Blockchain STO Seminar

BlockchainBlockchain STOSTOBlockchainBlockchain STOSTO
July 11, 2019July 11, 2019
Al G L ( l l @t hi )Al G L ( l l @t hi )Alex G. Lee (alexglee@techipm.com)Alex G. Lee (alexglee@techipm.com)
©2019 TechIPm, LLC All Rights Reserved www.techipm.com

Speaker: Alex G. Lee
-Tech & IP commercialization & monetization expert with over 25 years of
experiences.
-Has experties in integrated business, technology, law strategy
development and execution
-CEO of TechIPm, which is a professional consulting firm for high tech and
IP investment & monetization based in Boston
-Managing Partner of Xanadu Big Data, Elamachain USA, Zeus, HashBlock
USA
N Y k St t Att P t t Att C tifi d Li i P f i l-New York State Attorney, Patent Attorney, Certified Licensing Professional
-earned Ph.D. in physics from the Johns Hopkins University & attended
MIT Sloan School of Management Executive Program for strategy and
©2019 TechIPm, LLC All Rights Reserved
MIT Sloan School of Management Executive Program for strategy and
innovation certificate

Contents
-SEC ICO Regulation Status-SEC ICO Regulation Status
-How to Avoid or Comply SEC ICO Regulation
-Each State Regulation
-STO (Security Token Offering) IntroductionSTO (Security Token Offering) Introduction
-STO Use Cases
-STO Use Cases Directory
-SEC STO Fund Raising Complianceg p
-Launching A STO
-TechIPm STO Projects
-STO Infrastructure/Services
-STO Services Directory
-STO Technical Solutions I
-STO Technical Solutions II

Part I. Business & Legal Aspects
-SEC ICO Regulation Status-SEC ICO Regulation Status
-How to Avoid or Comply SEC ICO Regulation
-Each State Regulation
-US Regulator’s View on ICO & ExchangeUS Regulator s View on ICO & Exchange
-STO (Security Token Offering) Introduction
-STO Use Cases
-STO Use Cases Directoryy
-SEC STO Fund Raising Compliance
-Launching A STO
-TechIPm STO Projects

SEC ICO Regulation Status
A it i i t t t t i hi hA security is an investment contract in which a person:
1) invests their money
2) in a common enterprise
3) with an expectation of profits3) with an expectation of profits
4) based on the efforts of the promoter or a third party.
All four elements are necessary to be considered a security: Howey Test
Blockchain tokens are securities except tokens that are “sufficiently
decentralized “ (e.g. Ether and Bitcoin): Token is not reasonably expected to
increase in value due to the issuer’s efforts (business development, marketing( p g
and maintenance). Thus, almost all utility tokens can be securities.
Non-compliance can result in:
shut down of offering and return
of fund raised
fines and other sanctions
fines and other sanctions
fraud lawsuit from investors

How to Avoid or Comply SEC ICO Regulation
ICO IPO f ti ’ t kICO as IPO of a corporation’s stock
…. costly, complicated, time consuming
Exclude US investors (US citizen & permanent resident ) from token offeringExclude US investors (US citizen & permanent resident ) from token offering
Structure the ICO as a donation initiative to a not-for-profit organization
Exploit the lighter-weight regulations such as Regulations D, S, A+, or
Crowdfunding.

Each State Regulation
Source: Interactive Womble Bond Dickinson 50 State Blockchain and Virtual
Currency Law Map. (https://stateblockchainlaw.com/)

STO (Security Token Offering) Introduction
A t t k i ti i t t th l l i ht t t ith iAsset tokenization is to convert the legal rights to assets with economic
value into a digital token. Asset tokenization (security token) represent
shares of ownership in asset.
Potential Benefits
For InvestorsFor Investors
Fractioned ownership and divisibility
Programmable tokens
24/7 tradingg
Improved settlement times
For Issuers
New sources of financing without loosing governance on equity
Making illiquid markets liquid (secondary markets)
Lower costs in transaction and operations

STO Use Cases
R l E t t Fl idit (htt // fl idit i /)Real Estate: Fluidity (https://www.fluidity.io/)
Tokenization on Ethereum of $30 million worth of luxury real estate on
Manhattan (luxury condo development features 12, 1700-square-foot units).
Film: MovieCoin Smart Fund (MSF) (https://movie.io/en/)
Tokenization on Ethereum of $250 million worth of movie making business.
Fine Art: 14 Small Electric Chairs painting of Andy Warhol
Tokenized and sold to 100 accredited investors ($1.7 million for 31.5 per cent
of the artwork at a valuation of $5.6 million).)

