NEW BANK SECRECY ACT CRYPTO GUIDANCE FROM US REGULATORS

The Securities & Exchange Commission (SEC), Financial Crimes Enforcement Network (FinCEN) and Commodity Futures Trading Commission (CFTC) have issued a joint statement that reminds certain parties of their continuing obligations under the Bank Secrecy Act (BSA) with respect to crypto and digital currency related activities. The guidance applies to “financial institutions” such as futures commission merchants and introducing brokers obligated to register with the CFTC, money services businesses (MSBs) as defined by FinCEN, and broker-dealers and mutual funds obligated to register with the SEC. All crypto transactions should be dealt…

PROLIFERATION OF DISCOUNT LEGAL SERVICES AND THE PITFALLS INHERENT THEREIN

A disturbing and dangerous business model has become endemic which seeks to exploit unemployed and unemployable attorneys for whom there was never any room in the market place by paying them a highly undesirable salary by using them to provide basic legal services to people who presumably can’t or don’t want to pay for quality real legal assistance. Nowhere is it truer that with legal counsel you certainly get what you pay for. The reason some attorneys make $200-$500+ per hour is because they have built their clientele and experience…

PROPOSED UTILIZATION OF THE BLOCKCHAIN IN THE TRACKING AND REGISTRATION OF FIREARMS

Recent developments in firearms finding their way into the hands of criminals and mentally unstable individuals who have subsequently used such weapons during mass shooting sprees has raised many questions for which the solutions must weigh constitutionally enshrined and natural right of self-defense with the use of firearms vs. the rights of the population to remain safe and free from being randomly shot during their respective pursuit of life, liberty, and happiness.    The blockchain may hold a potential middle ground solution that will placate the calls for greater accountability…

REAL ESTATE ASSET PROTECTION GUIDE

Disclaimer: This guide provides educational and general principles and in no way represents a proposal, legal advice or specific recommendations as to any party which may obtain it. In this guide, the treatment of the law is non-specific and is not intended as a comprehensive discussion of all relevant issues that may be involved in your situation. You are strongly urged to seek the advice of experienced legal counsel to review your specific goals, financial situation, and circumstances. All warranties as to this guide are hereby expressly disclaimed, and absolutely…

5 TIPS WHEN NEGOTIATING A CONTRACT

Be certain the correct parties are named: if you want the other party to be personally bound then don’t let them execute the contract in the name of their company. If you don’t want to be personally bound, then use a legal entity to be bound and not yourself personally. Don’t agree to anything important verbally then not put it into the agreement. The contract will probably have a “merger clause” which states that there are no other agreements outside of what is in the contract and this provision makes…

WHEN IS IT TIME TO SETTLE?

In the present litigious climate full of starving shark attorneys, most business owners and other professionals have or will receive a certified letter threatening legal action if the demands contained in it are not met. Of course it’s always best to be prepared before one receives such a demand, because the real question is when not if. Such demands should not be taken lightly; however, it is necessary to understand their genesis and prognosis to properly deal with them. It goes without saying that the most prudent course of action…

ALTERNATIVE FRAMEWORK FOR ACCREDITED INVESTOR REQUIREMENT

Since 1982 the SEC has instituted a regulatory scheme wherein only persons with $1mn in assets and $200k in earnings for 3 years would be permitted to invest in unregistered securities offerings. At that time only about 2% of the population would have been able to comply with this requirement, effectively strangling the private offering space. Today, due to inflation adjustments around 10% of the population would be deemed accredited. This situation substantially increases the availability of capital to start-ups. Nonetheless, this arbitrary wealth requirement has restricted the ability of…

CONFIDENTIALITY, NON-CIRCUMVENTION, AND NON-DISCLOSURE AGREEEMENTS

Before a party enters into negotiations or preliminary discussions regarding any potential business transaction, idea or product care must be taken by both sides so that the communications are covered by a thorough agreement which will permit the full disclosure of potentially unique, profitable or secret information without fear of the other side appropriating and using it for its own benefit. If no such agreement exists the potential for litigation rises significantly if in the future one of the parties publicly reveals some product or idea which bears a resemblance…

WHY ICO’s HAVE INHERENT CONFLICTS OF INTEREST

When a new project development team issues what it deems to be a ‘utility’ or ‘non-security’ token, it means that that token is intended to have a use-case on the future platform to be developed and set into mostly autonomous operation by the developers. The ‘utility’ aspect is intended to mean that the new token will be used to ‘fuel’ the platform and therefore be consumed in the process. For example, a given token may be used to access the blockchain that contains automated tracking for goods, services, lists, preferences,…

THE NEED TO REGULATE CRYPTOCURRENCY EXCHANGES

The nascent cryptocurrency industry is awash in minuscule, unlicensed, unregulated, garage or basement based poorly secured exchanges that generally have little to no customer service. Such exchanges have poor security and regularly get hacked causing increased market volatility when the hackers dump their ill-gotten gains into the market at low prices, and retailers dump their holdings out of fear. This situation cannot continue if a public exchange traded fund is to ever happen. The point here is that the crypto-industry needs to begin to self-regulate or regulatory bodies will come…

