Topic: Offshore facilitator company to let Americans invest into ICOs- possible? (Read 191 times)

True. To be fair, all crypto-entrepreneurship and projects are in the grey area, for the sole fact that there is no legislation and regulatory frame for it. The best consult and auditory companies seem to be currently some of the Swiss banks, out of which projects like OmiseGo have launched their ICO.

I think if an entity was created for the sole purpose of evading U.S. securities law that they would absolutely be out to get you.

So the question can better be framed as, how do you not violate U.S. securities law but create a structure that U.S. persons or businesses could participate in?

Most of the securities laws are designed to protect investors from fraudulent investments, not the other way around.

As a U.S. person, I can buy shares of a foreign corporation, for example.  Provided I do not evade taxes, and I make an FBAR filing to FinCEN and the form 8938 to IRS, this is perfectly legal (except with respect to entities that are subject to U.S. economic sanctions, of course).

This is a tricky legal area and you should really seek expert advice of competent legal counsel before attempting something that could expose people to civil and potentially even criminal liability.

Best regards,
Ben

Wouldn't the SEC still come after the institution that was created for such a purpose?

I strongly disagree with my government acting this way.  They abuse their position of dominance and this is one of the things that attracts me to cryptoassets, overcoming these financial gatekeepers.  It's not immediate, and in the end I believe that the governments will see some advantage in doing the same, but only after they've tried everything else first.

This quote comes to mind:


Best regards,
Ben

That was very detailed. A lot to read. I guess the one thing that I got out of it is how long reaching the US government can be even if they're out of their jurisdiction, by doing thing indirectly.

From what I understand, and I am not an expert so this is really just what I've picked up, there is no specific law that prohibits U.S. citizens/entities from participating in what are foreign investments (at the time I write this post, if you're reading this 2 years from now I expect things have changed).  I believe many ICO projects are precluding participation by U.S. citizens out of an abundance of caution because they could be "subject to the Securities Act" if they accept funds from U.S. persons and the SEC determines that their ICO was a security.  Of course, that assumes that SEC has some sort of legal jurisdiction over the entity, which to me is questionable.  But in my experience, U.S. based regulators will attempt to assert their authority very widely, often beyond their legal limits, hoping that is not tested or challenged in a court.

One caveat I should make clear about the above paragraph in reference to no specific law precluding U.S. participation is economic sanctions and countering the funding of terrorism laws.  U.S. persons and entities are prohibited by law from certain financial transactions with entities that have been named subject to sanctions pursuant to numerous different economic sanctions laws and executive orders.  Typically, these are specific parties (but in some cases these are widely defined by country) that you are precluded from transacting with, and here's the page where you can see the exclusions: https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx

Considering that the SEC has opined on ICOs that have gone badly for the most part, the fact that a given team chooses to preclude U.S. participants could be looked as their pre-emptive attempt to keep the SEC away, should they fail as a business or otherwise defraud investors.  On the other hand, if I was a non-U.S. based project I might also exclude U.S. participants just out of caution, as the hand of the U.S. government can be very long and effective.  They can and do, for example, shut parties and even whole countries out of the SWIFT interbank payments system.  I personally consider this wrong in all but the very gravest of circumstances, but it does occur.

For my organization, which is a non-profit (no shareholders, no equity, etc.) so it's a bit different, I was advised by counsel to not accept funds from any sanctioned party, to return any funds that are contributed by a sanctioned party, and to include terms and conditions that BTRIC reserves the right to reject and/or return any funds from anyone.  (Also advised to let them know if we do receive funds from any of these so they can tell us what to do, lol.)  We also include language that we reserve the right to refuse funds from any group that is a "hate-group" or that is contributed for purposes that are "encumbered" or earmarked by the contributor for something that is counter to our purpose.  This language is required by GuideStar, which is a voluntary standard that we opt-in to regarding financial transparency.  So that part is not legally required, but we have it in our terms.  If you want to take a look at them, they're in our white paper and also on our website I believe.

Two other things come to mind.  If the SEC discovers that a systemic loophole is being exploited, I expect that they'd take steps to close that loophole.  The other thing, if an ICO terms/conditions says that they do not allow U.S. investors and/or you agree to terms that say "You are not a U.S. investor", and then the ICO finds out that you are, a scumbag ICO could say, "well you lied to us, so no coins for you".

