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KoreConx Co-Founder:
Why Custodianship Is Key

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Expert Interview


 
Oscar Jofre of KoreConX

Oscar Jofre

Oscar is currently one of the Top 10 Global Thought Leaders in Equity Crowdfunding, a Top 5 Fintech Influencer, Top 10 Blockchain and a Top 50 InsureTech. He has published an eBook that has been downloaded in over 20 countries, and been distributed by partners worldwide.

Oscar is a featured speaker on Fintech, regulated, equity crowdfunding, compliance, shareholder management, investor relations, and transparency in the USA, Australia, UK, Germany, France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering alternative finance, security token offerings, equity crowdfunding, STO, TAO, ICO/ITO, RegTech, insurance, banking, legal, and crowdfunding. Oscar also advises the world’s leading research, accounting, law firms and insurance companies on the impact Blockchain, STO, TAO, ICO, Fintech, RegTech, LegalTech, InsurTech and OrgTech is having in their business.

He is a member of the Crowdfunding Intermediary Regulatory Advocates (CFIRA) in the USA, and a contributing author to The Fintech Book, the world’s first crowdsourced book on Fintech globally. He writes for Sharewise, Locavesting, Equities.com, Business.com, Crowdfund Insider, Crowdfund Beat, Bankless Times, and Agoracom.

Oscar has been recognized as one of the 10 most influential Hispanic Leaders in Canada. In May 2010, Oscar A. Jofre Jr. was recognized by the Rt. Hon. Stephen Harper for his accomplishments.

Oscar was awarded the Vision 2012 Business Man of the Year by the Toronto Hispanic Chamber of Commerce on September 2012.

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KoreKonX: Creating the world's first highly-secure permissioned blockchain ecosystem for fully-compliant issuance, trading, clearing, settlement, management, reporting, and corporate actions for tokenized securities worldwide. KoreConX is the all-in-one, AI-based, global blockchain platform that manages the full lifecycle of tokenized securities to ensure compliance with securities regulation and corporate law. Connecting companies to the capital markets and secondary markets to facilitate access to capital and liquidity for private investors.

Transcript


 

Adam Chapnick:

Hey everybody, it's me again Adam Chapnick with the Security Token Academy and we are here at Security Token Industry launch week. And I am joined by none other than Oscar Jofre, the co-founder and CEO of KoreConX. Thanks so much for being here.

Oscar Jofre:

Thank you, thank you.

Adam Chapnick:

So, KoreConX, some people know of you, some people don't. For everybody who's watching you who hasn't heard of you, tell us what is KoreConX.

Oscar Jofre:

Great, thank you for that opportunity. I really appreciate it. KoreConX is an all in one insurance platform. To help insurers launch a fully compliant security token around the world. And along with it we provide a platform that has additional functionality to manage the lifecycle and all its corporate actions. Cap table management, investor relations, regulatory reporting, access to additional capital raising, and more importantly, to keep them compliant. We are also a transfer agent in over seven different countries around the world for private companies only.

Adam Chapnick:

See that's terrific. That's a term that people sometimes encounter a little too late, and they don't know that they needed or they don't know what it is. Can you just for everybody watching, just a define what is a transfer agent. Why is it important? Why is it essential in this process?

Oscar Jofre:

Great. You walked in here there were custodians and they get that mixed up with cryptocurrency, but we're more than just custodians. We are, we're the book of records for the company. So if there's ever a transfer, a sale, a movement of that security, or an action within that security, it's our responsibility to make sure there's a book of records for the shareholders to be able to have a transparent way to be able to report to them. For the board of directors to have confidence that these are the rightful holders in their corporation.

Adam Chapnick:

Right.

Oscar Jofre:

And to make sure that there's no monkeying around with the cap table going on. And more importantly, to make sure that when trades are occurring or any activity is being done within the regulations that is allowed within the regulation that you'll raise your cap table.

Adam Chapnick:

Yeah, it's a really important protection for the investors. They don't get to know what is happening once they've bought the shares, they just know that they did. But they don't know what happens next.

