SEC Targeting Bitcoin: Crypto Lawyer Explains



there are existing laws and we have to fit these crypto projects into the existing framework I'm hearing a different thing coming out of the SEC every other week well Cody do we have if any about web blockchain related companies stand in America the SEC is exerting jurisdiction in Austria they just shut down one broker so if you're selling to an American the SEC has jurisdiction over that you have to block Americans from your project if you're gonna block the SEC I'm here in Mexico on the contra cruise with Sasha Hodor who is an expert in crypto law works as a crypto lawyer thank you so much for chatting with me Oh Naomi thank you I've been a fan for a long time and it turns out so we actually met for the first time at coins in the kingdom 2014 which was an awesome Bitcoin conference then and we only just realized this when we met again on this trip so pretty awesome yeah yeah following your quiz show and it's great maybe you'll come on and you'll be able to answer all the law questions I have a lot of little questions for you today so first of all like what kind of clients do you represent well it's a pretty broad spectrum but they all have one thing in common they're doing a cryptocurrency related project so some are doing initial coin offerings and some are working on the money transmission side but usually and some don't have a token but they're writing software and selling that to other companies that need their their software so what are the biggest issues people have when they come to you is it that they don't understand the regulatory framework yeah the regulatory framework is not an easy thing to understand and a lot of them think that crypto has no regulation and it's this kind of Wild West environment and that's really not the case there are existing laws and we have to fit these crypto projects into the existing framework and that's where I guess you know legal side comes into place so if it's if it's a company doing an i co i there are attorneys out there that still believe you can do a utility token in America but I'm not one of them and I think I've probably given up a lot of opportunity to work with companies because of that stance but I've written I've responded to the SEC subpoenas for a few clients and they're not playing around so I only will do an IC o—- for someone if we do it as a Regulation D or regulation crowdfunding or Regulation S and those fall within your your completely legal doing it because you're selling them as securities but the challenge is there's not really a great secondary market after the one year holding period is up for for these tokens but I think those are being built right now in classes Regulation D CF s they have a very so that means that they're only available to accredited investors in America no there's there's actually quite a bit of opportunity for non-accredited investors to come in through regulation crowdfunding which is something that was put forth through the Obama administration in the JOBS Act where non-accredited investors can participate in these offerings but they can only invest up to two thousand five hundred dollars if their income is less than a hundred grand and they can put up to five hundred thousand if their income is up to is in the hundred to two hundred thousand range so it and the company can only raise 1 million seventy thousand dollars and it has to be done through a regulated crowdfunding portal it's regulated by FINRA I actually opened one of these portals it was one of 13 to go the FINRA license so there were only 13 that exists and they the the regular ones you hear of the kickstarter indiegogo and you have one of those well not any well mobo back up I helped start it but I dropped out of it and my two business partners continued to run it and a few months ago but it let me know the rules pretty closely of what's involved to become one of these regulated portals and start engine is kind of the only one that's working in the crypto space in America it seems that the regulatory framework is really complicated I'm hearing a different thing coming out of the SEC every other week the SEC chairman are all kind of fighting amongst themselves about this so like what clarity do we have if any about where blockchain related companies stand in America well after the June 14th director Hinman speech about B theorem being sufficiently decentralized to no longer be a security I think that kind of put a lot of people on a path thinking oh well if my project is sufficiently decentralized then it wouldn't fall into the Howey test which looks at whether the efforts of a third party are what are gonna generate the profit so it's it's I think very unclear and not safe to rely on just those comments to say oh we're outside of the Howey test because we also have about I think there's about six cases now it started with the Munchie case well it started with the Dow where they said the Dow was a security and then they didn't prosecute anyone on that and then in the Munchie case they gave a beautiful analysis of what Munchie did wrong in terms of spouting out that they would have profits you know a thousand percent profit it I think was one YouTube video and they went through you know all the facts and applied them to the Howey test and gave I think a pretty clear indication that that's how they're gonna look at everything going forward and that was in December and then they had a few more we saw Sentra which was just a complete a complete scam coin basically there were a ton of lies so they were they're getting criminally charged for making materially misleading statements they in that case they put fake people in their white paper they said that they had deals with Visa and MasterCard that were completely bogus so that one's an easy one for that you know that's a low-hanging fruit but then they came along tomahawk case where they said that one was air-dropped not sold so that was a funny one because it said that because tomahawk promised and tomahawk is a gold company that was on I believe they're a pink sheet stock so they said that they're tokens that were being air-dropped could be converted into their stock at a later time so that's what made that a security and that changed kind of the analysis or the framework because a lot of people were thinking if you can airdrop them then you're okay you get around these securities laws and then recently the CFTC and the SEC have kind of I always considered them as two separate entities but it turns out the CFTC regulates all of it and the SEC is like a 1 division of the CFTC and so that was that came out and I can't remember offhand the name of the case but that was last month there was a new one