Monday, September 24, 2018

Adam Tracy (Adam S Tracy) Revisits the SAFT

Cryptocurrency attorney Adam S. Tracy revisits the Simple Agreement for Future Tokens and FINRA’s recent guidance on the SAFT.

So I’ve talked about this SAFT before, and my problem with the SAFT has always been that it assumes that the token you’re selling is a security, but later it’s going to somehow not become a security and that there’s no real legal or factual basis for that happening anywhere in finance, right? 

There’s situations were securities become commodities and commodities become securities, but I can’t find anything nor do I believe anybody’s found anything where you have something that is a security and then ceases to be a security. And, Finra last week actually came out and said something to that effect, which basically threw water on the whole concept of the SAFT. And so I caution against using it because again, I think it’s predicated upon an untested legal theory. And that’s what Finra said. 

Finra said there’s no guarantee that the SEC or any court would actually agree with the the concept, if you will, that the SAFT holds, that you have a token that you’re selling – a token or a coin that you’re selling – that token or coin is a security for purposes of this ICO, but later down the road it wouldn’t be and that somehow would give you liquidity. Right? And that’s what I believe to be legal fallacy. So I think there’s good parts in the SAFT. I think, you know, it’s generally well written but I think, you know, (and I’ll talk about this in a subsequent video), I think what needs to be adopted is more of the license model, right? 



And the license is a constant exception to the Howey Test and, you know, when you’re drafting your Your SAFT agreements, which really isn’t a good term, you have to redesign that, and take away that nomenclature – that language that contemplates this transformation from something that it is to something it is not, because it just simply doesn’t exist anywhere in securities or commodities law for that matter. So Finra looks like they’re right on point with what the SAFT agreement. I’ve always said that the SAFT agreement was really the byproduct of large law firms, and was created for purposes of giving VC and other venture back private equity access to angel rounds and seed rounds, where they get the lowest valuation because after all, they have the ability, right? 

They have the cash flow, the working capital to sustain the illiquidity that you get in a VC model. And, you know, by labeling your initial coin offering, your initial token as a security, it’s going to be a restricted security, it’s not going to have that liquidity. Then, you know, it brings in sort of the bigger players and, you know, commits their or sort of guarantees their access to the best blockchain deals at the best valuation. So it’s a little bit of a conspiracy theory. I know. But, you know, that’s what I think about this SAFT, and it looks like Finra is actually agreeing with me for once. Who knew, right? So I’m Adam Tracy. Check me out – tracyfirm.com, and I’ll talk to you soon.

A former competitive rugby player, serial entrepreneur and, trader attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.
Primary website: http://www.tracyfirm.com
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