Crowdfinance 101 (Series: Crypto, Crowdfunding & Other Crazy Concepts)

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Practical and entertaining education for
attorneys, accountants, business owners
and executives, and investors.
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DISCLAIMER
The material in this webinar is for informational purposes only. It should not be
considered legal, financial or other professional advice. You should consult with an
attorney or other appropriate professional to determine what may be best for your
individual needs. While Financial Poise™ takes reasonable steps to ensure the information
it publishes is accurate, Financial Poise™ makes no guaranty in this regard.
About this PowerPoint: if you are looking at this PowerPoint without the benefit of
listening to the conversation that surrounded it then you are doing yourself a disservice.
This PowerPoint was prepared in contemplation of being viewed in conjunction with
listening to a one hour webinar on the topic
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MEET THE FACULTY
Moderator:
Chris Cahill – Lowis & Gellen LLP
Panelists:
Jordan Fishfeld – CFX Markets
Maureen Murat – Crowdie Advisors, LLC
Andrew Stephenson – CrowdCheck Law, LLP
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ABOUT THIS WEBINAR:
Crowdfinance – 101
What is the “crowd” in Crowdfinance? What does the crowd thus buy and by what
means and modes? And why should the crowd do this rather than put its money to
work otherwise? What are the old (and continuing) modes for marketing and
selling private securities? What is it like to purchase private securities from on-line
portals? How are risks of fraud and mistake allocated there? Do on-line portals
help get the rest of us in on unicorns in utero? How are equity securities purchased
by the crowd turned into money? Is there a secondary market for private securities?
Should ICOs be understood as crowdfinance by other means?
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ABOUT THIS SERIES: Crypto,
Crowdfunding & Other Crazy Concepts
Two “crazy” concepts, but crazy how? What is money and why is cryptocurrency different, in paying
for goods and services and as currency for the performance of commercial contracts? Should I (or
my clients) enter the “crowd” in crowdfinance, and thus get in on start-ups that scale into unicorns?
For investors, each of these concepts implies assets not correlated with returns from index funds
that invest only in public securities. So there are opportunities to do better than “the markets.”
However, these concepts are also associated with actual examples of large-scale fraud or at least fear
of fraud. Are crypto and crowdfinance investments crazy-beneficial (notwithstanding the presence
of risk) or just crazy? This series seeks to give professionals, investors, users, and their advisors
useful insight into relevant opportunities and risks.
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EPISODES IN THIS SERIES
4/30/19 Episode #1:
Crypto Currency-101
6/4/19 Episode #2:
Crowdfinance-101
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Dates shown are premiere dates.
All webinars will be available
On Demand approximately 4 weeks
after they premiere.

Episode #2:
Crowdfinance – 101
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EQUITY CROWDFUNDING
• Equity Crowdfunding
✓ Offering of securities to a group of investors
✓ Often subject to securities and financial regulation (JOBS Act)
✓ Enables broad groups of small investors to support startup,
potentially aiming to use a different funding source to finance
further growth

OFFERING PROCESS FOR EQUITY
SECURITIES
• Offers and sales of equity securities must either be registered with
the SEC and offered publicly or exempt from registration and
offered privately
• Pre-JOBS Act (2012), an investor must have been an accredited
investor in order to participate in an exempt offering, and issuers
of private equity securities were barred from engaging in general
solicitation or advertising

ACCREDITED INVESTORS IN EXEMPT
OFFERINGS – WHO?
“Accredited investors” include natural persons who:
• possess a net worth (alone or with spouse) >$1 million (excluding
value of home, and not counting home mortgage as a liability, unless it
is underwater) or
• have an annual income >$200,000 (or joint income with spouse
>$300,000) in the 2 most recent years, and reasonable expectation of
similar or higher income in the current year

INVESTING IN PRIVATE EQUITY SECURITIES
PRE-JOBS ACT [Rule 506(b)]
• Accredited investor has pre-existing, substantive relationship
directly with issuer
• AI has pre-existing, substantive relationship with an intermediary,
such as a broker-dealer or investment advisor
• AI purchases resold private equity shares in secondary markets

JOBS ACT OF 2012 (IN SUMMARY)
• SEC’s prohibition on general solicitation and advertising eliminated
in certain private offerings in which only accredited investors
participate (Rule 506(c) and Title II)
• In addition to pre-JOBS Act access via issuers and intermediaries
with whom AIs had pre-existing substantive relationships, AIs can
now invest in private equity securities via on-line investment
platforms that advertise and engage in general solicitation

