One solution at a time: Reg A and crypto
I was talking to a crypto-savvy SEC Commissioner the other day about my current obsession, which is that using the exemption under Regulation A is the way to address the constant complaint that “The Commission tells us to come in and register but we can’t make the registration process work for crypto.” As I mentioned […]
Lesson of the Month: The black box acquisition
Following up from last month’s I’m-not-going-to-call-it-fraud series, here’s another recent one. As always, identifying details changed. This one’s (problem is a clear omission of information required by the form filed with the SEC.) Form C says that if you raise funds in order to acquire another company, you must provide the target’s financials. This one […]
The SEC and crypto: the answer is Rule 261
A few years ago, we spent a lot of time with the Staff of the Division of Corporation Finance discussing the meaning of Rule 261(c) of Regulation A. “Rule 261 says Regulation A is for equity, debt or convertibles,” they would say (in more formal terms). “These things you are trying to qualify don’t look […]
Regulation CF fraud: Destiny Robotics
This is mostly a classic run-away-with-the-money case, combined with a bunch of misleading statements and omissions. But there are a couple of interesting twists here. What happened: Destiny Robotics Corp. raised funds under Regulation CF. The company used Wefunder’s “Lead Investor” structure, where the securities are held in an SPV and the Lead Investor makes […]
Lesson of the Month: The non-CFO
I was thinking of calling this series “Fraud of the Month” but didn’t want to go that far. You may reach your own conclusions as to whether that tag is warranted in any particular instance. While names and identifying details are changed, this is a true and recent story. Company raised funds in a Reg […]
Considerations in doing a Reg CF offering….
Companies often wonder, does it make sense to do a Reg CF offering rather than a Reg A offering? Keep in mind that although selling securities using Reg CF may at first blush seem faster, cheaper and may have some advantages for marketing purposes, it is not always an easy calculation to make. There are […]
Are state notice filings for Regulation A issuers still important?
One of the great benefits to issuers under the SEC’s rules for offerings under Tier 2 of Regulation A, effectively created by the JOBS Act, is the preemption of state requirements for registration of the offer and sale of securities. Known as “Blue Sky Laws”, these state specific rules added considerable cost to qualifying an […]
Criminal Proceedings Against Officers and Directors: Disclose now or wait for a conviction?
When do companies need to tell investors about criminal proceedings that allege their officers and directors have engaged in fraud? According to some state regulators, it may be sooner than companies expect. In a recent settlement, an issuer was found liable for failing to disclose in its Reg A offering the ongoing criminal proceeding involving […]
How to get sued…
If you work with us, you will hear it many times that we strongly advise against financial projections … as they can get you in trouble. However, companies always seem to want to include projections that start from zero, and grow exponentially. This type of financial projection that is untethered to reality is a primary […]
Do you really have permission to use those logos?
The Theranos jury’s fraud convictions of Elizabeth Holmes, former CEO and founder of the now defunct Theranos, Inc., should give pause to startups seeking to build their reputation by touting their relationships with other companies. In the press to find financing, it can be tempting to use the logos of other companies, especially those that […]