BCAP Token Offering: arguably the most lawyered up ICO ever

While the rightful owners of freshly minted BCAP Tokens are still proudly awaiting their reward for jumping on the right bandwagon it is time to look deeper into the hype to see what might be lurking at the bottom.

Update:

The memorandum is not available via direct links anymore but it should be accessible for verified users when they log into their accounts.

Getting the memorandum

There is an excellent summary by Smith + Crown where they say they were unable to get hold of the memorandum and ask anyone interested to get verified and provide a review.

Well, if you are one of their investors the memorandum is located here when you are logged in. It actually is 72 pictures glued together (!) and that provides for no text search and no copying. If you really want a copy, just save the whole web page and the .png files in the sub-folder will contain the memorandum.

For those less fortunate of you, who missed out on this opportunity to share your wealth with BC III DLVF (and the people behind it), there is a way. Suppose you accidentally stumble upon a direct link to the first page. Then all you have to do to get to the rest of it is just change the last digit before the “.png” part, like this.

Certain things will attract your attention. I am going to tell you what attracted mine. Going through 72 pages of intentionally scrambled legal terms is dreadful. I had to read it three times but I am sure there is more than the things that immediately caught my eye. Therefore you are strongly encouraged to download and analyse on your own. Make sure you post comments in this blog or on twitter if you come across anything interesting.

Preamble / the very first page

“BCTH may redeem any or all BCAP Tokens at any time (i) after ten years from the original issue date for the then net asset value of BC III DLVF … or (ii) as it deems necessary upon receipt of information that a BCAP Tokenholder’s possession of such BCAP Tokens causes regulatory concerns for BCTH or BC III DLVF”.

Actually this provision gets a little “fine-tuned” later on in the memorandum. As is the case with everything else.

Certain notices

page iii

Whatever we say elsewhere is just marketing. The memorandum is king. Whatever we say in the memorandum, we do not imply that the information there is correct as well.

While the memorandum contains the summary of The Limited partnership Agreement between Blockchain Capital Token Hub Pte LTD (Singapore) and Blockchain Capital III Digital Liquid Venture Fund, LP. , you will have to refer to a copy of the original document and “other” documents as mentioned in the memorandum. They will helpfully be provided upon request. If anything in the memorandum contradicts The Limited Partnership Agreement or other such documents — tough luck, they win.

You did ask for those documents and you had a good look at them before you invested, didn't you?

How to purchase

page 1

“By executing the Subscription Agreement, you will attest that…you…are purchasing the BCAP Tokens for your own account for investment purposes only and not with a view to resale or distribution” and in compliance with the U.S. Patriot Act, ”as amended.”

Overview of the Offering

page 3

Realization Buybacks

“If there are realizations” in the portfolio

  1. a minimum of 50% will be used for reinvestment,
  2. the remainder may be used to buy back BCAP Tokens on the open market in which case all repurchased tokens will be burned (thus increasing NAV).

page 4

Liquidity buybacks

I love this.

“If the market price of a BCAP Token … drops below 75% of the NAV per BCAP Token … BC III DLVF and/or BCTH may, at its sole discretion, make purchases of BCAP Tokens on the open market. Such purchased BCAP Tokens can be sold again …”

Doesn't say it will be at market price.

Fixed Price Offer

BC III DLVF and/or BCTH may at any time after the first NAV report

“offer to repurchase BCAP Tokens at a fixed price notified through a notice published on TokenHub with prior disclosure of a minimum of thirty days’ notice. Such purchased Tokens can be sold again…”

Offer to whom?

Distribution policy

“BCAP Tokens have no distribution or dividend rights”.
“Any return of capital to BCAP Tokenholders will occur through open market purchases or repurchases of BCAP Tokens” as described in Realization Buybacks.

Regulatory redemption

Upon receipt of information” that your status as a Tokenholder “may cause regulatory concern” your tokens may be redeemed “at a redemption price calculated as the lower of

a. 70% of the market price per BCAP Token

b. the NAV per BCAP Token

c. “the funds available from liquidation of the assets of BC III DLVF within the following 3 month period

Investors, I applaud your bravery.

page 5

No liquidation rights

You will have no liquidation rights. Furthermore, “BC III DLVF has no fixed termination date and is under no obligation to redeem the BCAP Tokens at any time”.

No Registration Rights and Transfer Restrictions and Limit on U.S. Accredited Investors. Don’t sell the tokens to people from the U.S. or on U.S. soil unless you are not a ”U.S. person” transferring the full amount of your tokens to another “U.S. person”.

If you are one of the original 99 lucky U.S. investors you may get redeemed and you may even receive priority in being redeemed. Sounds like someone is really protective about their Green Card. If you are a “U.S. Person” and you bought tokens from a “Non-U.S. Person” or failed to obtain tokens from one of your fellow citizen in a legit way consider your investment lost.

Offering Expenses

“Upfront expenses relating to this Offering…will be billed to BC III DLVF and amortized quarterly over four years”.

And it’s already up to $1 mln (or even more). We’ll get to that later.

page 6

BC III DLVF Management Fees

Annual management fee 2.5% NAV (and they set the NAV themselves) plus 25% of BC III DLVF’s realized capital gains. Plus ongoing accounting, legal and tax expenses.

Risk Factors

It’s good. I hope you all read it, investors.

“We have the right to redeem the BCAP Tokens at any time … upon the occurence of certain regulatory events. The amount for which we redeem your BCAP Tokens may be below market price”

No voting, distribution or liquidation rights for Tokenholders.

This is all just from the Overview. Not bad, right? But the devil is in the details. There is a reason why there are 60 more pages of legal skulduggery in the memorandum on top of the Subscription Agreement, the tokenhub.com Terms, the omnipotent and mysterious Limited Partnership Agreement and other documents.

In my next post we’ll see how the memorandum gets a little more specific about certain aspects of this “investment” deal.

It’s like falling from a skyscraper. A little spooky at the beginning, with plenty of room to get up to speed and gather momentum that will make your inner greed produce a nice splash when it finally connects with reality.

Here are the links to Part II, Part III and Part IV.


This is all I have time for now. I hope this helps. Make sure you have read and understood the disclaimer at the bottom. If you come across any factual mistakes or faulty grammar you are welcome to point them out in your comments. To get updates or PM me you can always follow me on Twitter.

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