Securities Token Exchanges Cranking Up in US: BOX +tZero

Lisa Fall, BOX Digital Exchange

Now that crypto cool kids are finally getting the memo: “These are Securities!” ,  the proposed first fully regulated Securities Token Exchange is coming to the US-via the Boston Options Exchange.

tZERO, the digital-themed broker-dealer created by Patrick Byrne and BOX Digital Markets LLC (BOX Digital)-a subsidiary of Boston Options Exchange, announced it has formed a joint venture to launch the industry’s first regulated security token exchange.

Lisa Fall, BOX Digital Exchange

Lisa Fall, Box Digital

On May 18, 2018, the two companies entered into a letter of intent to form an exchange to list and publicly trade security tokens for companies that issue, or convert existing stock to, security tokens. The proposed joint venture would be equally owned by tZERO and BOX Digital, with each having equal representation on the Board of Directors, together with one mutually agreed upon independent director. Lisa Fall, who currently serves as CEO of BOX Digital and as president of BOX Options Exchange LLC, would be the CEO of the joint venture.

“tZERO has proven to be a pioneer in the development and practical use of blockchain technologies for capital markets for a number of years,” said Ms. Fall. “tZERO’s track record and accomplishments in this innovative area, coupled with BOX’s expertise in operating a highly efficient and transparent equity options marketplace, made partnering together an easy decision and we look forward to building a world-class platform for listing and trading security tokens.”

tZERO plans to contribute cash and license tZERO’s blockchain technology for operation of the security token market. BOX Digital will contribute expertise and personnel toward obtaining regulatory approval and operation of the security token market. Approval of the U.S. Securities and Exchange Commission will be sought following execution of definitive documentation. Creation of the joint venture is subject to definitive documentation and customary conditions.

“Our partnership with BOX Digital Markets is a significant milestone that will create the first SEC-regulated exchange designed to efficiently trade crypto securities. Lisa Fall’s leadership, reputation and deep experience in the regulated securities exchange industry will be a major asset in achieving this objective,” said Saum Noursalehi, newly appointed CEO of tZERO. “Together, we will continue to work with the SEC as we develop a first-of-its-kind platform that will integrate blockchain capital markets into the current U.S. National Market System.”

According to electronic trading market veteran Jay Berkman, an Advisory Board member of fintech merchant bank SenaHill Partners and COO of investor documentation firm Prospectus.com LLC, “Now that pragmatic securities industry thought-leaders have figured out how to package crypto assets within the construct of a security so as to conform to the US regulatory regime, nobody can dispute the fact the genie is out of the bottle .  Added Berkman, “Securities Token Offerings (“STOs”) is a much more palatable approach, making way for a new mantra, “ICOs are dead, long live STOs”, until of course, another shoe drops.”

For the full story from Traders Magazine, click here

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Veteran-Owned Broker-Dealer’s Memorial Day Month Pledge

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Since its inception in 1995, boutique investment bank and institutional brokerage Mischler Financial Group (“MFG”) has been devoted to meeting the capital market needs of the nation’s leading corporations, municipal issuers and a broad spectrum of the industry’s most demanding investment managers and public plan sponsors. Positioned as a firm that ‘punches above its weight class in every metric’, Mischler is viewed by corporate treasurers and 6-pack banks as a ‘pure complement’ to the role played by lead underwriters. The firm’s highly-coveted middle-markets investor base, comprised of public plan sponsors and investment managers are notoriously ‘under-covered’ by the big Wall Street banks, and Mischler’s ability to bring these relationships to primary market offerings floated by Fortune corporations is a noticeable value add. The firm is also known for being the sell-side’s first and arguably, most foremost minority broker-dealer owned and operated by Service-Disabled Veterans.

Of equal importance, throughout its history, the firm has committed resources and year-round financial support to veteran-centric legislative initiatives, career building and mentoring veterans. This includes support of philanthropic programs focused on improving the quality of SDVs and their families’ lives as well as charitable programs that concentrate on supporting the families of military men and women who made the ultimate sacrifice in the course of serving our country.

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Mischler Financial Group CEO Dean Chamberlain

In connection with the firm’s year-round philanthropic mission, the months of May and November are specifically dedicated to honoring Memorial Day and Veterans Day. During these two months, Mischler contributes a percentage of the firm’s profit to select organizations that according to Chief Executive Officer Dean Chamberlain, a West Point grad and certified SDV,  “We deploy support to organizations that have a positive impact on the lives of vets, SDVs and Gold Star family members who simply do not have the depth of resources that so many of us take for granted.”

