or no disagreement on the facts and thus becomes a matter of the application of only the law.

It would be fair to say that the Judge saw the facts as being agreed by the warring parties and thus was able to opine solely on the law. This rarely happens as there is usually some fact that is in dispute.

This case was a much-watched case and was touted as an important bellwether crypto case.

It is, in reality, a disappointment in its lack of fanfare and grandeur, a yawningly predictable Howey Test case as many — myself included — said from the beginning. Yawn. Sorry.

The United States Securities and Exchange Commission made the noted charge whilst Kik denied that their issuance of “Kin” was an unregistered securities offering.

The parties now have until 20 October 2020 to thrash out some form of an agreement. Stay tuned, amigos.

Understandably, the SEC has the upper hand in this matter whilst Kik is in the unenviable position of negotiating whilst at a huge disadvantage.

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10/17/19

The US Securities and Exchange Commission Never Sleeps — Crypto

The crypto industry had called for clarity from the US Securities and Exchange Commission for years.

Let’s be clear. What the crypto industry wants is for the US SEC to roll over and play dead and stop with its pesky rules, interpretations, and “hopelessly outdated Howey Test” nonsense.

It is reported that the men in Hell asked for ice water this morning. The Devil is considering it, but initial reactions are not encouraging.

What has happened is that the US SEC has begun to take firm stands and firm stands mean enforcement actions.

Two that come to mind are the Kik/Kin issue that has blown through its MUI (matter under investigation) notification, a notice of a formal investigation(an important first step because it authorizes the use of subpoenas), a Wells Notice, a Wells submission (formal reply by the company), and a formal complaint — an enforcement action.

Kik subsequently put itself to death and is solely focused on Kin intending to fight it out to the death.

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06/5/19

United States Securities and Exchange Commission v Kik (Kin)

Yesterday, the United States Securities and Exchange Commission sued Kik Interactive Inc, a Canadian company, for “…conducting an illegal $100 million securities offering of digital tokens.”

Here is the SEC Press Release.

The issuance of “tokens” has been a supercharged issue in the cryptocurrency world for some time as the issuers contend these tokens are not securities — therefore not subject to the requirements to issue a US SEC Form S-1, Registration and to provide quarterly, annual reports as well as reports of material events — while the SEC says maybe they are.

In any event, the issue has been out there for some time.

Many crypto advocates have suggested it will take a legal confrontation, like this one, for the issue to be resolved. Well, fellas, you got your wish.

The SEC is focused on the implications of what happens or doesn’t happen when a “security” is registered and issued.

Specifically, they contend, “By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions.”

Keep that “information” nugget in the front of your brain as you read deeper into this post.

The SEC’s view is that it is the securities issuing regulations and compliance therewith that provides the appropriate protections for investors. The requirements as noted above are:

¬†1. The issuance of a US SEC Form S-1, Registration Statement — filed with the SEC for comment and revision prior to issuance and thereby providing a platform upon which to make disclosures about the financial health of the issuer, discuss risks and other information a buyer would find of vital interest.

¬†2. The filing of quarterly reports, annual reports, and reports of “material” events and actions.

This would, in essence, create a public security. It is not end of the world. You cannot even see it from there.

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10/5/18

Elon Musk and the US SEC – Shortsellers Enrichment Commission

Big Red Car here, following the unending saga of Elon Musk of Tesla fame and his continuing dialog with the United States Securities and Exchange Commission.

“Just want to [say] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!” Tweeted by Elon Musk.

Is this the smart play?

Image result for images elon musk smoking weed

Elon Musk taking a toke to release his inhibitions?

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