Marco Santori, Controversial Creator of SAFT, Leaves Cooley Law Firm To Join Blockchain

Bitcoin, Blockchain and the Law | February 6, 2018 By:

Bitcoin wallet purveyor Blockchain has named controversial attorney Marco Santori as its president and chief legal officer. He joins after a stint as a partner at the law firm Cooley LLP, where he led the global financial technology practice and built a digital assets-focused legal practice.

Santori is best known in the legal world as the developer of the legal framework known as the Simple Agreement for Future Tokens (SAFT), a method for justifying initial coin offerings without extensive legal filings.

Under SAFT, issuers can sell tokens under the belief that they will be a utility/commodity in the future, with the SAFT contract created as a security sold to accredited investors. When a functioning network is developed and the purchased tokens can be used on it, the bet is that the SEC or courts will determine that the tokens are not securities.

Running an ICO under the SAFT assumption carries serious risk and is viewed dimly by the SEC and many in the legal profession. Selling unregistered securities is viewed as a serious violation of the law if the SEC or courts determine that the tokens are unregistered securities. The selling of such instruments carries penalties of heavy fines and potential prison time.

The secondary markets that help create transactions in the SAFT-enabled tokens could also find themselves in legal hot water for failure to register as exchanges, broker-dealers or alternative trading systems.

The SEC has taken a dim view of the SAFT tactics. Speaking in January at a legal conference, SEC chairman Jay Clayton said some attorneys advising companies on ICOs are not living up to their professional duties and may be the target of disciplinary actions.

“First, and most disturbing to me, there are ICOs where lawyers involved appear to be, on the one hand, assisting promoters in structuring offerings of products that have many of the key features of a securities offering, but call it an “ICO,” which sounds pretty close to an “IPO.”  On the other hand, those lawyers claim the products are not securities, and the promoters proceed without compliance with the securities laws.”

Clayton added “These lawyers appear to provide the “it depends” equivocal advice, rather than counseling their clients that the product they are promoting is likely a security. Their clients then proceed with the ICO without complying with the securities laws because those clients are willing to take the risk.”

He also noted that he has instructed the SEC staff “to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the US securities bar.”

Santori debated Joshua Ashley Klayman of Morrisson and Forrester , who leads the blockchain and smart contracts group there, in December on the Unchained podcast. They disagreed on how to ensure a token sale won’t run afoul of securities laws.

Santori defended tokens sales using SAFT. “The idea being, at that point, the thing works, it’s more of a product, it’s more a commodity if anything, and the people who are buying it aren’t taking on enterprise risk anymore. It’s product risk, which is what the public is supposed to take on according to U.S. laws,” he said.

Klayman disagreed.  “Many founders were seizing upon this form and deciding this was the answer and this settled in stone,” she said. “So people would come to me and say, we’re going to do a token sale and we’re going to do a SAFT first, and if you would start questioning things or probing, they would say things like — and it was said to me — ‘You need to get smart on the SAFT!'”

The move to Blockchain seems to step away from the controversial SAFT arena.  In his new role, Santori will focus on building the compliance, legal, and corporate development teams, as well as leading new products.

“I’m honored and thrilled to join Blockchain, the leading provider for digital asset software,” said Santori. “It’s a compelling opportunity to contribute to a company that is not only achieving unparalleled business success, but also delivering on a powerful mission to create an inclusive financial system from which everyone can benefit.”

Santori assumes the role of President from co-founder Nicolas Cary. As Vice Chairman for the company, Cary will continue to be instrumental in day-to-day operations as well as Blockchain’s public affairs and external relations.