In honor of “Memorial Day Month 2018,” Mischler announced its annual pledge to the Semper Fi Fund, one of the country’s highest-rated charities. Formed in 2004, “SFF” is committed to providing immediate financial assistance, education scholarships, career transition programs and life-time support to post-9/11 combat wounded, critically ill and catastrophically injured members of all branches of the U.S. Armed Forces and their families.  Since its inception, Semper Fi Fund has distributed over $167 million to more than 20,000 service members and their families and MFG is therefore privileged to continue our support of SFF.

Stated Chamberlain, “On behalf of the entire Mischler Financial Group family, we are grateful and honored that clients of our firm will be supporting our Memorial Day Month 2018 pledge via our trading and capital markets desks and/or direct contribution to SFF.

 

FINRA Has a Facebook Data Breach Problem; Whistleblower

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FINRA, other regulators mishandled brokerage account data. Just like Facebook, Inc.!

If you’ve been on another planet during the past two weeks, Facebook Inc (NASDAQ:FB) reported that the company’s data network was hijacked by a “political intelligence” firm posing as an academic researcher and used captured data of 50 million Facebook users to launch a Trump-friendly advertising campaign in the weeks and days leading up to the 2016 Presidential election. We know how that worked out. Well, according to a whistleblower, it appears that US securities industry self regulator FINRA left its back door wide open too.

Per Bloomberg reporting, “..A whistleblower is accusing some key financial regulators of allowing sensitive broker information to become readily accessible, even as industry watchdogs emphasized the need for companies to protect client data.

According to a complaint lodged with the SEC, personal data such as brokerage account numbers provided to an industry-funded regulator have long been easily accessible online. Separately, Social Security numbers and other information meant to be kept private also was made publicly accessible by state regulators for years up until 2015, according to the complaint, which was reviewed by Bloomberg News.

At issue is material on brokers and their firms gathered by FINRA and other regulators to help clients keep tabs on the people handling their money. To spot potential red flags, the SEC encourages investors to search the data that’s housed in the sprawling Central Registration Depository of more than 3,700 broker-dealers and hundreds of thousands of people authorized to work in the securities industry.

Some of that information, which is used in FINRA’s BrokerCheck online portal and passed on to state authorities, has been mishandled, said the whistle-blower who asked not to be identified in discussing the allegations for fear of reprisals.

While both FINRA and the North American Securities Administrators Association acknowledged past problems in a response to questions from Bloomberg News, they dispute any contention that they’ve been negligent in efforts to clean-up the disclosures.

The issues shed light on the massive back-office systems maintained by regulators and the difficulty of keeping the sensitive information in them private. There is so much data that FINRA has a team of more than 30 people who review filings and runs hundreds of automated queries to look for information that shouldn’t be made public.

“They’re sitting on top of an even larger amount of private data than the firms they regulate,” said Donald Langevoort, a professor at Georgetown University Law Center in Washington. “There is an immense amount of cynicism about the ability of any institution public or private to do a good job at safeguarding privacy.”

Concern over financial regulators’ ability to safeguard data led to congressional hearings last year after the SEC revealed that hackers broke into its corporate filing system and accessed two people’s names, dates of birth and Social Security numbers. That disclosure followed a massive breach at Equifax that may have led to the theft of personal data on about 150 million Americans.

If you are advancing a private placement offering, please reach out to Prospectus.com LLC via this link

How Patrick Byrne Levered a SPAC to Create Cryptocurrency Kingdom

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(Republished with permission from Prospectus LLC) -Patrick Byrne has often been dismissed by contemporaries for being brash, confrontational and someone who just likes to create chaos. Courtesy of a $1million stake in Kennedy Cabot Acquisition Holdings, a Special Purpose Acquisition Company aka SPAC, Byrne is further along on a journey to secure the title of being the cheapest online discount broker and also, the crown to the cryptocurrency kingdom .

Overstock.com, the on-line retailer led by multi-industry disruptor Patrick Byrne has seen its share price surge nearly 100% in the past four weeks, and not because of online shopping spikes during this holiday season. And not because it was the first retailer to accept bitcoins back in the day when no other retailer even understood the concept of distributed ledger and blockchain, the elements that power bitcoin, the ubiquitous cryptocurrency whose price has gone from $500 to over $20,000 in less time than it takes most companies to float an initial public offering.

