Adam S. Tracy Explains Wyoming Trusts & Offshore ICOs
Cryptocurrency attorney Adam S. Tracy explains the legalities of launching an offshore ICO from within the U.S.A. and the importance of utilizing Wyoming trusts as asset protection vehicles.
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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So to clarify an issue that keeps coming up, and a lot of you have have you sort of hit me up with questions, and I always appreciate the interest. But one question I keep getting is, I want to do an ICO, I don’t want to go offshore with my ICO entity, but I’m not going to sell to U.S. Citizens. Can I do it? And the answer is yes. Right? You absolutely can. You know, your ICO isn’t dictated, right. You have to think of the terms of offering, and when best way to sort of describe an offering, which is legal term of art, is that you are throwing your solicitations sort of out into space, right, out into the void, and you don’t know who’s gonna Echo back, right? That’s an offering. You don’t necessarily know who your kind of approaching. You may generally know, but you don’t know from like an individual standpoint. And so, you know, when you look at regulation S, which is the securities exemption that relates to sales to non-US residents, that’s always been sort of wide open. Right? There are no restrictions in terms of accredited, non-accredited. There are no restrictions in terms of manner of solicitation, and there never were, right? If you go to pre-Jobs Act, there wasn’t those restrictions either. So, when you’re looking at a offshore ICO from a domestic structure, you can definitely do it because ultimately even if you’re selling a security token, you’re relying on regulation S, which allows you to sort of sell this in a general manner and to not have to worry about the accredited non-accredited delineation.
So that having been said, you need to be very very very cognizant and careful that you aren’t somehow, whether accidentally or not, soliciting US residents, of course. But the question becomes well, where do I domicile, right, in the states? And, you know, I’ve addressed that before. I think Wyoming right now even, you know, in the non-crypto context is your ideal domicile. Now that they’ve passed crypto-friendly legislation, I think it’s really the only place to incorporate. Now I’m going to take that a step further, because when you talk about offshore, you’re talking about tax benefits, you’re talking about asset protection benefits, and I want to talk about specifically about the asset protection benefits. And, you know, people don’t realize this because you read a lot about these Alaskan spendthrift trusts, right, which are these self-settled trusts, meaning a trust that you create and settle and you name yourself the beneficiary. And there’s a lot of talk about how those are accreditor proof. Well, Wyoming has, what I believe, an even better statue. Okay? And it allows you to create a trust, put assets in trust, and name yourself the beneficiary of that trust, and those assets can be protected from creditors. Right? And I’ll get to why that’s important in a ICO contexy in a second. But, what I really really like about it, which you do not see in Alaska, but you see in offshore structures like the Cook Islands, I have talked about Cook Islands trust before, and they have what’s called the protector, right? You have a trust trustee, who’s sort of the manager of the trust assets, and then you have what’s called a protector. And that protector has certain limited abilities, right, that trigger at certain occasions. So in Wyoming, right, that protector, who could be like a close friend or something like that, has the ability to control distributions at certain times, has the ability to change the domicile of the trust, has these abilities that when it comes down to litigation and it comes down to creditors pursuing the trust or the individual, Let’s put the assets in the trust, that protector comes into play and can take steps that will minimize the ability of that creditor to recover. what is in trust. Right? Recover the assets of say, you. You being the trust settler, right? You being the trust person who formed the trust. Now combine that with no state income tax, you know, great privacy laws, I think Wyoming — the truss structure is ideal, and it’s preferable, and far less expensive than what you’ll find in Alaska. So, I like that.
Now, why do I like it in connection with the offshore ICO or even a domestic ICO, is that when you have an entity, right, any sort of entity, and you’re talking about asset protection strategies, and this goes beyond just crypto, but when you’re dealing with crypto you’re dealing with something that’s super high risk at the moment. Well, one of the great structures that you can create is to take let’s say your Wyoming LLC and those membership units that you own and put those in trust, right? Form a Wyoming trust, put your shares right or your membership units of your Wyoming entity in trust, so they are the nominal owner of that and you remain the beneficiary. So, you remain in control of your company, but you put an additional wall in between the company’s activities and your personal assets and your interest in that. And so, a lot of these crypto companies, especially these ICO companies, they’re top-heavy, they’re super valuable in terms of IP, right? And that’s what people ultimately would go after if you’re involved in litigation. So one of the perfect ways to insulate IP and other like fixed assets, and especially intangible fixed assets like patents, technologies, all sorts of things like that, is to do this sort of entity trust structure where the trust remains the nominal share holder. You may remain the beneficiary of the trust, so you keep control. You keep the benefits of owning the shares, but you’ve put this wall in between the actions of the company and the actions of accreditor. And so it’s a beautiful structure for something like an offshore ICO, or even a domestic ICO, in so much that you’re able to to, you know, insulate yourself further than just the normal protections of like an LLC a corporation.
So again, Wyoming, you know, love Wyoming. There’s like ten people there. Great place. I haven’t been there, but phenomenal asset protection laws, phenomenal corporate laws, becoming very crypto friendly, which is great. And, I think when you when you add the the trust structure to it, which is really a minimal cost and it’s sort of a minimal event, with this protector aspect that you really only see in offshore trust, I think it makes it really one of one of your best options domestically, in terms of asset protection and insulating yourself from potential creditors, litigation, things like that, which obviously come up in business, and they come up or tend to come up or could come up a lot in, you know, more high risk cutting edge businesses like blockchain and cryptocurrency. So, you have any questions, as always, reach out to me. Love talking you guys. I’m Adam Tracy. I’ll you check out.