Structuring Combined Equity and Token Financing for a Cryptocurrency Exchange — Case study

Overview

A cryptocurrency exchange operator engaged Aurum to assist with structuring a $5 million fundraising in the form of combined equity and token offering. This project encountered its unique challenges, including navigating transactions involving both fiat and cryptocurrencies, accommodating investors with diverse profiles and from various jurisdictions, and structuring the project entities to ensure compliance with legal and tax requirements.

Challenges

The primary challenges faced by our team included:

• Designing combined fundraising and developing the investment instruments.

• Managing transactions involving both fiat and cryptocurrencies.

• Onboarding and negotiating deals with multiple investors from various jurisdictions.

Legal Strategy

To address these challenges, Aurum developed and formed the project corporate structure, ensuring alignment with regulatory requirements and investors’ expectations. Leveraging our expertise in blockchain law and fundraising transactions, we negotiated the terms of the deals with multiple investors and fundraising platforms. Additionally, we reviewed and drafted a comprehensive array of legal documents, including necessary corporate actions, Simple Agreements for Future Equity (SAFEs), token warrants, Initial DEX Offering (IDO) agreements, and more.

Actions Taken

Our legal team collaborated closely with the client throughout the fundraising process, providing guidance and legal counsel at every stage. Our efforts further included assisting the client with determining the commercial terms of the investment transactions, financing parameters, risk management, and compliance with the applicable securities and regulatory requirements.

Outcomes

Through diligent efforts and strategic guidance, our team enabled the client to successfully raise the required funds while complying with the investor’s expectations.

Lessons Learned

This case emphasises the importance of counselling in fundraising transactions for blockchain projects. By leveraging legal expertise of experienced advisors, businesses can navigate complex legal landscapes and achieve successful outcomes while mitigating risks.