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Fat Burger Secured $40M via Tokenized Securities

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Fat Burger Secures $40M in Funding

This week, the parent company of the popular food chain Fat Burger, Fat Brands, received a $40 million capital infusion. Importantly, the company raised the funds via tokenized securities. Company officials stated that the funding event was just one of many planned for the year, with the end goal of raising a total of $500 million.

Discussing the successful funding venture, President and CEO, Andrew Wiederhorn called the results “transformative” for the company. He went on to describe how the event represented an important milestone for the entire industry. Specifically, he described how there is a real demand from restaurant companies for access to the business securitization market to get capital, rather than seeking term loans.

Fat Burger Tokenization Strategy

Importantly, the security tokens utilized in this transaction are simply digital representations of ownership shares. As such, their transactions only occur outside of and parallel to securities transactions.  Consequently, these transactions will not govern actual ownership of the notes.

Fat Brands CEO Andy Wiederhorn

Fat Brands CEO Andy Wiederhorn

The notes break down into two classes. Company officials explained that the first issuance included $20 million in Class A notes. These notes received a rating of BB by DBRS Morningstar. Also, $19.7 million in Class B notes were issued. Importantly, these notes were the first blockchain security to ever receive a rating from Morningstar.

Morningstar Rates Tokenized Securities for the 1st Time

Interestingly, Morningstar pointed out some of the benefits associated with tokenized securities. Specifically, the group cited faster access to data and increased transparency using the Ethereum-based protocol.

Investor Perks

Investors in the Fat Brands tokenized securities receive a host of benefits. These benefits include a cut from all royalties and initial upfront fees charged to Fat Brands franchisees. Currently, the firm has over 400 stores in operations. Additionally, there are around 200 more scheduled to open in the coming months. These brands include Fat Burger, Buffalo’s wings and Ponderosa Steakhouse, to name a few.

Fat Burger – Cadence

In order to make this advantageous plan a reality, Fat Brands sought out the professional assistance of New York-based blockchain firm Cadence. For its part, Cadence would issue security tokens to all investors and record the transactions on the Ethereum blockchain.

Notably, this week was the first issuance of dividends. These payments came in three different tokens. Importantly, two token types represented tranches, whereas, the third was a US dollar-pegged stable coin called $CDG. In total, 80 million tokens were transferred to the respective transaction parties.

Fat Brand Funding

According to company executives, the firm earmarked $25 million to refinance existing debt. The move would benefit the company greatly with one estimate showing a yearly savings of $2 million. Also, any remaining funds will go to acquiring additional restaurant brands.

Tokenization Firsts

Fat Brand just opened the flood gates for all restaurants seeking access to more capital via the securities markets. You can expect to see the firm extend its services to interested parties in the coming weeks. For now, Fat Brands just made a power move in the market.

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David Hamilton is a full-time journalist and a long-time bitcoinist. He specializes in writing articles on the blockchain. His articles have been published in multiple bitcoin publications including Bitcoinlightning.com

Security Tokens

Germany – Crypto Custody License Receives Push-back from Banks

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Germany - Crypto Custody License Recieves Push-back from Banks

Germany’s crypto custody license was supposed to give blockchain-based firms access to the basic banking essentials. Despite this fact, stories continue to emerge of companies finding it very difficult to acquire banking services such as checking accounts. A closer look reveals some of the reasons why the German banking industry is still pushing back against crypto adoption.

Confusion, FUD –  Crypto Custody License

One of the main reasons German banks are hesitating to provide crypto-related platforms service boils down to a lack of clarity in the space. Both crypto firms and institutions have uncertainties and concerns related to applying for the crypto custody license. Until Germany’s Federal Financial Supervisory Authority (BaFin) clarifies these issues, such as what type of activities would qualify as crypto custody, banks will still error on the side of caution.

For example, there is a lack of transparency around crypto exchange operations. Banks are curious about how functionalities such as staking and lockup periods could affect the custodial license of an exchange. Currently, the law states that any crypto firm with access to customer’s private keys is a custodian.

