Is this an STO? Derivatives exchange seeks shareholders, FTX offers minimum of $250,000 in equity stake.

The derivative exchange FTX, supported by Binance, announced yesterday (25) the issuance of equity tokens with a valuation of $1 billion. The minimum investment amount is $250,000.

The cryptocurrency exchange FTX, which offers a variety of derivative products such as contracts on the U.S. presidential election and Shitcoin, has climbed to sixth place in the seven-day trading volume rankings according to Coingecko. This week, the exchange announced the opening of purchases for FTX equity tokens with a minimum limit of $250,000.

Founded less than a year ago, the exchange was reported last week to be seeking funding at a valuation of $1 billion for expansion. According to its CEO Sam Bankman-Fried, the equity fundraising target is set at a minimum of $30 million to $50 million or higher. He believes that this approach is one way for small investors to obtain shares in the company.

As per the announcement, FTX issued 500 million equity tokens at a valuation of $1 billion, and investors can purchase them using methods such as Bitcoin. The tokens will be distributed to the exchange wallet and dividends will be distributed according to the shareholding.

Restrictions on Investment and Trading Prohibited

Due to the issuance of equity tokens and their full circulation, there are still many restrictions or undefined areas in various securities regulations worldwide. Perhaps due to these considerations, there are several additional conditions for purchasing these equity tokens.

According to their announcement, holders of these equity tokens have economic rights equivalent to owning shares in FTX Trading LTD (referred to as FT), but they do not have voting rights as shareholders.

The company's operational headquarters are in California, USA, while ownership belongs to a registered company in the Central American island nation of Antigua and Barbuda. In consideration of various national securities regulations, the announcement has stated that there is no sale in restricted areas such as the United States, trading of equity tokens on any platform is prohibited, and withdrawals from wallets are also not allowed.

FTX strongly hints that equity token trading will be allowed in the coming years, but compliance with securities registration or exemption conditions and providing liquid trading will require significant legal compliance costs under various national securities regulations and coordination with many regulatory restrictions.

Registering exchanges overseas to evade regulations in major countries is a common practice. However, due to the borderless nature of cryptocurrency trading, despite exchanges blocking users from specific countries to avoid controversies, there are still many loopholes to exploit.

It is certain that the issuance of unregistered equity tokens is a matter of significant concern for the U.S. Securities and Exchange Commission (SEC), as seen with the considerable pressure faced by Telegram for its involvement in unregistered securities. Therefore, if in the future U.S. users acquire them through resale, there may be legal implications.

Community Confusion

Regarding FTX's initiation of equity fundraising, there are voices of confusion within the community. Some question why funding is needed when FTX seems to be profitable enough. Others notice that fundraising through equity tokens is a very aggressive financing method, wondering why a well-operating exchange would need financing at this time.

In addition, FTX's platform token FTT, besides being used for fee trading rewards, also has a mechanism for profit buyback and destruction. After issuing equity tokens for funding, it remains uncertain if there will be conflicts of interest between the two.

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