Oscar Jofre:

That's right. Even though they sign the subscription agreement online, how many people read the hundred pages? They just get the bullet points. You know, maybe it's a, it allows you do to this, this and that, but people don't actually read the fine detail. And it's the details that actually, down the line they go "hey can I do this, can I do that?" Well image all that embedded in an immutable small contract like ours, with artificial intelligence that actually knows how to respond to make sure that they know what they can do with it.

Adam Chapnick:

Yeah.

Oscar Jofre:

So, they go to secondary market, it knows how to act. It's doesn't need to go back, "hey Oscar can they do this?" Yes of course. It's automatically done for them.

Adam Chapnick:

So, this is actually interesting. I don't get to drill down on this, almost ever so if you wouldn't mind, can you talk through some examples of like, what are somethings that someone might say "is it okay to do this?" Like, for example, what? What are the things that a transfer agent can say "yes, you can," or "no, you can't."

Oscar Jofre:

The most common question we get today, because you know we deal with real world companies today that are raising capital in the private world. On an average 15, 20 questions a day, "I just got this share, what does it mean?"

Adam Chapnick:

Okay, that's pretty wide open.

Oscar Jofre:

I know, I know. "Do you know who the CEO of the company is?" I mean we're talking some basic. The other one is, "so who can I sell it to?"

Adam Chapnick:

Okay.

Oscar Jofre:

That is often in the top three. Who can I sell it to? Then this whole notion-

Adam Chapnick:

Sorry, that's an important one that I've seen play out in good and bad ways.

Oscar Jofre:

Yes.

Adam Chapnick:

So in that case for example, someone says "who can I sell this token to?" Sometimes there are restrictions. Sometimes there are fewer, sometimes there are more.

Oscar Jofre:

Yes.

Adam Chapnick:

How does the transfer agent make sure that nothing bad happens.

Oscar Jofre:

In the current world with all tokenization it's all manual.

Adam Chapnick:

Right.

Oscar Jofre:

Now, you embed all of those requirements and it has to be something extremely smart. To make sure that it meets, the transfer agent is to check some balances. With again the custodian, we're making sure that yes, okay that's great. It's great that you read the core contract and it said that this individual fits the KYC, they're coming from that country, they can buy it, so forth. But we still have to double check it. It's one thing you telling me. I'm the one that finally said add it to the cap table. Once it gets added to the cap table, I can't just erase it.

Adam Chapnick:

Right.

Oscar Jofre:

It's not that simple right. Now I have to have an audit trail… oops we made a mistake. We accidentally added you as a holder and you shouldn't actually be a holder. So, it's a combination of two things, it's combining the element of making sure that it gets done properly, but you still need the last check. Now, that can be completely electronic digitized per se-

Adam Chapnick:

Yeah, but only if you know what you're doing. I mean you have to be…

Oscar Jofre:

Exactly, thank you. You need to know, right. Let me give you a perfect example of this. I mean, it's that we're here in the United States, this is fantastic. But, I don't know any token that's only sold in one country, have you?

Adam Chapnick:

Correct. Not Yet.

Oscar Jofre:

Not yet, exactly. We all want to sell global, right. The equity crowd funding on steroids, right. So here it is, we want to sell securities and multiple jurisdiction. So what happens when you sold a security to different holders in different countries. How does the security work at that moment, right? So, yes the token can make sure it meets all this require, but you still need somebody to double check it at the end.

Adam Chapnick:

Wow.

Oscar Jofre:

Because once it gets added, that's it. Right.

Adam Chapnick:

So do you guys, did you bake you're own token that you proprietarily put together? Or have you, you know cobbled together a couple of other ones? Or do you use a third party? Or a mixture of any of those-

Oscar Jofre:

Yeah. That's a good question. I don't want to use the word proprietary because we are a… our core protocol is going to be available for companies to use to launch their own. We have no mining in our protocol. We didn't want to have any gas prices to it. We wanted to make sure when a security was given to a holder, there be no leans on it, there be no restrictions whatsoever. Our protocol is now being adopted by broker dealers to help companies raise capital. We now working with four secondary markets that are regulated in the United States and Europe, to be able to trade. So, we're an alternative to what's been normally been discussed. Ours is based on Hyperledger Fabric. We felt that as a regulated entity, we needed something that we could bring confidence to the market.