Crypto Custody License

Additionally, in March, BaFin released a guidance stating that tokens originating from security token offerings (STOs) can be custodied by a crypto custodian without the use of a depository bank. Shortly thereafter, regulators issued additional guidelines regarding the management, IT, and security requirements set for crypto-related businesses seeking licensing. Importantly, BaFin states it intends to create more rules focused on operational risks in the near future.

Stifling Bank Participation

This “to-be-announced” approach is enough to keep Germany’s major banking institutions on the sidelines for now. In fact, only tech-focused service providers contributed to the space so far. Next-generation banks, such as SolarisBank, continue to slowly propagate the sector. Solarisbank opened a location in Germany in December 2019.

Solaris via Homepage - Crypto Custody License

Solaris via Homepage – Crypto Custody License

Lack of Banking

In a recent interview, Matthias Winter, partner at Eversheds Sutherland Germany discussed how the lack of banking is a real issue facing the market. He explained that there is “no legal reason why” banks are hesitating to take on crypto clients. Winter described “confusion” as the main hurdle the industry needs to overcome.  Additionally, he spoke on how banks function on a risk versus reward premises and opening a checking account for crypto-firm leaves them exposed to future regulatory changes

Notably, Winter also spoke on how the changes could affect the market. If, or rather when, BaFin clarifies these inconsistencies, there will be a gold rush to the market. In essence, banks would need to acquire crypto custody firms to gain access to the technology as fast as possible.

Crypto Storage Deutschland GMBH

To find examples of how this market confusion wreaks havoc on the industry, you need not look any further than Crypto Storage Deutschland GMBH. This firm underwent a real struggle when they decided to open a branch in Germany to take advantage of the new regulations. Executives went to no less than 15 different banks before they were able to get a basic checking account.

Discussing the tribulations, Stijn Vander Straeten, CEO of Crypto Storage AG cited a plethora of difficulties his firm encountered. Straeten described a scenario where you are up against the institutional banking arm. He explained that crypto companies aren’t “making them money by asking for checking accounts“, and as such, they are not a priority by any means.

White-Label Solution for Banks

Notably,  Crypto Storage AG recognizes the need to secure digital assets. The firm currently offers a white-label solution for banks that want to offer the services to their clientele without taking on the risks associated with emerging markets.

Germany Moves Forward –  Crypto Custody License

German regulators appear to be moving, albeit slowly, closer to the digitization of the markets. Every day that passes signals more growth and development in the country’s blockchain sector. Hopefully, in the coming months, BaFin provides banks with the specifics they need to give firms access to banking essentials. If not, Germany risks falling behind in the global race to tokenization.

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Lawsuits Goes After Some of the Largest Names in Crypto

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Lawsuits Goes After Some of the Largest Names in Crypto

In what appears to be a broad swipe at the crypto sector this week, multiple lawsuits filed with the Southern District of New York claim wrongdoing against a myriad of blockchain-based firms. The class-action lawsuits allege wrongdoing on the part of crypto heavyweights such as Binance, Block.one, BitMEX, KayDex, BProtocol, Status and TRON Foundation, just to name a few.

According to court documents, the latest suit lists three plaintiffs – Chase Williams, Alexander Clifford, and Eric Lee. Interestingly, Roche Freedman is the firm heading the lawsuit. You may recognize the name from their recent lawsuits against Bitfinex and Tether. Additionally, they led the cases against Craig Wright and Bitfinex in the past.

Crypto Lawsuits – Details

The new lawsuit lists eleven companies in violation of regulations. These companies span the entire crypto sector.  Tokens such as ELF, CVC, TRX, TOMO, SNT, and others are listed for their use of IEO and ICO models in the past. The suit claims these tokens are unregistered securities. As such, the token made agreements with exchanges in violation of Section 5 of the Exchange Act.

Section 5 via Cornell Law School

Section 5 via Cornell Law School

The violations also extend to the named exchanges. The lawsuit lists KuCoin, Block.one, Quantstamp, Civic, and Binance as exchanges who sold unregistered tokens. Plaintiffs argue that these exchanges didn’t possess the required broker-dealer license in the U.S. Importantly, the plaintiffs believe that the SEC clarified in the past that the listed tokens are securities.