so I think going forward unless you start out you have lots of time leading up to your project and you do a no action letter and you go and get the SEC to look at your specific situation and tell you that no this is not going to be a security it's gonna be a CFG like a sorry a commodity which would fall under the CFTC's side and in that side you just have to make sure you're not doing any fraudulent statements is the main thing market manipulation and fraud is what they're looking for otherwise you follow so we discussed briefly regulated crop regulation crowdfunding but there's also Regulation D where you can raise an unlimited amount of money from accredited investors and that's what I think a lot of companies have kind of started to do in the last six months or so and that one you still have to wait a year for the tokens to be resold on the secondary market so you can raise any amount of money you can sell them accredited investors then with after a year there will be security token so they can't be sold on bit tracts or finance or an on SEC compliant exchange so what about decentralized exchanges can they be stopped from going onto those no I don't think so i but it's that i I don't want to get myself in trouble saying that that's where we can go but I think that is the answer to a lot of these regulatory regulatory problems so a lot of people might go that route if they find that it's too limiting being within SEC only regulated exchanges yeah but I mean the SEC is exerting jurisdiction in Austria they just shut down one broker so if you're selling to an American the SEC has jurisdiction over that so the decentralized exchange has to be actually decentralized and not I'm gonna hybrid and yeah right so we're in America do you think is the best regulatory environment for blockchain companies well if everyone could adopt Wyoming's regulation then we would have a utility token Wyoming as as you may know back in I think it was in March when they passed all those bills it might have been earlier than March but katelyn long and a group of people in the Wyoming coalition got some very excellent laws passed and one of them is that they they created a utility token so that utility token does not fall within the securities law it's something separate it would be like selling your tokens on eBay where we don't have to go through the whole SEC procedure to sell for instance if I wanted to resell my sandals no one would probably want them but because I don't know pretty pretty nice sandals back comfortable let me tell you nice arch support but because it's a actual physical good it is not in the securities realm and so these utility tokens are likewise not in the securities realm but if they sell them to anyone outside Wyoming then they cross into so each there's a Supremacy Clause where the federal law takes prick is more powerful than the state law but you can do whatever you want your own state without implicating the SEC which is a federal law so if we were to you and I created you know a strawberry token or something and wanted to have an IC o—- in Wyoming and only sell it to Wyoming residents that would be possible so the more people who adopt a Wyoming like policy the easier it will be like at least people in those states would perhaps be able to be involved in ICS etc correct they could get reciprocity now a few states have tried I think Colorado put together a Colorado coalition and attempted it and it didn't go through so it's Morse did the more states that try but I think they're having trouble as we've seen the results from the last year's icos the states are pushing back and saying well is this good for our people to have a non regulated krypto sale because it's looking like a lot of them are seeing exit scams or terrible results and when the government regulates things like Bernie Madoff everything works out really well I have a question about like America as being a sensor for the blockchain world because we have Silicon Valley here and it seems to be a hub a tech hub but perhaps if they don't adopt the right regulatory frameworks I mean a lot of companies are leaving a lot of them are going to places like Malta or Gibraltar or Eastern Europe and trying out the the different regulatory frameworks there because the American government does tend to be very heavy-handed even if companies do do that do you think it helps because it does seem that the SEC has very long arms and if they're reaching into Austria as you mentioned perhaps even being overseas might not be that useful yeah if it depends where the people running the company live to there's a lot of rules around the tax side where if you reside in America and you're just doing business over the internet from a company registered in say Gibraltar you're not subject to gibraltars tax laws you're subject to your home countries and the SEC kind of works in the same way it's like a where your primary business is generated but also there's what's called the commerce clause which means if you're using the roads or wires for commerce then you have put yourself into the SCC's jurisdiction so if you're a company and you send one email to an American you've now and it's a sales solicitation you've now used the wires for commerce so SEC has jurisdiction it's very very broad so you have to block Americans from your project if you're gonna block the SEC and I have a question about that let's say that I use some sort of a VPN and I'm saying that I'm in Australia and not in America I'm saying that I'm in Mexico for example I'm either one liable for if I enter into an agreement with people who have specifically blocked American does that fall on me or just that fall on the company because I mean they have no idea that I'm using a VPN that's a difficult question for me to answer without getting myself in trouble but the way I kind of see it is that if if someone's using a VPN you don't there are ways to detect that but it's putting a lot of burden on the company to actually do that so I do see the government putting that burden on companies like regardless and just the disclaimer Sasha is a lawyer in crypto space she's not your lawyer so if you were looking into this please do seek out specific legal advice that is relevant to you but thank you so much for chatting with me this has been amazing and what a wonderful backdrop here in Mexico so thanks so much Asha and Thank You Naomi for the pleasure if you like my channel please hit the like button and be sure to subscribe I also have a patreon account and wanted to give a special shout-out to all the awesome people there and a huge thank you to the sponsors of the show for making these videos possible thanks so much for watching she used to just party

