https://www.youtube.com/watch?v=d9tc6C4SDGs&t=36s
Blockchain attorney and advisor Adam S. Tracy explains the use of South Dakota trusts with respect coins, tokens and initial coin offerings.
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A former competitive rugby player, serial entrepreneur and, trader attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.
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TRANSCRIPTION:
I get questions from people who want start a coin, okay? And let’s differentiate between a coin and a token. A coin is like a currency coin is not necessarily even etherium based, but a coin doesn’t represent a ownership interest — it’s not a security. A coin is typically, you know, not launched through an ICO, but it can be. And the question becomes what structure, if I’m launching a coin, what type of structure should have? And I’ve spoken about this before, and I spoke about this in the context of foundations, right? I don’t like foundations, as a foundation implies not-for-profit — I think that’s, one, limiting and I think that’s, two, perhaps untrue in a sense, right? There is some profit motive behind launching a coin in most cases. As it relates to, you know, the structure that you have to use, you definitely need a structure, right? There’s still liability in launching a coin, and there definitely needs to some of entity behind it. And, really, the best structure for that is a trust, and there’s plenty of offshore trusts, which I’ll talk about in a different episode, but there’s also a lot of good structures that are domestic that would certainly do the trick. And, again, in a trust you have a trustee, who’s in charge of the trust corpus or the property of the trust, and the beneficiaries of the trust are the owners or the people who are entitled to receive the the property in the trust — so basically your coin holders in this case. One of the great places oddly enough for domestic trusts is South Dakota, right. You hear lot about Delaware and Alaska, and they’re good. South Dakota just tends to be the best and there’s a few reasons why:
1) A self-settled trust, meaning a trust that’s settled by the person who may be a beneficiary, is immune from creditors, meaning that in event of like a lawsuit or anything like that, a creditor can’t attach or obtain any of the trust corpus, the trust property. So in this case, like in the case of a coin, your trust properties likely to be more coin, right? And so what you want to be able to do is sort of shield that from any sort of creditor claims, and that’s what a South Dakota trust is able to do.
2) It has what’s called the protector and so, you know, typically with like a South Dakota trust you have a professional trustee — you pay trustee a certain fee for a year to, you know, on an annual basis to act as the trustee of trust. And that trustee is to some degree to govern the assets of the trust, which in the case of, you know, a decentralized coin or token there’s really nothing to do, right? So you’re safe in that regards. But the South Dakota law allows from something called the trust protector. And the trust protector is an individual or an entity that, in the instance or the case of any sort of legal peril, call it, has the ability to fire or terminate the trustee, and take the trust corpus and move that trust corpus, right? So it has the ability effectively take the trust property and move that to a different jurisdiction to seemingly shield it from any sort legal parent, like a lawsuit or anything like to that effect. So it’s really important and like the trust protector is really common with offshore trusts because, you know, those are asset protection trust by nature and you want to see like the utmost ability to sort of override a trustee. And you see that with South Dakota trusts, which is rare if not unheard of in the United States.
So two main reasons. Obviously South Dakota trust income is tax-free by the state. You know, you still have to contend with the IRS, but at least you’re not dealing with state level taxation. And so, you know, for starting a coin of any nature, right, you definitely need an entity, you definitely need something that is alive from a legal perspective, right, that has some sort of formation behind it because if not, you as the promoter are, much like with any like just starting a regular company, you’re creating lot of liability for yourself. So check me out. If have questions hit me up. My information is TracyFirm.com, at@tracyfirm.com — and I’ll talk to you later. Cheers.
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