Jor is heavily involved with building out the ecosystem for digitizing and trading securities on the blockchain. He is most well-known for his expertise in alternative finance, including EB-5, crowdfunding, and initial coin offerings (ICOs). He is a co-founder of VerifyInvestor.com, the dominant accredited investor verification service in the world. In addition, Jor practices corporate and securities transactional law in Los Angeles and is a founding shareholder of Homeier Law PC. He is an expert on attracting and verifying accredited investors.
VerifyInvestor.com is the leading resource for verification of accredited investor status as required by federal laws.
Hey everybody it's me again Adam Chapnick with the Security Token Academy. It is Security Token Industry Launch Week and I am joined by one of our returning champions ... the one and the only, Mr. Jor Law, the founder and CEO of Verify Investor, thank you for being with us.
Thank you for having me.
Alright, so you and I have spoken countless times on this show about all of the exciting things that are happening in this industry. What I love talking to you about is sort of the nitty gritty. But before we get to that, why don't you tell people who aren't familiar with Verify Investor, what is Verify Investor?
So, very simple. Verify Investor is a service that does accredited investor verification, and that's generally used in many of these STOs that are being sold in the U.S.
Okay, great. And so who are the clients that you serve at Verify Investor?
There's a sub-
What kind? What kind of client?
At the end of the day, the onus of doing the verification is on the issuer or the company that's raising capital. Now, because they have to do the verification, but the verification is of investors, we also service investors. At the end of the day, if the investors aren't happy, then the issuer's not happy, for example right? Sometimes, the relationship is not always issuer and investor directly. Sometimes, it's issuer intermediary, investor and issuer, advisor investor. So really, any one of those three parties could be our client.
Got it. And how do you do what you do?
So, it's a software-based solution. Essentially, we match people that have verification needs, with people that are willing to perform the verifications. They're generally third party licensed attorneys, that understand the laws, and they will take the information that's been submitted, conduct the review, and return the result. So we're a technology layer where we don't provide the verifications ourselves, we provide infrastructure and technology, that enables people to safely conduct verifications, quickly and efficiently.
Got it. Now, while you're doing that, you're also ... the mild-mannered supervisor to many of these, sort of, biggest companies in the space. We won't tick 'em off, but you get to see, sort of the inner workings of a lot of the different components that are emerging in the STO ecosystem. So, in that sort of privileged seat that you have, what do you see as some of the more ... interesting developments that have been happening in the last, say, couple months?
The technology is getting to a point where it's pretty much workable for like, limited use cases, with limited interoperability. Where, if you've developed something, and you know your code works, and you've done it, a lot of people have gotten most of the way there. Maybe they've made mistakes but they've gotten pretty close. There's still a little bit of lack in terms of interoperability with, if I do this and I have to collaborate with that person, can I collaborate with that person? So both of us, if you've got your technology, I've got my technology, we're both happy with each of our technology, we haven't exactly figured out a way to seamlessly talk to each other just yet.
So that's happening. It's exciting that that's starting to happen. We're starting to see some deals being forced through, that is starting to force that interoperability, which I think is important because it's the deals that are giving people real use cases instead of abstract use cases.
Right. If somebody understands, what does this whole world do for me, that's when people are going to start using it. Cause, they'll suffer through the pain of getting there, if they know the benefit at the end.
Right. And also, you're able to start putting systems at work, otherwise when you're building for the unknown, you're just trying to build for everything. If you're doing it properly, but that means it's slower, and you're not ready to go to market yet. But if you just have a deal that you can send through, and you know that you can service that one deal, then you can start focusing on, well, at least with this part, I know I can make it work, and I can even make it work with your part, because it's small enough that both of us can just collaborate, to see if that one thing works. I think from there, you might be able to see, the big beginning of interoperability and it'll expand from there.
Yeah is it going to be kind of ... I mean, this is a genuinely ignorant question. Is there going to be an adoption, of a certain standard? Like when it was the Blu ray versus the HD DVD. Are we going to see some sort of standard that everyone will have to develop on so that that interoperability works?
So ... that's happening now. Right now you're getting a lot of people that are coming out with the realization that they need some sort of standard. Much like ERC-20, standardized things so that everyone knew how to deal with a token interact with a token. Well people are starting to realize well okay maybe I need some sort of standardization, so people know how to deal with a ... security token. And the evolution of that was that you had some people, start creating, one particular type of standard or protocol, and brand it under their own thing. Under their own name or brand.
