We are exited to discuss Initial Coin Offerings (ICOs) with the highly respected and very successful Jor Law. Jor is heavily involved with building out the ecosystem for digitizing and trading securities on the blockchain. He is a corporate, finance, and securities attorney most well-known for his expertise in alternative finance, including EB-5, venture capital, crowdfunding, and initial coin offerings (ICOs). He is a co-founder of VerifyInvestor.com, the dominant accredited investor verification service in the world. In addition, Jor practices corporate and securities transactional law in Los Angeles and is a founding shareholder of Homeier Law PC. He is an expert on attracting and verifying accredited investors.
We have watched Jor become one of the top securities expert in the country since meeting him in 2010. Jor is frequently sought out as a speaker internationally. The United States has been very active in leading the charge on responsible ICO enforcement. We are excited to interview Jor to learn about the latest news in Crypto.
Hi Jor. I would say one of the most frequently asked questions we get in the crypto community is how do we ensure we are SEC Compliant?
Jor: The best way is to retain a qualified securities attorney that is familiar with securities law, crowdfunding, decentralized ledger technologies, and ICOs.
Which US Securities exemptions are commonly used in ICO?
Jor: Rule 506(c) and Regulation S are most commonly used. Less commonly used are Rule 506(b), 4(a)(2), Regulation A, and Regulation Crowdfunding. This article describes common exemptions in more detail.
Do I have to issue out equity during my ICO?
Jor: No, it’s possible to issue out investment contracts in an ICO which just give a tokenholder certain rights. It’s also possible to just have a sale of utility tokens, despite the fact that the SEC has suggested that all ICOs are securities offerings.
How do we token? Can you explain the process as simply as possible?
Jor: This is honestly a better question for a technologist. A token is essentially a representation of something (rights, assets, utility function etc.) on the blockchain. To create the token, you really need a software developer that understands the blockchain and smart contracts. Two good resources to learn more about tokens can be found here and here.
When should I start to collaborate with my securities team? Before or after I have my white paper created?
Jor: In an ideal world, you’d start your collaboration with your securities team before you create your white paper as it could affect how you structure your token, your capital raise, and write the whitepaper. However, if you don’t mind preparing your whitepaper and possibly having to change it later, then collaborating with your securities team after you have created your white paper would give them a better perspective to provide legal advice.
How do we find investors once we have our white papers?
Jor: Crowdfunding combined with a strong marketing campaign is one method, but there are groups of private crypto investors (commonly referred to as “whales”). You can find them by networking.
Do we have to verify accredited investors? How would we be able to verify investors quickly?
Jor: First, you have to determine whether you even need to screen for accredited investors, and then, you have to determine what level of screening is required. In the case of Rule 506(c), all investors, regardless of whether they are domestic or foreign, need to be verified as accredited investors. There are a number of ways to do this, but most of the industry actually uses VerifyInvestor.com, a company that I founded.
What are the biggest concerns with a foreign corporation launching their own ICO, in particular, China?
Jor: The biggest concern is regulation, in particular securities regulation, though other regulations are also very important. In China, the regulatory environment is quite hostile against ICOs; it may take them some time before they understand how to properly regulate the space. The US is not quite so hostile, but it certainly is enforcing its own laws and taking some preliminary positions which might be a bit extreme. It’s crucial for ICOs to understand that proper compliance will likely require a multi-disciplinary analysis across the laws of multiple jurisdictions.
We know you have spoken all over about tokens, including recently in the Bahamas. Where are your next speaking engagements in the crypto community?
Jor: I have speaking invitations from all over the world, and have confirmed maybe half a dozen of them for the time being. I’ll try to get most of them posted on http://homeierlaw.com/news/ or https://blog.verifyinvestor.com/. Here are a few of the upcoming ones that I’ve confirmed:
We would love to thank Jor for his time to conduct this exceptional interview to teach us about the ICO process. Thank you so much for joining us Jor! You can reach out to Jor through email at firstname.lastname@example.org or email@example.com and follow him on twitter here: @jorllaw.