The suit also lists several crypto stars specifically. For example, Changpeng Zhao (CEO Binance), Vinny Lingham (CEO Civic), Justin Sun (TRON), Brendan Blumer (Block.one) and Dan Larimer (EOS) are all named in the suit.

Serious Allegations

The allegations are not trivial, For example, the trio argues that tokens such as TRX deceived investors about their purpose and level of decentralization. The suit claims that the centralization was “not apparent at that time.” It was only after the passage of time that investors gained the necessary insight to determine this. The suit states that there was a clear delay before the “issuer’s intent, the process of management, and success in allowing decentralization to arise”  become apparent. In this way, the allegations state investors were “misled into believing that TRX was something other than security when it was a security.”

Taking on the Crypto Industry

This case appears to be an attack on some of the most important firms, exchanges, tokens, and people in the crypto sector. The large scope of allegations and the global nature of the case will cause delays along the way. Consequently, it could be a while before this trial makes its way to the courtroom.

Lawsuits for the Stars

It’s hard to imagine a scenario in which the plaintiffs win this case. They would need to establish numerous precedents during the trial. These new rulings could stifle innovation in the US blockchain sector for years to come. As such, you can expect to see a measured response to this lawsuit in the coming weeks.

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STOMarket Adds Mt Pelerin – MPS Token

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STOMarket lists Mtperelin

This week, the research and analytics firm, the STOMarket announced the addition of the first international security token to its tracker. Importantly, researches chose the Swiss tokenization platform, Mt Pelerin Group as the project to receive this honor. Now, potential, and current MPS token investors can monitor market developments easier than ever before.

Currently, the STOMarket hosts the largest repository of live security token data available globally. The firm has held on to this title since it first entered the market in 2018. Importantly, the group was the first data aggregator in the digital securities industry. As such, STOMarket researchers gathered primary offering data for over 300 STOs to date.

Mt Pelerin Group SA Tokenized Shares

The decision to list MPS tokens makes sense for a number of reasons. Primarily, the Mt Pelerin Group SA is one of the first tokenized shares to provide direct and full ownership to token holders. This strategy differs greatly from companies that utilize tokens simply as a form of tethered ownership rights. In this instance, the token is the actual share.

MPS Token

As part of the strategy, the Mt Pelerin Group tokenized its 2018 cap table. Interestingly, 5% of these tokenized shares were sold at a public offering. Importantly, no US investors were permitted to participate in the event. Notably, the group chose to make MPS tokens ERC-20 compliant.

MPS Token Data via STOMarket

MPS Token Data via STOMarket

Currently, Ethereum host the largest number of security tokens in the market. As such, ERC-20 compliant tokens enjoy added interoperability when compared to other protocols in the space. This interoperability comes in the form of more wallets, Dapps, and platform options. Already, the MPS token trades on the Uniswap Decentralized Exchange.

Mt Pelerin Joins the Ranks – STOMarket

Discussing the important milestone, Arnaud Salomon, CEO of Mt Pelerin stated that his team was “thrilled” to see the MPS token listed on stomarket.com. He described how this decision places his project in line with other “industry trailblazers.” Lastly, he described how the addition allows investors and analysts to monitor this unique token’s growth.

STOMarket Growth

Not surprisingly, the STOMarket continues to expand its role in the market. For example, in 2019, the firm launched support for secondary trading transactions. Immediately, investors gained access to important data on the six largest security tokens in the market. Since then, the group has added multiple tokens. Today, the firm is building advanced support for hourly security token pricing, trading volume, and market cap updates internationally.

Future Listings

As part of the STOMarket’s early response strategy, the company works closely with security token issuance platforms and exchanges. Notably, the firm has data partnerships with MERJ, BlockStation, Tokenise, just to name a few. Discussing the important role the company plays, Marko M. Hafez, Co-Founder and CEO of Blockstation explained how researchers took the “initiative to centralize and publicize STO and Tokenized IPO listing.”

STO Data Access

Providing the STO market with live trading data continues to be a critical role in the space. Thankfully, the STOMarket makes it easy for anyone to monitor and share data on developments in the industry. You can expect to see these researchers play a more pivotal role in the market as STO adoption continues to expand in the coming months.

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