JOBS ACT OF 2012 (IN SUMMARY) (cont’d)
• Accredited investors and the “crowd” of non-accredited investors will
be able to invest in private equity securities via Title III (aka Reg CF)
on-line “crowdfunding portals” (with annual investing limits keyed to
income, net worth)
• Accredited investors and non-accredited investors will be able to
invest in private equity securities via Title IV (aka Reg A+) offering
platforms (with annual investing limits keyed to income, net worth)

HOW HAVE ACCREDITED INVESTORS HISTORICALLY
ACCESSED ALTERNATIVE INVESTMENTS?
• Occasionally, by having a pre-existing, substantive relationship
directly with the issuer or intermediary (know a guy- just for AIs
who travel in the “right” circles)
• In the secondary markets for resales of private investments
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HOW WILL ACCREDITED INVESTORS ACCESS
ALTERNATIVE INVESTMENTS IN THE FUTURE?
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 See previous Slide- +
 AI-only Platforms
 Rule 506(c)
 Title III (open to all)
 Public vehicles

Accredited Investors are able to participate in certain alternative
investment opportunities not available ot non-accredited investors, e.g.,
• private equity
• hedge funds
• venture capital
• angel investments
• private placements.
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WHO CAN INVEST IN PRIVATE COMPANIES VIA THE WEB?
Title II Reg D Offerings Title III Equity Crowdfunding
ISSUERS
The JOBS Act Rule 506(c) of Regulation D provides
domestic and foreign issuers with the opportunity to
engage in general solicitation and advertising of offering,
so long as they meet standard SEC requirements for
issuers.
Only open to accredited investors.
ISSUERS
U.S. companies will be eligible to raise funds using new
crowdfunding exemption 4(a)(6 )
Can only raise $1 m per year.
Companies that crowdfund will have to use a registered
broker or registered funding portal
Proposed rules require issuers to comply with significant
financial and business documentation, similar to public
company reporting, aimed at protecting
unsophisticated investors
Anyone can invest
Limits on investment amount is based on income and net
worth. Those with an income /net worth < $100k/year
will be able to invest the greater of $2k/year or 5% of
annual net worth/income
Those with an income/net worth greater than $100k per
year can invest 10% of their annual net worth/income
up to a maximum of $100k per year
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WHAT DOES CROWDFUNDING COMPETE WITH?
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• OPERATING COMPANIES
• EQUITY
Seed/F&F Angel
VC
Round 1/A
Round 2/B Round 3/C…
Pre-Revenue, early stage
Beta
Product Development/R&D
Early Operations
Special Initiatives
Main Street Growth
Pre-Institutional
Scale & Growth
Growth Capital
Product Expansion
Market Expansion
Assets
Wall Street Growth
Institutional Partners

TITLE III EQUITY CROWDFUNDING
• Creates new exemption: Section 4(a)(6) of the Securities Act
of 1933
• Issuers permitted to raise $1 million per year from both
accredited investors and non-accredited investors
• Crowdfunding issuers must use a registered broker or
registered funding portals

WHO CAN GO WHEN IT’S GO TIME [TITLE III]?
Title III Equity Crowdfunding
ISSUERS: JOBS Act Title III provides that US companies can raise money
from non-AIs using crowdfunding exemption 4(a)(6)
INVESTORS: Anyone may invest, but investment amounts are limited based
upon individual net worth and income; e.g., those with income/worth <
$100k/yr may invest the greater of $2k/year or $5% of net worth/income.
Those with income/worth > $100k may invest 10% of net worth/income up to
$100k/yr

DUE DIIGENCE OF INTERMEDIARIES
TITLE II (REG. D)
• Reasonable steps to screen out fraudulent offerings
• If platform is a broker-dealer, further duties apply for screening out stupid ideas,
outrageous valuations, and unsuitable investments
• Platforms that are not broker-dealers may have due diligence responsibility for
offerings they promote, unless they are passive bulletin boards
• Reg. D Rule 506(c) offerings must take reasonable steps to verify the accredited
status of investors
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DUE DILIGENCE OF INTERMEDIARIES TITLE III
CROWDFUNDING PORTALS
• Reasonable steps to screen out fraudulent offerings
• Portals that are broker-dealers have same duty as such portals
under Title II
• All crowdfunding portals must take reasonable steps to ensure
that investors do not exceed their investment limits set by net
worth and income

MORE ON TITLE II FUNDING PORTALS
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For a detailed description of Reg D offerings on funding portals
under Title II of the JOBS Act, see David M.
Freedman,“Accredited Investor Installment 6: Equity
Crowdfunding Under Regulation D” (May 9, 2019) at
https://www.financialpoise.com/equity-crowdfunding-under-
regulation-d/

