New York Venture Hub

Legal & Business Issues Facing Entrepreneurs and Investors

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The Securities and Exchange Commission filed a complaint last week against the founder of venture-backed mobile payments startup Jumio, Inc., charging him with causing the company to prepare false and misleading financial statements that inflated the company’s earnings and gross margins and with defrauding secondary market purchasers of his shares. The founder, Daniel Mattes, agreed to pay more than $16 million in disgorgement and prejudgment interest plus a $640,000 penalty and to be barred from…
Lyft, Inc. last week completed its highly anticipated initial public offering, raising over $2.3 billion at a valuation of approximately $25 billion, and turning its co-founders Logan Green and John Zimmer into near billionaires on paper. But that’s not the only reason they’re smiling. Despite owning only 7% of the outstanding pre-IPO shares, Green and Zimmer will control nearly 50% of the voting power by virtue of their Class B shares having 20 votes per…
2018 was a historically good year for venture capital in the United States in terms of dollars invested by VC funds in U.S. companies, dollars raised by VC funds and dollar value of exits by VC-backed companies, according to the Venture Monitor for Q4 2018 published by PitchBook and the National Venture Capital Association. VC funds invested over $130 billion in over 8,000 portfolio companies in the U.S., limited partners committed $56 billion to 256 new American…
Real estate developers should seriously consider equity crowdfunding to fund development projects for two major reasons, one of which has little or nothing to do with money. The first reason is that new securities offering legislation enacted in 2012 creates new legal capital raising pathways which allow developers for the first time to use the internet to find investors, and also to raise money from non-accredited investors. The second reason is that a crowdfunding campaign can be…
On December 19, 2018, the Securities and Exchange Commission issued final rules to permit reporting companies under the Securities Exchange Act to offer securities under Regulation A (affectionately referred to often as Regulation A+), as mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.  The rule amendments also provide that so long as an issuer is current in its Exchange Act reporting, its periodic Regulation A reporting obligation will be deemed to be…
On November 27, 2018, the United States District Court for the Southern District of California denied the Securities and Exchange Commission’s motion for a preliminary injunction to block an initial coin offering, finding the Commission did not meet its burden of showing the digital token in question was a security. Although this appears to be the first Federal decision against the Commission on the question of whether a token is a security under the Howey…
If you were looking for a safe blockchain investment and had the chance to invest in the “first licensed and regulated tokenized cryptocurrency exchange and index fund based in the U.S.” and audited by a Big 4 accounting firm, you might do it, right? One problem: turns out it’s not licensed, regulated or audited. On October 11, 2018, the Securities and Exchange Commission announced it had obtained an emergency court order halting Blockvest, LLC’s initial…
Private companies in the gig economy like Uber and Airbnb would love to issue compensatory equity to their platform participants, just like they’re able to do with their employees. The problem is that the exemption from registration for compensatory issuances only covers issuances to employees and consultants of the issuer.  Last July, however, the Securities and Exchange Commission published a concept release seeking comment on whether the exemption should be extended to equity issued to participants…
If you’re thinking of airdropping free tokens or implementing a cryptocurrency bounty program, be careful. The Securities and Exchange Commission just issued a cease and desist order (the “Order”) with respect to an initial coin offering, finding the issuance of “free” tokens through a related bounty program in exchange for online promotional services constituted an unregistered sale of securities and thus a violation of the registration provisions of the federal securities laws. Although courts and…
It’s not often that the House of Representatives votes nearly unanimously on anything noteworthy these days, but that’s exactly what the House did on July 17 in voting 406-4 for the “JOBS and Investor Confidence Act of 2018”, also known on the street as “JOBS Act 3.0”, which is the latest iteration of the effort to improve on the capital markets reform initiative started in the original JOBS Act of 2012. JOBS Act 3.0 consists…