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Comment by EGreg | Hacker News Reader

Serious question: Do you know any countries AT ALL that have no securities commission, or one that doesn't strictly regulate sale of securities, while at the same time the country allows formation of a company?

Being that token sales are international, it would seem there is absolutely nothing illegal about opening a company in that country and offering securities. Even if the owners of the company are US citizens. Then you have the company pay YOUR company as its main supplier, as opposed to its parent.

Is anyone on HN familiar with such a country?

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Israel does not regulate sales of securities to non-Israelis. This resulted in a huge binary option scam industry based out of Tel Aviv.[1] It got so big that it was 40% of Israel's financial sector. It became a political embarrassment for Israel. "Because this industry gives Israel such a bad name and inflames anti-Semitism, we must uproot the phenomenon." - Israel's top securities regulator. A law change is coming, and most of the binary options operators have already fled elsewhere. Cyprus and Bulgaria are popular.

[1] http://www.timesofisrael.com/topic/binary-options/

Can you elaborate on the details of these laws?

For example can Israel's Securities Authority retroactively go after companies by classifying ICOs as securities? Or in this case, ALL securities can still currently be sold by Israeli companies to foreigners?

Also, what are the rules for Cyprus and Bulgaria? Where do you get the information about their popularity and their applicable securities laws?

No, but if you want, I can refer you to a good securities lawyer at Wilson Sonsini.

Sure! Please email me.

> Being that token sales are international, it would seem there is absolutely nothing illegal about opening a company in that country and offering securities. Even if the owners of the company are US citizens.

Actually the US regulates companies that so much as offer securities to US citizens. Try getting an account with a forex broker that's based outside the US and you'll see what I mean. The CFTC doesn't limit itself to US companies.

I haven't seen the same attempts being made on other kinds of securities but the framework is clearly there as the CFTC is using it.

What about this rule:

https://www.sec.gov/rules/final/2008/34-58465.pdf

The SEC has chosen not to regulate securities that meet the conditions in that document. If it wishes to, it can change its mind.

> or one that doesn't strictly regulate sale of securities

There's a reason why some crypto-companies (and not crypto actually) are based in the Cayman Islands (BitMEX), British Virgin Islands (Bitfinex), etc... Crypto Valley [0] in Switzerland is also gaining momentum. BTW, Fred Wilson wrote an interesting piece about this recently [1].

But the issue here is that if you plan to sell "tokens" to US nationals, you now know that you must play by the SEC rules. That or you shouldn't offer them to US individuals. Nothing rare about it, for instance CFDs [2] are financial instruments banned in the US, but traded without problems in the rest of the world. My guess is that ICOs will be like CFDs, offered around the world, but not to US citizens.

[0] https://cryptovalley.swiss/

[1] http://avc.com/2017/07/jurisdictional-competition/

[2] https://en.wikipedia.org/wiki/Contract_for_difference

But can't their securities commission also pass such a resolution?

No, the issue is that it doesn't matter where you are based, if you offer securities to US persons, you have to abide by US securities laws. If you offer securities to Germans, you have to abide by German laws.

I an not sure that is binding on the company. Can you find a source for it in US securities law or SEC memo?

https://www.sec.gov/about/offices/oia/oia_crossborder.shtml

https://www.sec.gov/rules/final/2008/34-58465.pdf

Sure, that refers to foreign issued equity securities listed on foreign exchanges as securities, not tokens claiming not to be securities

So once they realize they are securities this applies?

The main question is, are the exchanges considered foreign if the ICO is of a foreign company? How do you trade stuff if the securities are not transferrable?

Perhaps the ICOs don't pass the Howey test!

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