CASE FOR A REVERSE ICO FOR THE UNITED STATES POST OFFICE

Initial Coin Offerings are well known by most to provide funding to a blockchain project before it is viable or at least before it is operational, while a reverse ICO is defined as the integration of a blockchain protocol into an already existing business operation, whether profitable or not.  Many potential reverse ICO scenarios are possible with an unending list of applications for all types of businesses from tech companies, to pharmaceutical manufacturing, to Uber and the like. Decentralized blockchain is set to change business operations forever. The first reverse…

REMAINING QUESTIONS REGARDING SEC TREATMENT OF INITIAL COIN OFFERINGS

The Howey test involves an analysis of a given token offering to assess whether or not it should be treated as a ‘security’ under US securities laws and sold only to a certain pool of high net worth investors, or whether it is a ‘utility’ token, which would not be a security and may be sold to any retail investor. Generally speaking utility tokens are digital assets that are used or consumed to obtain goods or services. Otherwise, utility tokens may also be tokens that act as securities but are…

TOKENIZING ASSETS ON THE BLOCKCHAIN

You will be hard pressed to find any expert or authority in the field who will not agree that blockchain technology holds heretofore untapped potential yet to be capitalized upon. The future appears bright for the distributed ledger. A strong use case for cryptographic tech is its use as a new kind of registration or ownership vehicle of security interests in an enterprise or a particular securable segment of an enterprise. This process involves the development of a blockchain protocol for the asset, and the distribution of security tokens to…

SEC ISSUES MAJOR NEW GUIDANCE ON CRYPTOCURRENCY

William Hinman head of the Division of Corporate Finance at the SEC has today announced that the SEC does not consider Bitcoin (BTC) or Ethereum (ETC) to be securities subject to US securities laws. The reasoning provided by the SEC was that whatever offering process may have occurred at the early stages of these tokens’ respective developments, both of these platforms are now sufficiently decentralized and automated so as to not require passive reliance on a manager or operator in order for each platform to function as intended and perhaps…

HOWEYCOINS.COM-SEC LAUNCHES FAKE CRYPTO OFFERING WEBSITE TO SCARE INVESTORS

The Securities and Exchange Commission has taken an unprecedented step in creating a fake website which purports to raise funds for a hypothetical Initial Coin Offering venture. Apparently, it is designed to educate the ignorant masses regarding ICO scams; however, the design is so absurdly lacking in factual content it would be difficult to conceive of a person gullible enough to invest in something so blatantly spurious. While it is true that some ICOs are indeed pure scams, the vast majority of these do have valid project plans and the…

AVOIDING INITIAL COIN OFFERING SCAMS AND FRAUD

The unfortunate reality is that the crypto space is inundated with shady people, hype, empty promises, and dishonest marketing. This Firm deals regularly with due diligence reviews of various coin offerings and drafting of opinions regarding crypto projects, to include their viability as an ongoing business concern as well as legal compliance. Most investors are simply not sophisticated enough to be able to fully review a given project and judge its merits without professional assistance. A bad decision with respect to an investment may cost far more than the professional…

UTILITY TOKEN VS SECURITY TOKEN

A great deal of confusion exists as to the gauntlet of US securities laws with respect to alt-coins  or crypto tokens issued through initial coin or token offerings. At its most basic a utility token may be described as a license, a ticket, or a franchise where the holder of the token has not purchased the token in order to obtain a profit in the form of capital gains or dividend-type passive payments but the token is intended to be used in commerce within a particular platform to obtain some…

CRYPTOCURRENCY ESTATE PLANNING

Due to its increased ability to store significant amounts of wealth, cryptocurrency storage and access is fast becoming a big topic in estate planning, but thankfully not an extremely complicated one. Cryptocurrency is generally controlled by a private key to a given wallet which permits access to any funds stored on that wallet. In addition, access to a wallet may be obtained through a 12-15 word seed phrase which can restore any lost or stolen wallet in most instances. This is in addition to any standard password used to access…

ICOs ARE NOW A HIGH RISK VENTURE

AriseBank’s $600 million ICO has been taken down by the SEC which has now formed an intra-agency unit devoted exclusively to researching and shutting down ICOs which violate US securities laws. Tether is a now a high risk token which may or may not be a fraud with open investigations. Its near-term destiny may have a very significant effect on the entire crypto market for a long time. If it turns out to be a massive fraud all cryptocurrencies will fall and regulators around the world are sure to crack…

TAX ACT KILLS “LIKE-KIND” 1031 EXCHANGE FOR CRYPTOCURRENCY

Cryptocurrency owners are generally obliged to pay taxes when they exchange it for dollars or physical goods, but the new rule now effectively means that all crypto-related transactions will be a taxable event. Sec. 13303 of the tax act amends IRC Section 1031 (a)(1) to replace “property” with “real property” barring all like-kind exchanges except those between real property owners. Amendments to lighten cryptocurrency reporting requirements were not included in the final bill. Because no crypto exchanges at this time provide a 1099 to customers, reporting requirements will be next…