SEC Registration Important To Pocketinns ICO: “We Couldn’t Let Legal Distractions Take Our Focus Away”br>
Sarva Mada is the founder of Pocketinns, an online marketplace ecosystem built around a decentralized blockchain model offering vacation rental services. The company is gearing up for an ICO in January, but is one of the few doing so after registering the company as a security with the US Securities and Exchange Commission.
Mada talked with Block Tribune about why he took the unusual step with the SEC.
BLOCK TRIBUNE: I suppose you’ve seen the news about Munchee’s ICO being voided because it was an unregistered security. Will we see more of this?
SARVA MADA: Yes, the SEC is likely to send enforcement letters to more ICO companies for various reasons and potential infractions. The SEC has said many times that it wants ICO companies to follow the applicable rules and regulations. It’s actually unfortunate that founders take it so lightly and risk the reputation of the whole of our emerging industry.
BLOCK TRIBUNE: Why did you take the step to register with the SEC?
SARVA MADA: We believe what the SEC is doing is the right thing and are really impressed in the way they have handled the entire situation. Overall it has been incredibly praiseworthy. Our interpretation is that the SEC has been relatively liberal in their governance and has provided adequate space for the industry to flourish while also protecting investors. Our goal at Pocketinns, from the very beginning, was to follow securities law, protect our investors who put their trust in us and to have a legally compliant ICO. The company we are building is for the long haul and we couldn’t let legal distractions take our focus away.
BLOCK TRIBUNE: What was the process for registering?
SARVA MADA: We are managing and operating Pocketinns as a Rule 506(c) exempt securities offering, so our securities are not being registered. This registration exemption is clearly denoted within the securities laws and SEC staff attorneys themselves have publicly mentioned that it is acceptable to use a registration exemption to do an ICO. Another reason is to make sure your legal counsel are the cream of the crop and know exactly what they are doing.
BLOCK TRIBUNE: Is the SEC cracking down? What was your experience like in trying to register this? Was it like being deposed in a lawsuit?
SARVA MADA: Yes, definitely. We’re now seeing the SEC demanding that ICOs follow securities laws as appropriate and we feel that’s a great move for the whole industry. In terms of our own registration experience, we did not have a difficult time preparing to do an exempt securities offering. We actually made more disclosures than we were required to make. Our team spent over 4 months before even commencing work on the ICO to ensure all the legal requirements were in place and that we had the appropriate legal counsel of experienced attorneys in the field of securities. We’re also grateful and pretty lucky to have some amazing securities attorneys on our team to guide us through the process.
BLOCK TRIBUNE: Tell me about your ICO plans
SARVA MADA: We feel that the Pocketinns Initial Token Auction (ITA) is one of the most legally compliant blockchain companies and token offerings in the space right now – and we’re proud of it. We incorporated Pocketinns about two years ago about when blockchain was still in it’s infancy and venture capital opinion of the space could not have been less positive.
Since then, we have launched a rather disruptive service in the form of a blockchain-based vacation rental marketplace that is live in Europe with about 50,000 properties and 0% fees across the platform with over 1,000 community users. And vacation rentals are just the beginning.
We prefer calling our ICO a token auction and our current plans include hosting a Reverse Dutch Auction starting January 15th, 2018 for 16 days in compliance with the SEC’s filing 506(c) exempt securities offering. Our Pinns Tokens (currency) offered in the auction is not a gimmick token. It is the actual lifeblood of the entire Pocketinns ecosystem without which the entire project becomes a dummy due to its model and dependency on the blockchain. Our goal is to be KYC/AML compliant and we are taking as many measures as possible and to the best of our knowledge to be totally in sync with the SEC and other regulatory forces.
In order to protect our investors and provide assurances that we are not among the “pump and dump” ICO scams harming the cryptocurrency space, we are not offering a pre-sale. This decision, to be honest, was one of the most tempting and difficult choices we could have made. It’s also our biggest risk as a project as we outright rejected big money offered for discounts on our tokens but the decision was made as a team in unity and we know we’re working to redefine how the cryptocurrency space is operating.
What this Dutch Reverse Auction means is that investors decide the final price they are willing to pay in the period of the 16 days of the token auction. 5 million goodwill bonus tokens are being offered to investors to derisk them – a new investor protection for those who do not take time and do due diligence to understand the risks involved. The hard cap for the auction would be $46 million USD and total supply for the Dutch Reverse Auction will be 30 million Pinns Tokens.
As you can see, we tried to think of everything to ensure that the Pocketinns ITO is investor friendly and we hope our due diligence will become the benchmark for all companies looking at pursuing an ICO.
BLOCK TRIBUNE: Will there be a chilling effect if more companies have to go through this registration process?
SARVA MADA: Probably, yes. Many companies will not want to follow or be bogged down by the securities laws whether it be registering their projects as securities or using an appropriate exemption from registration. The primary reason for this is that these projects won’t want to potentially limit who can participate in their ICO or face the higher legal costs. The benefit for everyone else though, specifically investors, is that this be a major deterrent for ICO scams that are plaguing the industry’s reputation. We encourage this oversight from the SEC as well as call on project developers to hold themselves to a compliant standard.
BLOCK TRIBUNE: There have been several companies coming out that claim they will make it easier to create a token by navigating through the regulatory maze. Should we trust them?
SARVA MADA: No, we feel that you should not trust them and the answer is simply because they are not law firms. Many of these companies coming out of the woodwork with these opinions are not qualified to give this assessment which is incredibly shortsighted. My advice to anyone pursuing a token offering or auction would be to only work with experienced legal professionals, especially within the securities specialty, because the regulatory issues are extremely complicated. One of the biggest priorities of your ICO process should be legal compliance and it is definitely a worthwhile investment for if you are serious about your company’s longevity in this space.