32 thoughts on “SEC Targeting Bitcoin: Crypto Lawyer Explains”

  1. most ICOs are illegal equity offerings. This is the reason I focus on one of the few legal chains. BCH will 1000x in 7 years.

  2. wow 😮 it’s such a shame the SEC and CFTC are being such Nazis !!!! Why should they have powers in another country??? So awesome what Caitlin long has done !! Everyone should move to Wyoming and set up a reg crowd funder! Awesome interview as always Naomiiii 🏆!!

  3. This is crypto bitch.. I will not allow them to tell me what I can or can't spend my money in.. I'm all into crypto.

  4. Hi Naomi, what does the Trump gov think about Crypto or is the problem the security stick up bottom people who still think the earth is flat. Cheers

  5. It is a myth that just because you are born within some imaginary lines that they have "jurisdiction" over you. Can you prove that just because you are in a certain area that the laws (threats of violence), apply to you? You can't.. there is no proof.. all they have is gangs of thugs with guns to rob you. Please show me proof that any of these documents they write up apply to anyone.. you won't find it. The document is not the proof that the document applies.

  6. Hello.. McFly.. "fit into existing regulations".. the SEC is just a criminal gang. Crypto currency was invented to defund the gang, to prevent the government gangs from stealing a percentage of everything moral people trade with each other. Wake UP. If you are going along with regulation by these government criminal gangs that are funded by theft (taxes), you may as well just be using USD Federal Reserve toilet paper… why bother using crypto? Crypto will change the world by going around SEC gang threats of theft and violence.

  7. Until 'regulators' learn how to code they have nothing to say! They will try to regulate 'you' though! Their law is imaginary!

  8. Great talk Naomi! <3
    ..and very interesting, especially the part about truly decentralised exchanges since there really are a lack of those, and too many hybrids. 
    Would be cool and very educational if you got the time, to maybe dig into some of the very few projects out there who are focusing on, and actually building, a fully and truly decentralised exchange, and most important, what makes them so? I think following four components should all be decentralised in order to catagorise it a real DEX:

    1. Capital deposits
    2. Order broadcast
    3. Order matching
    4. The exchange of tokens ((atomic swaps))

    – I know The Blocknet project has done it, with it's release of "BLOCK DX", maybe have a panel discussions, get one from their team on to chat about it, and what the near future might bring within this important arena.

    All the best, and keep your content flowing, it's a blessing! <3

  9. Great stuff leaning about regulation, what does the SEC do about the market being played with like it seems to happen daily, NOTHING. So why are the relevant?

  10. scc Always focus on negative things more than positive to instill their fangs in the name of the law and assure you that the real corruption will come from their side and summary of the girl's words prove it…
    Their main concern is to fight fraud and deceive people and not to attack their personal freedom and people privacy

  11. Quite interesting about the framework of regulations. when it comes to crypto investing. The Catch 22 is , yes we do need rules. Interesting of what she said about the ICOs and the portals.
    Also what is consider a security and what is not. That is quite interesting from Wyoming state on their utility token. So many different ups and downs of laws in the USA. always an interesting story. BTW that backdrop of this Interview of Mexico, probably the best, so far. Good Work as usual sincerely JR

  12. Thanks Naomi. Whether one agree or disagrees with the current US governmental oversight of the crypto space, it’s important to have a working knowledge of the information in this video.

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