Tilden Moschetti: In 2022, I got
a number of phone calls from

potential clients were
interested in syndication and

putting a fund together 2023, I
had a lot less of this one type

of client, but I still had some,
and probably will have some in

2024 as well. Now, what is this
type of client? It's the person

who's looking to put together a
crypto offering. So in this

video, we're going to talk about
the big challenge with crypto,

and why most of the time I
actually can't help them.

So what is the big problem with
crypto and Regulation D? Well,

they Regulation D is an
exemption to the SEC rules,

which allow somebody to raise an
unlimited amount of money from

an unlimited amount of
accredited investors and

possibly up to 35 non accredited
investors in any 90 day period,

depending on the rule that you
fall into. But why is a crypto

offering itself? Why is it coin
itself different? Well, the

biggest problem is that it's
round peg and square hole. In

the round peg category, we've
got the SEC rules, ni SEC rules,

the exemptions to a security
filing are basically where the

SEC has said, Look, we're one
people to be able to invest into

these things, it's good for
America, it's good for our

economy. We want the that
private investment world to be

robust and there but we need to
put some protections in place.

What we don't want this is the
SEC talking, what we don't want

is for there to be a private
marketplace that exists that we

don't we are not able to
regulate. So that's their

problem is that they don't want
this secondary private market

that exists. Now to do that,
what the SEC has said is put a

restriction on resale. So
essentially, I cannot buy a

private security. So I cannot
with the intent of basically

turning it around and selling it
just because of the appreciation

of the security itself. So if
you think about like when you

buy a share of Apple stock,
really, I mean, theoretically,

you're buying a share of the
income of the of the stock

itself, but why am I actually
buying it, because I am thinking

that the price of the value
itself of that share of security

is gonna go up. Not that it's
tied to income or anything like

that, I really care at the end
of the day, if I'm not getting

dividends from something, I'm
expecting that share value to

appreciate. Now, that can't
exist without having a

marketplace, right without the
mark. So the marketplace,

obviously for Apple is the stock
exchange, it exists on the stock

exchange, it's registered, the
shares are traded publicly,

they're there that's kind of
generic. There's no interaction

between me and Tim Cook. I don't
call Tim on the phone and say,

Hey, buddy, what do you think's
gonna happen with with your

company in the next week, it
just doesn't happen, right? So

that whole world of is based on
this appreciated value of why an

investor actually invest into us
into a security, that's public,

so like a stock. Now, if I were
to do that, for a private

security, there's no mechanism
there for me to actually have

that banking on the appreciated
value of the security itself.

Only that I only am choosing to
invest based on my guess of the

appreciated value of the
underlying asset. Right, so real

estate's an easy example, if
there's a, a syndication that's

been put out for an apartment
building, my guess as an

investor is rent growth is going
to drive drive up, the more

rents the cap rates, even if
they stay the same, the

appreciated value of the
underlying asset of the

apartment building itself is
going to go up. That's how I'm

going to profit from it. So
there's no secondary market.

There's no me investing in the
security for the elements of the

security itself. That's the
round peg of this. When we talk

about a the square the square
hole of the crypto, that's

entirely different. What's being
invested into is only the

appreciated value, right?
There's no actual The day to day

mechanism, like there's no
profits in that in that element

in Bitcoin itself, it's actually
creating value, right? It's just

a marker of something that has
that people have decided has

some value. But it's that, that
decision about that value that's

appreciating or depreciating. So
the only way that market really

exists is because it's got an
exterior market, right? It's got

that market where it's being
traded on exchanges, and people

are making money or losing money
based on their their investment

into that Bitcoin or that
whatever that coin is itself. So

that's the change that's taking
place. So the problem with the

with not being able to resell
this security is that if I'm not

able to resell the security,
well, by its very nature, a coin

is supposed to be decentralized
and basically be fungible.

Right. So I can trade these
things, without having any sort

of thing I can give it to my
brother in law, I can sell it to

somebody across the country, I
can sell somebody across the

world, that's what the whole
point of the coin was, is that

it would rise and fall based on
some other external thing,

whatever that value is, and then
I can freely trade it. But the

SEC has said the exemptions of
the rules are strictly for non

widow are not able to resell it.
For those purposes, I'm not able

to make an investment for that.
And so if I have a client in

front of me who wants to put a
coin together, it is possible

that we can invest in the
company that's behind the coin,

it's possible to put that
through, but it can't be the

profits from it can't be based
on the appreciation or the

depreciation of the crypto coin
itself. It's an exterior thing

that is not that rises and falls
in that sort of secondary

market, which is completely
adverse to what the security

regulations, the exemptions to
the registration requirements

are. Now I know that's kind of
technical, and it's kind of

advanced. But hopefully that
makes some sense. It just

doesn't work. If they're just
round peg square hole, the two

are not going to see eye to eye.
So that's the conversation that

I have with people who come to
me with strictly coin offerings,

if they have a business like a
mining operation or something

that is different, right. So
where the underlying thing

what's going to generate that
income is not based on an

exterior market thing, and being
not resellable is okay, we find

a mechanism in order to do that,
then it works fine. If I can

help you with your securities
offering with your Regulation D

offering, I'd be happy to help
give me a call. My name is

Tilden. Moschetti Moschetti
syndication Law Group