STO Use Cases Directory
STO i (htt // t i / t /)STOwise (https://stowise.com/sto/)

SEC STO Fund Raising Compliance
Regulation Amount Investor Requirement/Manner of Time Cost Transferg q
Offering Limitation
Reg D
506c
unlimited unlimited US
accredited
Form D/no general
solicitation(*)
~ 100
days
$50,000 -
150,000(**)
1 year
investors/up to 35
non-accredited
investors
Reg S unlimited non accredited no required SEC $20 000 1 year forReg S unlimited non-accredited
Offshore Investors
subject to local law
(e.g., restrict
investor in China )
no required SEC
registration/Private
Placement
Memorandum (PPM)
and Subscription
$20,000 -
$50,000
depending
on
complexity
1 year for
resales into
the US/local
law holding
periodinvestor in China ) and Subscription
Agreement
complexity period
•Issuers can advertise their offerings But they do have to verify that anyone who actually invests is an accredited•Issuers can advertise their offerings. But, they do have to verify that anyone who actually invests is an accredited
investor, and investors must prove they are accredited to participate in the offering.
** This includes: (a) preparing all offering documents (b) preparing the purchase agreement for the sale of the
tokens (c) addressing state blue sky laws (d) addressing federal FinCEN money transmission issues (e)
addressing state money transmission issues (each of the 50 states has their own money transmission laws and
some, like New York, have specific laws that apply to virtual currency businesses (f) white paper review (if any).
For (d) and (e), the above estimate does not include any filing and bonding fees.

Launching A STO
Explore asset to be tokenized: real estate, business, technology/intellectual
property
Strategic planning the STO: valuation of asset, amount of capital to raise &
ff i ti f d i i STO tit t t t f lioffering time frame, designing STO entity structure, type of compliance
Legal compliance
Whitelisting of investors who can be approved to invest (KYC/AML)
Targeted marketing to the right potential investors (experienced broker dealerTargeted marketing to the right potential investors (experienced broker dealer
for specific asset to be tokenized
Handling the financial reward (dividend payments/tax reporting)g ( p y p g)
Handling lost private keys (canceling/issuing of tokens & transfer to the new
account)
Implementing data privacy compliance

TechIPm STO Projects
SNK Motors is a global leader economic electric vehicle and has a product
line-up of 6 types of small cars.
Tu Meng Bi is a real estate development project in Palawan, which is an
archipelagic province of the Philippines.

Part II. Technical Aspects
-STO Infrastructure/ServicesSTO Infrastructure/Services
-STO Services Directory
-STO Technical Solutions I
-STO Technical Solutions II

STO Infrastructure/Services
Source: The Block Genesis (https://www.theblockcrypto.com/2018/11/15/mapping-
out-the-security-token-ecosystem/)

STO Services Directory
STO i (htt // t i / /)STOwise (https://stowise.com/company/)

STO Technical Solutions I
Securrency STO platform supports the secure, compliant, and convenientSecu e cy S O p at o suppo ts t e secu e, co p a t, a d co e e t
issuance and trading of security tokens.
Source: Securrency (https://stoscope.com/platform/securrency)

STO Technical Solutions II
Jacqueline Kwok Live Demo

TechIPm STO Consulting Services
STO d t d j t tSTO end-to-end project management
STO Strategic Planning: target asset evaluation & valuation, required
resources & cost estimation fundraising options & strategy SPC formationresources & cost estimation, fundraising options & strategy, SPC formation
STO Legal Compliance: token & legal structuring, coordinate legal council for
proper complianceproper compliance
STO Technical Solution Development: selection of the best STO solution &
customized solution development according to the specific STPp g p
STO life cycle management: project management from token issuance,
investor relationship, marketing, sales, trading, re-sales, any post-STO
management

Thank you!Thank you!

Blockchain STO Seminar

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