Dilendorf Law Firm advises on all aspects of formation, governance and operation of tokenized funds, including hedge funds, private equity funds, venture capital funds and real estate funds.
Consulted client in connection to setting-up alternative hybrid structures and tokenized real estate lending “master feeder” fund (US/Cayman)
Advised client on potential issuance of fund tokens and their possible effect on an existing LP structure
Consulted fund manager on setting up a SPV for the tokenization of a LP interest in a venture capital fund, including advising on structure’s classification for purposes of US and Cayman securities regulations
Services Related to Formation and Operation of Tokenized Funds
Tokenized funds offer a number of potential benefits as compared to traditional funds.
- Access to a global pool of capital;
- Increased liquidity;
- Simplified digital management of significant number of investors via smart contracts;
- Automated and transparent governance, voting and compliance using smart contracts on blockchain;
- Prompt cryptocurrency operations as an alternative to banking transactions in fiat.
Our fund tokenization services include:
- Developing a fund’s strategy and structure;
- Possible integration of the token issuer into the current structures or creation of a separate tokenized structure for existing manager;
- Advising on jurisdiction and cross-jurisdictional issues;
- Implementing the chosen trust structure and preparing all the necessary documentation;
- Preparing private offering memorandum and subscription documents;
- Advising on foreign and US investor qualifications;
- Advising on AML/KYC compliance.
Fund token issuers must structure each offering very carefully to take into account various pitfalls presented by securities regulations, AML/KYC requirements and current investment and governance restrictions. Heightened global liquidity may present additional operational complications, for example, with secondary market re-sales and maintaining capitalization tables.
Some of the other major considerations that should be acknowledged and addressed by emerging tokenized fund managers are that security tokens may by subject to limitations on re-sale, number of investors, investor solicitation and acceptance, tradability on secondary markets in the US and foreign jurisdictions, etc.
We help our clients efficiently navigate the web of challenges arising throughout formation, governance and operation of tokenized funds.
- Engaging on Fund Innovation and Cryptocurrency-related Holdings
- Bank Secrecy Act/Anti-Money Laundering – FDIC
- Tokenized Security & Commercial Real Estate – MIT Digital Currency Initiative
- From Initial Coin Offerings to Security Tokens – Stanford Law School
- Private Equity and Blockchain: New Infrastructure or New Asset Class? – Harvard Law School
- Initial Crypto-asset Offerings, Tokenization, and Corporate Governance – Columbia Law School
- Potential for Cryptocurrency to Fund Investment in Sustainable Real Assets – Duke University