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Patrick Byrne

Along the way, we can guess that the former online discount retailer of stuff has watched his net worth increase by at least several hundred million dollars, as the shares of all of his various holdings have increased multi-fold. Its because Patrick Byrne has been hard at work during the past number of months executing a stealth strategy by leveraging his purchase of a SPAC (special purpose acquisition company) that has made Overstock a virtual holding company whose portfolio of companies now includes (i) Medicia Ventures, a cross between a PE and VC platform that is focused on cryptocurrency enterprises (ii) an on-line brokerage that was formerly a woman-owned broker-dealer known as Muriel Siebert & Co and renamed “tZero” that will enable day traders to make $2.99 stock trades and pay in cryptocurrency, (ii) a stake in Delaware Board of Trade, an electronic exchange run by the former head honcho at the Philadelphia Stock Exchange former vice-Chairman of NASDAQ OMX and positioned as the first and only blockchain based Alternative Trading System fully licensed by the SEC, which will float Initial Coin Offerings (ICOs)  and enable investors to buy and sell bitcoin based bond funds that are packaged in similar fashion to exchange-traded funds aka ETFs.

Having a successful ICO is usually easier and costs less than an IPO, the penalties for fraud remain the same. Make sure you document everything and have an experienced partner in your corner to ensure you are meeting obligations to both investors and, eventually, regulators.

But every road has its bumps. A planned initial coin offering (ICO) for Overstock blockchain subsidiary tZERO, scheduled to go live at midnight Monday, has yet to launch as originally anticipated. While little is known about the now nearly day-long delay, a countdown clock on SAFTLaunch.com, the issuance portal for tZERO’s token, has expired without any update to the company’s website or social media accounts. Indeed, CoinDesk’s calls to key Overstock executives, including CEO Patrick Byrne, went unreturned or unanswered today.

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SEC Cyber Unit Brings First ICO Fraud Charge

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ICO Fraud Charge is the First, Certainly Not Last as Initial Coin Offerings No Longer Under Regulators’ Radar

(Courtesy of RTTNews) – The Securities and Exchange Commission said Monday that its new cyber unit has obtained an emergency asset freeze to halt an Initial Coin Offering or ICO fraud.

The SEC noted that the ICO fraud, advanced by “PlexCorps” owned by a mysterious shell company known as DL Innov Inc., which is operated by Canadian resident Dominic Lacroix and Sabrinia Paradis-Royer raised up to $15 million from thousands of investors since August by falsely promising a 13-fold profit in less than a month.

These charges are the first to be filed by SEC’s cyber unit, which was created in September 2017.

The SEC’s complaint was filed in federal court in Brooklyn, New York. The complaint alleges that Lacroix and PlexCorps marketed and sold securities called PlexCoin on the Internet to investors in the U.S. and elsewhere by claiming that investments in PlexCoin would yield a 1,354 percent profit in less than 29 days.

Based on its filing, the SEC obtained an emergency court order to freeze the assets of PlexCorps, Lacroix, and Paradis-Royer. These charges are the first to be filed by SEC’s cyber unit.

The complaint seeks permanent injunctions, disgorgement plus interest and penalties. In addition, the SEC is seeking an officer-and-director bar for Lacroix, and a bar from offering digital securities against Lacroix as well as Paradis-Royer.

Issuers of Initial Coin Offerings: Don’t Get Caught Short By Failing to Follow the Spirit of Securities Regulations. Industry experts at Prospectus.com can provide sage guidance for staying inside the regulatory goal posts and prepare investor offering documents that conform with the spirit of the regulatory regimes governing ICO initiatives.

The SEC’s cyber unit was created in September to focus on misconduct involving distributed ledger technology and initial coin offerings, the spread of false information through electronic and social media, and hacking as well as threats to trading platforms.

“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing. We acted quickly to protect retail investors from this initial coin offering’s false promises,” said Robert Cohen, Chief of the Cyber Unit.

In August, the SEC’s Office of Investor Education and Advocacy issued an Investor Alert warning investors about scams of companies claiming to be engaging in initial coin offerings.

BrokerDealer.com expresses thanks to RTT News for the coverage content. For the full article from RTTNews.com, please click here

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