Today, what people don't talk about is that when investors make an investment on public chains, the mart guys know how to hack. They know how to, they call it leakage. Now, I want you to understand something. On a utility world, leakage is acceptable. Under securities law, no leakage is acceptable. So where do the two million go? Where's the two million? According to you, you invested but the money's gone. So, we needed a chain that would no longer be acceptable in the pubic, it's permission based. It's not exposing the investors, it bring in investor protection. It's keeping everybody in the ecosystem compliant. And not only that, it's cost effective. We're not talking a 150 thousand dollars to pay developers, to mine and stuff like that. We're talking 10 thousand dollars. And you want a billion token or you want 10 billion? How many do you want? Right, it's your element. It's about the market sizing capitol, right. And you have to remove all the barriers to it. Technology is a great vehicle, but it's not the end all, sometimes.

Adam Chapnick:

Right. No, absolutely. Especially in the regulatory environment, you need people who can be compliant or else there's a lot of bad stuff that can happen.

Oscar Jofre:

Exactly.

Adam Chapnick:

It's not a joke and leakage is not a joke.

Oscar Jofre:

It's not a joke. I mean, one gentleman here told me "but, Oscar it's acceptable." I'm trying to tell you in securities law, it is not acceptable. And they've accepted it. They actually have a mine item, where they're willing to take the capitol to compensate the leakage.

Adam Chapnick:

Oh boy.

Oscar Jofre:

If you do that, I don't know how to-

Adam Chapnick:

The consequences, let's just say.

Oscar Jofre:

Exactly. So, what I will say is this. It woke up those that were sleeping. It woke up the industry. It woke up Wall Street, Bay Street. It woke up all the streets around the world. Everybody's awake. To think for one minute, that institutional investors, family offices, don't want to be. They want to participate, but they want custodianship. I said it earlier today, custodianship, custodianship is that key.

Adam Chapnick:

Yeah. So let's shift a little bit. Now KoreConX, who are the people, who are the constituents that you're serving. Who's your typical client and if they're one way now, who do you expect them to be next year? Are they the same or?

Oscar Jofre:

Yeah, that's a good question. So up until now, about 98 percent of our client bases all American companies, [inaudible 00:09:21]. We work with platforms like republic and a few others. A plus and Reg D. So these are companies that are doing traditional capitol raises and they're smart enough to say, "hey we would like somebody else to help us manage our corporate records." We provide a portfolio management to their investors, but now we've opened offices in Australia, Singapore, Dubai, and now we're expanding even further. Will the largest make up still be the United States, it will be. Today, there's still more capital raising being done in the U.S. than anywhere else in the world. That is reality today.

Adam Chapnick:

We're the cowboys.

Oscar Jofre:

We really are. We really are. You know people say, "Oscar, look at Malta." That's fantastic. A 145,000 companies raised trillions of dollars in the United States. That isn't changing.

Adam Chapnick:

Amazing. So, do you see any sort of trend, in terms of the types of issuers that coming around? In terms of verticals? Is it any certain kind of company versus another, or is it just sort of a wide array that there's not really a signal in the noise yet.

Oscar Jofre:

Yeah, do you recall the crowdfunding days?

Adam Chapnick:

I am from the crowdfunding days, yes.

Oscar Jofre:

So in 2012 we all thought that it would be early stage technology companies.

Adam Chapnick:

Yes.

Oscar Jofre:

In Orlando, we got a massive surprise by a gentleman, by the name Rodrigo Nino, from Prodigy Networks.

Adam Chapnick:

Oh right.

Oscar Jofre:

Rodrigo stood up on stage and he raised 680 million dollars,

Adam Chapnick:

In Colombia or something?