I do hope that clarity is brought to the regulatory atmosphere because there are some great projects that deserve to be funded, mixed in with all the "trash".  Even among some of those projects that just aren't mature enough for an ICO, there are many that have potential which are the type of projects my organization wants to work with.  They will come out of our incubator as a world-class, investment-ready business.  But often these projects are missing some components for success, and just throwing money at them doesn't always fix the problem without the type of strategic and business planning that is really needed to make a great business.

Anyway, good luck wherever and however you invest.  I hope you make great picks!

Best regards,
Ben

[not legal advice. not tax advise. not investment advise. not advise of any kind, etc.]

They will try whatever it took to prevent such a thing from happening.

Then again aren't these just precautions set by the particular ICO? If so the only people getting fulled would be the ICOs, and I'm sure they wouldn't care too much since they will be getting more investors.

There are certainly ways to accomplish this by using non-U.S. entities if the entity itself could be considered accredited pursuant to the Investment Company Act but yet within one of the exemptions.  Would the SEC be triggered?  If it was clear that the purpose of this was to circumvent U.S. law, probably eventually they'd not take a favorable view of that.

However, there are also ways to accomplish this without foreign entities.  Take a look at the extensive exceptions granted to 501(c)(3) organizations pursuant to the Philanthropy Protection Act of 1995.  This is the law, and therefore is NOT circumventing the law.

My organization is structured as a 501(c)(3) because we are focused on incubation/startup accelerator for projects in their early phases, making them good quality ICO/ITO and/or other types of investment offerings when they are divested from BTRIC as separate businesses.  Donors are rewarded for their support of projects, but that reward will vary based on the legal jurisdiction that the project launches as a separate business in.  None of this is an investment.  When the business launches as a for-profit, it will then have investors, but while it's being incubated, instead it has donors.  It's been difficult to communicate the message that, yes, a non-profit economic development business can indeed launch businesses that are separate entities, and at that time they can take on investors as well as (within the legal bounds of the jurisdiction the business is formed in) reward donors.  But I'm working on spreading that message to build support for what we're going to be doing.

Many people aren't aware that non-profit organizations can launch and even be the sole shareholder of for-profits, but it's an excellent hybrid structure to take in certain cases.  For example, the Red Cross is a charity, but the part of their organization that actually sells the blood products that it makes is a separate for-profit business, wholly owned, with all profits going back to the charity as a contribution.

My organization is going to do other things that benefit the whole ecosystem.  One of those things is to produce model structural documents that allow businesses to create the best structure that is most favorable for investment.  Those documents will be public, open source, and able to be used by anyone.

Best regards,
Ben

(disclaimer: none of this is legal/investment/tax/etc advice, it's just my contribution to this discussion.  get your own lawyer/accountant/etc for professional guidance.) I should put that in my signature.

I thought about the same idea, do you know how trusts are held in microkingdoms like Lichtenstein? Families in Lichtenstein are actual signers and nominal holders of the trusts while real investors are kept in secret and these families are giving the nominal services for years and centuries, from generation to generation. So actually making an offshore trust for the US investors is a great idea, but who knows how soon it will be shut and robbed by the US authorities who are the only real evil in the world today.

What about if the non US based company offers participation in the ICO as a Productised Service. or think of lootboxes in the video games.
so
1. there is an ICO Americans are missing out on. Lets call it ThisPopularICO.
2.the non-US company offers a product, a lootbox, a whatever (piece of stone) called "ThisPopularICO".
3. US citizen send crypto (ether) to non-US company to buy the product called "ThisPopularICO".
4. the non-US company invests ether into the ICO.
5. US citizen receive their lootbox eletronically (or a piece of stone from those nice offshore beaches by airmail if need be)
5. US citizen sell the product back to non-US company in exchange of crypto (not ICO tokens but the initially sent ether)

This way the American investors do not get the ICO tokens but their multiplied ether back when they think fit. It is as close as investing and getting tokens as possible.

the American investors do not invest into ICO, they buy the product, the lootbox. The STONE. They do not get tokens, they get their crypto (ether)back. No investment, no anhthing, we sell/buy lootboxes here

What do you think?

This new company now becomes the one that is required to collect accredited investor status.

Legal question.
1. Create non-US, based company. Acting as a trusted third party offshore facilitator for US non professional crypto investors
2. Advertise to US citizens "Missing out on ICO? We can help out"
3. US citizens send crypto to the non-US based company.
4. The non-US based company invests into ICOs.
5. The non-US based company returns ICO tokens to US citizens.

Would the SEC get triggered? -something tells me that they would.
What scheme would it take to leave SEC out of the equation? What that company should be  in registration capacity, fund etc?