And then of course you have multiple folks say well, I've got this protocol and I've got that protocol and I've got that protocol. So, people have realized okay, well now you have a proliferation of protocol, let's try to standardize it. So then one party said, okay, we're going to have a standard, and all protocol should adhere to this.
Well, of course now you've got multiple people proposing multiple standards… but, the big difference is before, the protocols were controlled by a single party, whereas the standards are, being proposed to the community. So even if they're proposed by one party, there contributed to by the community, and hopefully now you get a convergence upon a single standard that, now everyone can take home, and modify.
Yeah, some sort of agreement that's great. So ... in the past we've talked about some of the inherent technical challenges that you witnessed or understood. That had to do with the verification process with the KYC process, have you, tackled those? Are you seeing similar problems or, are they getting ... greater or lesser, or what's going on with that?
I think in general there hasn't been that much movement made, in solving identity gaps. Or verification gaps. The laws haven't changed much. The tech hasn't changed much. What will, be required will be some sort of shift in law, or some shift in what people believe is reasonable or acceptable right? So, if all the banks come together and say we agree that this is one method of AML / KYC, that we think works, for ourselves. And we'll share this with everyone else and they all agree. That would already be a step forward and things like that are starting to happen. So when things like that happen, then you can really start doing things, focus on standardization instead of, being separate. Now a credit investor verification, is a national standard, so we're lucky that we benefit from having that standard. And then you're starting to see, AML/KYC identity, providers trying to attain something similar.
That's great. Okay well, progress is progress, even if it's incremental. We like that. So, what about some of the developments we've seen around SCC action and things in the last month or so. Have you noticed anything going on there?
Yeah, I mean certainly they've been active, in investigating, and subpoenaing people to learn more about the industry. You know certainly at VerifyInvestor we've seen issuers get investigation letters. They've reached out to us to help, we've seen issuers get subpoenas, we've gotten subpoenas, not kind of for ourselves but to, respond to investigation requests, on other issuers, people that have used us. So there's that process and, as far as we're concerned, part of us is excited because when the SEC starts doing stuff like this, it's good for business. People start realizing oh okay, this is why we use Verify Investor we're happy we use VerifyInvestor.
On the other hand, it's difficult as well because sometimes the subpoenas are a little bit overreaching. You know we really want to strike a balance between being very cooperative, with the SEC, and regulators to help, make this place safer for everybody. On the other hand not just giving everything, because we're concerned about investor privacy and things like that.
Got it, so what's your prognosis for the STO space. How are we looking? Are we on pace to be killing it at the end of 2019? Are there a lot of inherent obstacles that some of the lay people don't understand?
Certainly. I think we'll do well. Woll we ramp up, amazingly quickly? I don't ... quite think so. I think there's some time. If you're taking a wait and see approach before you get in, you're not necessarily missing the boat. If you come in now, you're still early adopters, still one of the first movers, the boat has not left the harbor.
Yeah, that's great. What are one or two of those inherent obstacles that people may not be aware of?
I think interoperability, multi-jurisdictional issues, and ... liquidity, and cost right? So-
They go together, right,
Right. All of that stuff right? If I have a deal that is going to be small, private deal, maybe a generally solicit deal, and I'm going to not tokenize it and sell it only in the US, only to accredited investors. Well, it's not that difficult to do right now. So, if you go tokenize it, there's cost time involved with doing that. There's trust of the technology, then, if you're out there still trying to sell it, the promise of the extra liquidity is that enough to really get additional investors, and once you get those investors, is there really that liquidity? All of those are in early stages so, you might get a little bit of lift, but you're not really getting substantially, different, types of lift on there. So that's the thing I think early adopters will, be charging for leading the way. But, the benefit that they're getting initially, maybe not necessarily be so obvious.
They will be there. But they will definitely, be the first movers to realize them ... a little bit later than they expected to probably.
Yeah, I got it. Alright well we always love hearing, sort of the view from the inside from Jor Law. Thanks for being with us again and you know we'll have you back soon and we'll have you back often.
Right, thank you very much.
Good talking to you.
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