Quote from: SmartRE on August 20, 2017, 05:55:15 AM

Quote from: coinluvr on August 19, 2017, 09:31:32 PM

Quote from: SmartRE on July 23, 2017, 09:52:36 AM

Quote from: Eddyc on July 22, 2017, 11:57:02 PM

You are involved in the most complex and demanding market on the planet! How did you get the releases to continue with this project? Or do not you have them yet? How do you plan to achieve it and what will you do if it's not possible to proceed with the rules?

By releases I assume you are asking about regulatory issues? If so, there are certain ways to make sure we do not overstep our bounds. We are a platform to connect homeowners and buyers, so very much a marketplace. Our collaboration with a San Francisco specialized real estate legal firm took months (since last year) to hash out what is necessary to make our business model work. That is also the reason why we are starting in the San Francisco Bay Area, as that's where we know the legal issues the best. The direction we are on, currently, is the easiest. If somehow it is not possible, we have a Plan B already that will have more paperwork involved but still solvable.

We are not arrogant enough to think we can tackle the entire real estate sector, but just a small subset. I'm sure you guys hear huge numbers being tossed around (people are quoting USD 210 trillion!) but it's impossible for a startup to tackle such a big market from the beginning. We're helping people who need liquidity but there's no current way right now without accumulating more debt. Our targets are the people who take out home equity loans and reverse mortgages, and help them find a more equitable way to unlock value in their properties. On the other side, allowing everyone to invest without having to be part of the affluent or being forced into funds that the managers decide where to invest.

I think this you are in a risky position here:

-Your token is clearly an equity under California Law.
-It's not "access to the network". It's an equity.
-California has a "risk capital test" which determines what is or is not an equity, and you fail that test.
-Since US-based equities (such as your token) cannot be legally traded US crypto exchanges, this makes your token useless until one of the registered equity exchanges (NYSE, or t0) decides to start trading tokens. This isn't likely until Jan of 2018 at best. So until Jan of 2018 your token isn't really tradeable, except outside the US.
-It appears from your sales brochures that you are trying to convinced foreign token investors that your token will give them "ability to own" of US real estate, which is absolutely not true. -The token you are selling now will give them no access whatsoever. If they want to buy fractional real estate, they can do this with many other crowdfunding platforms.
-Your token has almost zero real value and does NOT allow ownership of real estate. It conveys no technological advantage. Its sole purpose is to fund your company. This is hidden in your terms and conditions.
-No doubt you have conferred with attorneys and have put in boilerplate language in your agreements. This is irrelevant. The California courts won't care what's in your T&C, they only care about the "facts of the matter" and the facts point to your token as a risk capital pre-sale, and thus, equity.

That is a rather harsh thing to write, and I'm sorry, because "fractional ownership of real estate" is a great idea and tokens could be great to enable it. Maybe you are a great group of people.

Thank you for your comments. We're used to constructive criticism so no need to apologize about being harsh.

You may be confused with the SRE token and the property-specific tokens. During the token sale, SREs are being sold. They are structured as vouchers because if we structure them any other way, as you pointed out, they would be securities. Any token that is structured as "fuel", currency within a system, promises a return or dividend is very likely going to be regulated as a security or currency. If you look at almost all real token sales (led by people who have experience in building startups), the language is the same because having your token classified as a security is a non-starter.

Any startup has risks, absolutely, so we're not going to tell you there are none. Success of a startup is based on execution, which includes ways to mitigate risks in addition to delivering what the market wants. We believe we have the talent, experience, and network to make this startup successful. Can we guarantee it? Of course not; that would be lying. We know there will be detractors and those we cannot convince; we understand that. Following the legal framework is what's needed for the token sale and that's what we're doing.

I'm not confused at all. I understand perfectly the difference between a "fuel" token and an equity token.

The point is, your marketing doesn't clearly state that what the investor is buying is a fuel token. Right on the front page of your website, you state:

"There are 100 million SRE tokens, and no additional tokens will ever be produced, giving them a likelihood of value increase with the utility of the platform, which will grow rapidly with homeowner and buyer adoption that will be spurred by the planned marketing program."

Right up front, you are making claims about "increase of value" which instantly mark SRE as an equity, or, you as making fraudulent or deceptive statements.

If the California attorney general decides to sue you for securities violations, they will simply put that webpage up as evidence. Bang. You lose the case. It makes zero difference what you say elsewhere. Your front page is the killer.

People are buying your tokens because they think the tokens are going to appreciate in value. Your entire token sale is based on that. Without the "increase in value" component, nobody would buy anything you have, at all. You would get a few thousand dollars maybe. As I said, I'm not hostile to your underlying concept. The problem is that a token sale is not legal in the US if it implies "increase in value", because that makes it a security. Also you have not addressed the "risk capital" test which your attorney should have told you about. California will judge your token a security irregardless of the Howey test, if you run afoul of the "risk capital" test, which you do.

PS. I'll attach a snapshot of your front page for public record, in the next post.