Blockchain STO

BlockchainBlockchain STOSTOBlockchainBlockchain STOSTO
May 3, 2019May 3, 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
-Managing Partner of Xanadu Big Data, Elamachain USA, Zeus, Liquidax
Capital
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
-ICO (Initial Coin Offering) Fundraising StatusICO (Initial Coin Offering) Fundraising Status
-SEC ICO Regulation Status
-How to Avoid or Comply SEC ICO Regulation
-Each State Regulationg
-US Regulator’s View on ICO & Exchange
-STO (Security Token Offering) Introduction
-STO Use Cases
-STO Use Cases Directory
-SEC STO Fund Raising Compliance
-STO Fund Raising Compliance in Korea
L hi A STO-Launching A STO
-How Korean Company can do STO in the US?
-STO Infrastructure/Services
STO Services Directory-STO Services Directory
-STO Technical Solutions I
-STO Technical Solutions II
-STO Technical Solutions III
STO Technical Solutions III
-STO Technical Solutions IV
-STO Technical Solutions V/VI

Part I. Business & Legal Aspects
-ICO (Initial Coin Offering) Fundraising StatusICO (Initial Coin Offering) Fundraising Status
-SEC ICO Regulation Status
-How to Avoid or Comply SEC ICO Regulation
-Each State Regulationg
-US Regulator’s View on ICO & Exchange
-STO (Security Token Offering) Introduction
-STO Use Cases
-STO Use Cases Directory
-SEC STO Fund Raising Compliance
-STO Fund Raising Compliance in Korea
L hi A STO-Launching A STO
-How Korean Company can do STO in the US?

ICO (Initial Coin Offering) Fundraising Status
Funds raised in 2014
F d i d i Q1 2019Total raised: $16 M
Number of ICOS: 2
Funds raised in Q1 2019
Total raised: $902 M
Number of ICOS: 328Funds raised in 2015
Total raised: $6 M
Number of ICOS: 3
Number of ICOS: 328
Cf.
Total raised: $90 M
Number of ICOS: 29
C
Q4 2018 $1.4 B, 585
Q1 2018 $6.5 B, 581
Total raised: $613 M
Number of ICOS: 873
Source:
https://icobench.com/reports/ICO_Market_Quarterly_Analys
Total raised: $7.5 B
Number of ICOS: 1247
is_Q1_2019.pdf
Number of ICOS: 1247
Source: ICODATA (https://www.icodata.io/)

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/)

US Regulator’s View on ICO & Exchange
T lk@2019 MIT Bit i EXPO b G G l (S i L t MIT Sl &Talk@2019 MIT Bitcoin EXPO by Gary Gensler (Senior Lecturer, MIT Sloan &
Former Chairman, CFTC) & Hester Peirce (Commissioner, SEC)
Video Link: https://www.youtube.com/watch?v=-x9_puukAwU&t=228s

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.

STO Fund Raising Compliance in Korea
H b l STO G id li 1 02 b D KHanbyol STO Guideline v.1.02 by Dan Kwon
Link: http://hanbl-sto.com/wp-
content/uploads/kingkongboard/2019/01/12116/12232/attached/kkb-
201901070552369077 pdf201901070552369077.pdf

Launching A STO
E l t t b t k i d id i th t f it l t i &Explore asset to be tokenized considering the amount of capital to raise &
offering time frame (type of asset/token)
Whitelisting of investors who can be approved to invest (KYC/AML)Whitelisting of investors who can be approved to invest (KYC/AML)
Targeted marketing to the right potential investors
Handling the financial reward (dividend payments/tax reporting)
Handling lost private keys (canceling/issuing of tokens & transfer to the newg p y ( g g
account)
Implementing data privacy compliance

How Korean Company can do STO in the US?
Rod Turner Live Explanation

Part II. Technical Aspects
-STO Infrastructure/ServicesSTO Infrastructure/Services
-STO Services Directory
-STO Technical Solutions I
-STO Technical Solutions II
-STO Technical Solutions III
-STO Technical Solutions IV
-STO Technical Solutions V
-STO Technical Solutions VI

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
O J f J Li DOscar Jofre Jr. Live Demo

STO Technical Solutions II
Jacqueline Kwok Live Demo

Solution for Fraction0xSo ut o o act o 0
(https://www.fraction0x.com/) real estate STO
projects in India
● STO Dashboard for Users and Admin
● Wallet For Users and Admin
● Smart contracts for Crowdsale
● Smart contract For Dividend Sharing
● Eth /St ll S it T k C ti● Ethereum/Stellar Security Token Creation
● Token issuance / Dividend Issuance
● Token Security Audit● Token Security Audit
● Know Your Customer (KYC)
● Accredited Investors verification
● Accredited Investors verification
● Secondary Market Dashboard (Token Buy/Sell for Investors)

Tokenic Video DemoTokenic Video Demo

STO Technical Solutions IV
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 V
Polymath STO Marketplace Platform Explanationo y at S O a etp ace at o p a at o
Source: BlockWolf (https://www.youtube.com/watch?v=Tz-iz63-hLc&t=695s)

STO Technical Solutions VI
Swarm Fund & STO Platform ExplanationS a u d & S O at o p a at o
Source: BlockWolf (https://www.youtube.com/watch?v=AkVJwr0htng)

TechIPm STO Consulting Services
STO d t d tSTO end-to-end 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

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