Crypto & startup lawyer. Founder of OC Advisory: a crypto focused law firm. Ex: Founder & CEO @LexproofHQ. 🇩🇴🇵🇷
New York, NY
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1/ Crypto's coming back & VCs are deploying again.
Unlike trad VC, these deals often involve tokens. But there's little info on how these deals work.
So I partnered w/ my client @MagnaTokens and @Bfaviero to demystify the most common token rights instrument: The Token Warrant.
1/ What are token warrants? Why do they matter to crypto founders when they have plans to issue a token? In this week's blog post, we partner w/ crypto lawyer @Orlando_btc to cover what a token warrant is, why it's gained popularity, and how they might be structured
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Phew! Finally finished reviewing the SEC's proposed Regulation Crypto Assets (Reg Crypto). The big takeaway:
Legal ICOs may be finally be here.
I read the most important parts so you don't have to (yes, I actually read ~100/400 of it. I know, rare these days).
HUGE! Please excuse any delay in your crypto lawyer's response for the next couple of hours as we all pour over this.
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Two more things.
State law preemption is huge here. Both exemptions, both tiers, plus secondary trading, preempt state law. If you follow the regulation, states can’t come after you.. But it only lasts while you’re current on filings. Fall behind and your holders lose preemption on resales until you cure.
And what this doesn’t do: nothing on “exchange,” “broker,” or “dealer.” No relief for trading venues or intermediaries. SEC punted that to either a subsequent rule or Congress.
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Finally, this is a proposal. 60 day comment period.
The SEC declined to impose an insider lockup and leaned on disclosure instead, but asked directly whether it should require one. If you’re planning allocations, that question is live.
Overall, this is the most constructive thing the SEC has put out on tokens, ever. And the first time the rules contemplate a security that can dissolve.
Comment period is open. If you have any thoughts, consider submitting a comment to the SEC.
While not perfect, I think this is a major step in the right direction. Feels like crypto is becoming exciting again.
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HUGE! Please excuse any delay in your crypto lawyer's response for the next couple of hours as we all pour over this.
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I’m literally the person in this ad.
Apple just dropped ad for new MacBook Air with M5 chip (18hr battery life, 16GB Unified Memory, 512GB storage) for $1,099.
Solid video because addresses everyone’s #1 anxiety: being able to operate laptop with 100x Safari tabs open and 47 desktop apps running at the same time.
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Me when a client tweets “the tokens aren’t securities but all profits that the company generates accrues to the token.”
Les Wexner’s attorney did not like his answers to the questions during the House Oversight Committee deposition.
He told Wexner: “I’ll fucking kill you if you answer another question with more than five words, ok?”
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Congrats to everyone who has worked on Aave. This has been a long time coming.
After four years, we are finally ready to share that the SEC has concluded its investigation into the Aave Protocol.
This process demanded significant effort and resources from our team, and from me personally as the founder, to protect Aave, its ecosystem, and DeFi more broadly.
DeFi has faced unfair regulatory pressure in recent years. We’re glad to put this behind us as we enter a new era where developers can truly build the future of finance.
DeFi will win.
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Yeah so...even the Nova/BH side letter had the type of token lockup MFN I was talking about LOL.
I'd be shocked if Berachain's earlier stage investors did not have investment docs with similar language.
If true, then Nova's refund may trigger all investors' tokens to be unlocked 1 year out vs a 3 year schedule.
If I'm right and I were a Berachain venture investor, I would be exploring my legal options rn.
One thing that I’m curious about re BH’s 1 year post TGE refund right from Berachain’s Series B:
Most token warrants I’ve seen have a sort of token lockup MFN—no lockups on an investor can be more restrictive than that given to another Insider.
Bera’s docs show that only 1/6 of investor tokens unlock after a year. If these investors have such a token lockup MFN, it would seem that BH’s refund right would trigger it—being able to refund 100% of your tokens IMO is a lot less restrictive than having 5/6 of your tokens locked up.
Of course there could be some reason that I’m not privy to (admittedly
I have very little info here) why this wouldn’t be the case: Berachain’s investors don’t have this token lockup MFN, their lawyers figured out some cleaver structuring to get around it, etc.
But from most token investment docs I’ve seen and worked on, I’d expect this investor right to be triggered, altering their lockups to be as restrictive as BHs…
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One thing that I’m curious about re BH’s 1 year post TGE refund right from Berachain’s Series B:
Most token warrants I’ve seen have a sort of token lockup MFN—no lockups on an investor can be more restrictive than that given to another Insider.
Bera’s docs show that only 1/6 of investor tokens unlock after a year. If these investors have such a token lockup MFN, it would seem that BH’s refund right would trigger it—being able to refund 100% of your tokens IMO is a lot less restrictive than having 5/6 of your tokens locked up.
Of course there could be some reason that I’m not privy to (admittedly
I have very little info here) why this wouldn’t be the case: Berachain’s investors don’t have this token lockup MFN, their lawyers figured out some cleaver structuring to get around it, etc.
But from most token investment docs I’ve seen and worked on, I’d expect this investor right to be triggered, altering their lockups to be as restrictive as BHs…
For the record, giving post-TGE refund rights to an investor is insane. I typically like to explain scenarios and risks to clients without pushing too hard on what a client should do.
But this is something that I 100% would have been kicking and screaming to my client about—it’s just that bad.
I’ve done a ton of crypto startup venture financings, and while I’ve sometimes seen refund rights in SAFTs for projects that don’t launch a token by a certain time, a POST-TGE refund is ludicrous. Removes the downside of being a. Investor.
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