A cybercoin initiative licensing its name from Eastman Kodak Co. is looking to raise tens of millions of dollars this month.
Wenn Digital said on Thursday it plans to raise money starting May 21, selling future rights to KodakCoin tokens to accredited investors. Bloomberg News quoted the co-founder of what’s being called KodakOne as saying the funding being sought ranges from $10 million to $50 million.
Wenn Digital licensed the Kodak
name to launch an initial coin offering and is the creator of what’s called the KodakOne platform. KodakCoin is intended to be a token to be used for licensing digital images and paying photographers.
Kodak shares surged 119% on Jan 9 when the camera and film pioneer announced the “major blockchain initiative” at the Consumer Electronics Show in Las Vegas on Jan. 8. The stock went up again, 60%, the next morning when Global Blockchain Technologies Corp., a Canada-based blockchain investment company, said it was the “lead investor” in KodakCoin.
Kodak shares reached a high of $10.70 Jan. 10 but have come back down to earth since, trading at $5.20 at midday Friday.
Accredited investors must have a net worth of over $1 million, or have consistent income of more than $200,000, or be a company with more than $5 million in assets. So far, at least $2 million has been raised in what’s been called a presale to Global Blockchain, whose president, Shidan Gouran, tweeted that KodakCoin will eventually reach retail investors.
2018 is going to be the year that securities get on the #blockchain and that is going to be a big deal. @KodakOne is going through all the hoops with the regulators, all the way. Be available to a retail audience in a proper way. That is a big deal. https://t.co/nUGKZN4QTF pic.twitter.com/GujyCJaSmB
— KODAKOne (@KodakOne) April 30, 2018
That transition will be difficult.
Erik Syvertsen, an attorney who is the general counsel of AngelList, a website for angel investors and start-up companies, said the tokens can’t be awarded until the one-year holding period of Rule 144 has been satisfied. For those buying this month, this means they can’t get the coins delivered until May, 2019 at the earliest.
“The question is whether the SEC will treat the planned distributions of KodakCoin to platform users as a securities offering,” he said.
A spokesman for Eastman Kodak directed MarketWatch back to the Wenn Digital press release. A representative for Wenn Digital did not respond to a request for comment.
“There’s a strong argument, in isolation, that the distribution of small quantities of coins to photographers and other users as rewards for participating on the platform should not involve a securities offering,” says Syvertsen.
The press release says Pickwick Capital Partners, LLC and Exemplar Capital, LLC,“both FINRA-member firms and SEC-registered broker-dealers,” will participate in the offering. The use of brokerage firms, however, “may tilt the SEC towards concluding that the KodakCoins are securities in all contexts,” said Syvertsen.
In a recent speech, SEC commissioner Hester Peirce said, “Designating certain ICOs securities offerings does not end the inquiry once and for all. For those ICOs and tokens that do come under the SEC’s jurisdiction, it will fall to us to devise an appropriate regulatory structure for these new types of deals.”
Syvertsen says that for these ecosystems to flourish, “there really needs to be a way to distribute tokens to end-users in their commodity state. Otherwise, the myriad of uncertainties and frictions around offering and resale registration, exchange registration, broker-deal regulation and a host of other securities law issues will deter a lot of projects from launching in the U.S.”
Read: Key KodakCoin exec barred from serving as officer in German companies
Read: Here’s the blueprint for how ICOs are getting off the ground without SEC vetting