Oscar Jofre:

In Colombia, in real estate. So, I guess what I'm telling you today, we don't know what the asset class will be yet, and that's the opportunity. But, from our perspective, you know today we got over 50,000 companies on our platform. They come from biotech technology, cannabis real estate, film, funds.

Adam Chapnick:

Wow.

Oscar Jofre:

For us, we're agnostic.

Adam Chapnick:

Sure. Oh it's exciting. I just like to hear from people who get the view I don't get to see what's the use, who's using these things. So what do you think about, say in your crystal ball looking 18 months ahead. Where do you think this security token phenomenon will be? Will it be kind of still fighting through figuring out, you know, clarity from the regulators? Or is it going to be off to the races?

Oscar Jofre:

As far are regulars are concerned, clarity is there. It's a security.

Adam Chapnick:

All right.

Oscar Jofre:

There's no argument on that end.

Adam Chapnick:

Okay.

Oscar Jofre:

That's Canada, U.S., Australia, and a few other countries are following. So, that for many of us, it's already there.

Adam Chapnick:

Great.

Oscar Jofre:

As far as in 18 months, 18 months I see institutional inside. That's the key. We never got it in crowdfunding, because we couldn't give them the comfort of the security and the magnitude that this has, now we do.

Adam Chapnick:

Do you think, but don't you need to comply with the same caps? Won't you be fund raising within CF or an AA plus, things like that? Or is it, no, we're just not go do that.

Oscar Jofre:

No, I mean CF will still be, yeah, I think Reg D will benefit the most and Reg A plus. If Reg A plus gets shifted from 50 to 75 million, that's another game changer, right. But Reg D is going to benefit the most because we're going to see that kind of money that typically doesn't come in as early as it does, but it will come in. Real estate definitely, will be one. I mean you're definitely hearing that by us already.

Adam Chapnick:

We just had a 30 million dollar building in the East village get tokenized this week.

Oscar Jofre:

That's right. So, you can instantly get it, but tokenizing is one thing, now liquidity.

Adam Chapnick:

Yes.

Oscar Jofre:

You've spoken to Mr. David Weild, who is an advisor in KoreConX, we believe that in order to get true liquidity, you need the retail, but if you don't get the 36 plus trillion dollars of, you know, that's sitting out there right now in institutional side, liquidity will not happen. So we're working to solve our problem and that's one of the reasons we chose Hyperledger Fabric as our chain, to make sure that we can glue ourselves into the infrastructure that needs to have trust. Remember what I say, investor trust is everything.

Adam Chapnick:

Everything. Do you want to talk, a quick moment about what the benefit of Hyperledger Fabric is versus other things?

Oscar Jofre:

So from my perspective, being a regulated entity, as a transfer agent and having broker dealers that are regulated, we needed a chain that we could assure that all the information from a securities law perspective, could be properly managed, immutable. True immutability, no forking.

Adam Chapnick:

Got it.

Oscar Jofre:

Okay. So, you know-

Adam Chapnick:

There you go.

Oscar Jofre:

Okay there it is. You know, I go into a room that I never would be allowed in, right, with bankers and Hyperledger, good no forking. So that adds, those are big points, but the big surprise was that, this year IBM and Hyperledger, they're starting to expose the 700 plus installations. When everybody thought that the, the Goldman Sachs, J.P Morgans were asleep or were actually playing in sandboxes. Well I want to tell everybody, these 700 plus installations, they were working on it implementing. So they're inside, so they're working.

Adam Chapnick:

Wow.

Oscar Jofre:

So now, we need to plug ourselves into that. And it could be a theory based, I'm not saying, I'm just, for us at this time we felt this was the right chain to solve our problem as a company and make sure that, and we're not an island. We're never going to be one, we're not a broker dealer, we're just infrastructure and we just want to make it available to everybody.

Adam Chapnick:

Amazing. Well, we are big fans here at the academy and please we hope you'll come back soon and often and keep us updated on what you're doing.

Oscar Jofre:

We surely will. Thank you.

Adam Chapnick:

Thanks Oscar.