MORE ON TITLE III FUNDING PORTALS
For detailed description of Title III investing limits, constriants on
issuers and portal, and allocation of risk among players, please see
David M. Freedman, “Accredited Investor Installment 7: Crowdfunding
Under Title III of the Jobs Act” (May 10, 2019) at
https://www.financialpoise.com/crowdfunding-under-title-iii/
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INITIAL COIN OFFERING (ICO): A FORM OF
CROWDFINANCE
1. An enterprise looking to create a new coin, app, or service launches an ICO, first by issuing a “whitepaper”
on what the ICO will fund, funds needed, duration of ICO, and how much the issuers will keep for
themselves
2. Investors purchase a new cryptocurrency token specific to the ICO in exchange for fiat currency or other
cryptocurrency
3. The issuing enterprise uses investor funds as a means of furthering its goals (launching product, starting a
digital currency, or fraud)
4. ICOs seek to bypass the rigorous and regulated capital-raising process required by venture capitalists or
banks

ABOUT THE FACULTY
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Chris Cahill – ccahill@lowis-gellen.com
Christopher Cahill is Head of the Bankruptcy and Restructuring Practice Group at Lowis &
Gellen LLP, in Chicago. He advises businesses on relationships with vendors, customers, and
lenders, to maximize market share, return, and liquidity. He also litigates on behalf of secured
creditors, trade creditors, and in chapter 11 cases and advised more generally on corporate
restructuring, including workouts, loan forbearance, assignments for the benefit of creditors,
UCC Article 9 foreclosure sales, and avoidance litigation.
Mr. Cahill also publishes and speaks frequently on commercial insolvency and commercial
transaction issues. He is an Executive Editor of Commercial Bankruptcy Litigation, 2d Edition
(Jonathan P. Friedland, Elizabeth Vandesteeg & Christopher M. Cahill eds., 2017), a
comprehensive treatise that is updated annually and published by Thomson Reuters. In
addition, Mr. Cahill is the host of Financial Poise Radio, a weekly interview and commentary
podcast for investors and other market participants, with 100 episodes and counting.
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Jordan Fishfeld – Jfishfeld@gmail.com
Jordan is the co-founder and CEO of CFX Markets, an online trading platform for non-public
investments that is transforming how people view and hold alternative asset positions. CFX
Markets is venture-backed with offices in Chicago, New York and California. As an early
innovator in the crowdfunding space, Jordan assisted on the rule development of many online
capital and crowdfunding rules in a number of different states and federally. Jordan is also the
elected Treasurer of the Crowdfunding Professional Association (CfPA), and continues to
advocate and educate on behalf of the crowdfunding industry. Additionally, Jordan is a board
member of the young professional real estate division of the Jewish United Fund and a Board
Member of UpStart, a San Fransisco based accelerator focused on Jewish engagement and
innovation. As a result of Jordan’s passion for working with the Jewish Community, he was also
named by Oy Chicago and the Young Leadership Division of the JUF as one of Jewish
Community’s 36 under 36. Prior to that, Jordan worked as a finance attorney for Katten Muchin
Rosenman, LLP, where he assisted on more than $1 billion worth of syndicated loan
transactions.
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Maureen Murat – maureen@crowdieadvisors.com
Maureen L. Murat is an attorney and is principal of Crowdie Advisors, LLC, a business consulting firm dedicated to
helping local and foreign entrepreneurs and small businesses form business entities, transact business (strategy,
planning and problem-solving), and obtain financing via equity crowdfunding and other alternative financing
methods.
Maureen is an Adjunct Professor at the University of New Hampshire School of Law, where she teaches Tokenomics
and Cryptocurrency Regulations and Smart Cities: Blockchain, Law and Government.
Maureen is a partner with Axes and Eggs, a blockchain think tank and digital advisory firm that focuses on
blockchain consulting, education courses for executives and digital advisory services.
Maureen also serves as Of Counsel to Cogent Law Group, a law firm dedicated to helping clients meet their business
objectives. Her practice focuses on corporate matters, cryptocurrency regulation compliance, securities and general
tax matters.
Find more information about Maureen on LinkedIn: https://www.linkedin.com/in/maureen-l-murat-esq/.

Andrew Stephenson – andrewstephenson@crowdcheck.com
Andrew D. Stephenson, Chief Product Officer for CrowdCheck and Partner with
CrowdCheck Law, is an entrepreneurial attorney focused on assisting small and early stage
businesses with corporate governance and securities law related matters. Prior to joining
CrowdCheck, Andrew was involved with evaluating internal company communications and
reports as part of complex civil litigation matters. Andrew has also worked for the United
States Congress, handling a wide range of policy areas.
Andrew received his B.A. from Claremont McKenna College and graduated, cum laude,
from the University of California, Hastings College of the Law. Andrew is a member of the
California and District of Columbia bars.
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IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily
for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education.
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Crowdfinance 101 (Series: Crypto, Crowdfunding & Other Crazy Concepts)

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