In the aftermath of the recent regulatory crackdown by the SEC on two non-compliant initial coin offerings (ICOs), BX3 Capital, a business advisory firm for companies in the blockchain and cryptocurrency space, is launching a new service to help firms prevent being the object of such enforcements. Crypto Janitors is a new offering to help companies that conducted ICOs clean up the fundamental business failures that jeopardize those companies’ future operations, as well as the reputation of the cryptocurrency industry as a whole.
“The market has changed, and expectations are different. Regulators, investors, and the market-at-large are all watching to see what the companies who completed ICOs do next,” says Michael Minihan, partner at BX3 Capital. “If you raised money in an ICO, you have a fiduciary duty to the people who gave you funding for your project, and if you haven’t properly accounted for those funds, or spent them in the way that you promised, there is a storm brewing—and it is headed directly for YOU. If you need to clean things up, now is your chance.”
There are more than 2,000 cryptocurrencies in circulation today, most of which were issued pursuant to a whitepaper that contained a plan for the use of the raised funds. Many ICOs purported to raise funds to support a project or business, or to provide an apparent “utility,” an unregistered security, that granted access to a native technology platform. Crypto Janitors utilizes that whitepaper to help answer the overarching question: Did the project do what it said it was going to do?
From there, the process turns to key business fundamentals and potential exposures to regulators and investors. Says Minihan, “We have the benefit of hindsight. Since 2017, the SEC has directed crypto projects that raised money from US investors to follow established securities laws. Legal opinions that indicated ‘utility’ status in an effort to avoid registration will not pass muster. We will work with projects to proactively disclose gaps and comply. Cleaning up messes is not fun but as we saw with the AirFox and Paragon enforcement actions, the SEC can provide a path to compliance for legitimate projects that are willing to work with them to get things right.”
Kyle Asman, partner and co-founder at BX3 Capital, adds, “It’s not just the SEC that should cause crypto CEOs to lose sleep at night. Investors who put their money into a project based on whitepaper promises likely have an arsenal of claims against the projects that did not do as they promised. Thoughtful, detailed accounting in the form of US GAAP or IFRS financial statements can go a long way towards promoting investor peace of mind.”
The BX3 Crypto Janitors program was built to help ICOs identify common mistakes and omissions and set them right, ultimately making the project stronger for the long term. The team is comprised of crypto-experienced lawyers, accountants, and marketers who can help with SEC compliance and other matters, including:
- Revisiting the legal strategy to ensure regulatory compliance
- Protecting intellectual property
- Preparing financial statements
- Curing delinquent or deficient securities filings
- Accounting for collected and spent funds from investors
- Preparing tax filings
- Communicating with investors and getting them back on board
- Sourcing talent replacements for team members who have abandoned the project
- Creating REAL, earned media marketing placements to help spread the word about the potential benefits of the underlying project
As stewards of good practice in the blockchain and cryptocurrency space, BX3 Capital offers free consultations for projects that wish to work with its Crypto Janitors unit. Says Asman, “Bad ICO raises hurt everyone. It is our mission to fix good projects that just need help getting compliant and back on track. For this reason, we are willing to consult with any project that wants to talk about their situation, and will only charge those who wish to engage us to actually clean up something that isn’t right.” Crypto Janitors seeks to reinstill some sparkle into cryptocurrencies, a sector that has been unfairly tarnished by a few bad actors.
About BX3 Capital
We are passionate professionals with decades of combined experience in banking, marketing, accounting, finance, tax, and law, and use our expertise to provide the necessary tools and framework to turn ideas into successful businesses in the blockchain and cryptocurrency space. We believe that the disruption that blockchain technology enables will inevitably lead to increased pushback from regulatory bodies as they see bad actors and noncompliant parties continue to take advantage of the decentralized, pseudonymous nature of the industry. We exclusively work with clients and partners who reflect our core principles of collaboration, ethics, and transparency. BX3 is headquartered in New York, NY. More at bx3.io.