“There are an abundance of crypto funds out there, and many of them aren’t complying with the Investment Company Act. And, there are two main exemptions from the Investment Company Act 3: the 3C1 Fund and the 3C7 Fund. A 3C1 Fund limits you a 100 owners, right? So think of a 100 investors or 99 if you’re set up in a general partnership, because general partner counts as one, and so you’re exempt from registration up until and including the point where you hit 100 investors. You can use 506, you can sell to non-accredited and other elements of reg D, and you’re exempt from registration.”
“If you want go over 100 investor limit, then you’re a 3C7 Fund. The 3C7 Fund says you can go up to two thousand investors, but those investors have to be qualified, and that qualified status is actually higher than accredited, right? So qualified purchasers must have at least 5 million in investments, or if they’re an entity, the entity must be owned by qualified purchasers. So you have the flexibility of having far more investors, but yet you have the threshold for obtaining those investors as much higher. So it’s something to obviously consider when you’re structuring your funds. Do you want to have one large fund that’s a 3C7 but perhaps limits the the pool of investors, or do you separate that and have multiple funds, right, to stay as a 3C1 Fund and have different funds that are each themselves exempt under 3C1.”
“But there’s a multitude (I see him everyday) of crypto related hedge funds, and people kind ignore the Investment Company Act because they think that they don’t necessarily qualify as one because they’re doing crypto or what have you. But you do, because irrespective the oldest debate and discussion on what exactly crypto is from a legal perspective, you’re not selling crypt. What you’re selling is a security, because you’re selling a, you know, purchase interest — a unit interest in the fund, right, a limited partnership interest. So you’re definitely within the ambit of the securities world. Just the underlying assets may or may not be securities. But you know, there’s been hedge funds for everything from racehorses to cargo containers, so in those each were under the ambit or within the exemption from the Investment Company Act. So that’s my two cents. Adam Tracy. Check me out. adamtracy.io, [email protected] and hope to hear from you. Thanks.”
A former professional rugby player, Adam S. Tracy brings over twenty years’ experience as an attorney, consultant and dealmaker with a particular focus on cryptocurrency, digital products, payments and immersive corporate structures. As an accomplished executive and advisor to high risk merchants and stakeholders, Adam has proven himself as a results oriented, decisive leader with proven success advising early market entrants, technology adapters, as well as established participants across a wide range of verticals. Adam Tracy’s attack-first personality allows him to excel in dynamic, demanding environments including complex corporate negotiations, distressed environments and regulatory investigations.
In addition, Adam S. Tracy also has a successful track record co-founding high risk industry ventures, building & leading cross-functional teams, and spearheading diverse corporate transactions. A serial entrepreneur, Adam has successfully started and created exits across a wide swath of markets, including various mobile SaaS ventures, nutraceuticals, peer-to-peer payment systems, and several telemarketing-based ventures. Moreover, as a recognized expert in the payments field, Adam Tracy has been a blockchain and digital currency evangelist and influencer since the early days of Bitcoin.
Utilizing his proprietary “Pre-Event Driven™” strategy for decision making, Adam S. Tracy further leverages his over twenty years’ experience to create cost-effective, value-add solutions for each client. A data-driven acolyte, Adam continually refines his strategies based on field studies and data collection. Moreover, Adam Tracy further augments his range of solutions by actively networking with regulators, liquidity providers, legal and compliance experts, deal-flow brokers, investors and management of leading high risk industry ventures.
Adam S. Tracy earned his Bachelor of Science in Computer Applications and Bachelor of Science in Finance from the University of Notre Dame. He subsequently earned his Masters in Business Administration from the DePaul Kellstadt Graduate School of Business, while concurrently earning his Juris Doctorate from the DePaul College of Law. Adam lives outside Chicago with his with his wife, four dogs, and two cats.
On the Web: https://www.adamtracy.io
Email me: [email protected]