"Syndications and Cryptocurrencies and Crowdfunding, oh my! with Mark Roderick"
Episode 68: "Bad Beats"
Listen to the Podcast Here:
Mark Roderick fills us in on how the rich can take care of themselves and the non-rich need the government to help protect them, which is why he thinks crowdfunding is so important to the average person. Since the JOBS Act of 2012, Mark has spent much of his time in the crowdfunding space. If you have ever thought to yourself the internet is a ruthless landscape slowly squeezing the middleman and driving human beings up the value chain? Then you’ll want to tune into this week’s episode where Mark will explain everything from syndications to cryptocurrencies to crowdfunding, oh my!
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Markley S. Roderick concentrates his practice on the representation of entrepreneurs and their businesses. He represents companies across a wide range of industries, including technology, real estate, and healthcare.
Expanding on his in-depth knowledge of capital raising and securities law, Mr. Roderick spearheads the firm’s Crowdfunding practice and is one of the leading Crowdfunding lawyers in the United States. He maintains a Crowdfunding blog at www.crowdfundingattorney.com, which contains news, updates and links to important information on the Crowdfunding industry. He is one of the leading attorneys in the Crowdfunding/Fintech industry and speaks at conferences and other events all over the world. If you’re interested in having Mark speak at an event, please contact Molly Grimm, Communications Manager at Flaster Greenberg PC.
Mr. Roderick represents dozens of portals and other participants in the Crowdfunding industry, providing both technical knowledge and industry expertise.
Mr. Roderick has spent more than 30 years representing entrepreneurs and their businesses in a wide variety of transactions, including:
- Counseling entrepreneurs through the formation, development, and growth of their businesses
- Raising money through private placements and venture capital
- Buying, selling, and investing in businesses
- Planning business transactions to minimize corporate and individual taxes
- Preparing Shareholders’ Agreements, Partnership Agreements, and Operating Agreements
- Protecting business goodwill through restrictive covenant (non-compete) agreements
- Compensating key employees using options and restricted stock
- Technology licensing and development
Mr. Roderick developed and moderates a seminar series for entrepreneurs co-sponsored by the Rutgers-Camden Business Incubator, the Burlington County College High Technology Small Business Incubator, and the Rutgers-Camden Small Business Development Center. In this series, Mr. Roderick and other panelists guide the entrepreneur through key legal aspects of business development and growth.
Honors & Awards
- Top Attorney List, SJ Magazine, 2010 – 2014 & 2017
- Awesome Attorney List, South Jersey Magazine, 2009, 2013
- New Jersey State Bar Association
- Member, Taxation Committee, Health and Hospital Law Committee and Internet Law Committee
- Crowdfunding Professional Association
- National Crowdfunding Association
[00:00:30] – Quick Pitch Free LLC
[00:01:20 ] – Introduction to Mark Roderick
[00:01:47 ] – Mark Roderick discusses background in the crowdfunding sector. Since the JOBS Act of 2012, he has spent all of his time in the Crowdfunding space and today he is one of the leading Crowdfunding and Fintech lawyers in the United States.
[03:40:00] – He discusses the cool and challenging aspects of crowdfunding. The American Exchange Laws were created due to the Great Depression. Which is why we have the Securities Act of ’33 and the Exchange Act of ’34 among others. People were not thinking about the Internet when these laws were made. The law is antiquated.
[00:07:03] – He flashes back to the quagmire of Cryptocurrency. In August of 2017 many risk-takers and regular people who didn’t understand what they were buying threw their life savings into cryptocurrencies when prices were going through the roof. What was unknown was whether a Cryptocurrency was actually a security. The big law firms decided that Cryptocurrency was brand new and not a security and those regular people lost their life savings and none of the old laws were applied to help the investors.
[00:12:14] – He goes on to discuss the severe inequality that we have today. In the investment universe that has translated into the wealthy get wealthier and the non-wealthy don’t. The best investments have been reserved for very, very wealthy families. Crowdfunding is new opportunity to even out this playing field.
[00:16:14] – Crowdfunding 101:
- Only invest with someone you now. For example he recommends online platforms such as Crowdstreet or Realcrowd.
- See what the sponsor’s track record is.
- Read the operating agreement. Is it a mess? That is a red flag!
Accredited Investors Only and Fewer than 100 people
Why Accredited? “Rich people can take care of themselves.” They can pay for advice. Non-rich people cannot pay for lawyers and accountants. So they need the protection of the government. There are rules for accredited and non-accredited.
“The law assumes all investors can take care of themselves.“
[00:32:21] – Mark explains the difference between the 506(b) and the 506(c). It can be confusing. So what is the difference? Rule 506(b) allows an issuer of its own securities to raise an unlimited amount of money from an unlimited number of Accredited Investors and up to 35 Sophisticated Investors.
However, the issuer cannot make any offers or sales of the securities by any means of general advertising or solicitation. To prove they didn’t solicit investors, issuers must be able to demonstrate a pre-existing relationship with an investor. The relationship must pre-date any offer to sell securities.
For these issuers, the pre-existing relationship and non-solicitation provisions or Rule 506(b) have been a source of great confusion. The provisions also have caused misinterpretation and been a significant impediment to their ability to fund their real estate transactions or businesses.
Under the Rule 506(c) exemption, Issuers can advertise on their own websites, as well as website platforms operated by others who generally pre-screen the viewers to restrict viewing of offering materials to Accredited Investors only.
[00:37:03] How to find a good syndication attorney?
- Is the attorney is comfortable and does he have a background in the business?
- Check the internet
- Word of Mouth
- Find out if the attorney has done a lot of deals
In law, as in most everything these days, you get what you pay for.
[00:39:27] In the Syndication Space, fixed fees haven’t always been the norm when it comes to legal counsel, however, many attorneys are now working on a fixed fee basis. Mark goes on to explain that the most important thing in regards to billing clients is to have a happy client and not to nickel and dime a client to death.
[00:44:45] Mark discusses the dynamics of Crowdfunding and how it is just the Internet coming to the Capital formation industry.
“The Internet is ruthless. It drives down cost and promotes efficiency and eliminates middlemen.”
No one is exempt. The Internet makes us work efficiently. It rewards the efficient.
“What happens with technology is it drives human beings up the value chain.” It takes away the stuff at the bottom because the machine can do it faster.