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Security Token Insight: Expert Interview with Alfred Ritter, vice president of US Capital Global

Expert Interview


 
Alfred Ritter, Vice President, US Capital Global

Alfred Ritter

Alfred Ritter serves on US Capital Global’s business development team. He is responsible for all aspects of the firm’s debt and equity business development, advisory services, client negotiations, and relationship management.

Prior to US Capital Global, Alfred was a Managing Director at Columbia Capital Advisors, Inc. and Columbia Capital Securities, Inc. He brings extensive investment banking, operational, and entrepreneurial experience with emerging growth and middle market companies in the security, consumer products, and media and entertainment industries, including equity and debt financing, private placements, buy/sell side mergers and acquisitions advisory, restructuring, and strategic advisory engagements. Previously, Alfred served as a Managing Director at Angeles Capital Group, LLC, where he was an investment banker providing strategic advisory services, private placements, and M&A advisory services. He also served at Allen and Associates, LLC, a boutique corporate finance advisory firm.

Prior to this, Alfred held senior executive, business development, and financial analyst positions with firms in the specialty retail, media and entertainment, and manufacturing and logistics industries, during which time he also worked in Malaysia and Taiwan. Additionally, Alfred has collaborated with a charity called Operation Hope, in which he helped provide financial literacy training and volunteered for a program called “Banking on Our Future.”

Alfred received a BS in Business Administration, magna cum laude, with a minor in Economics from California State University, Los Angeles. After graduation, he studied at National Taiwan Normal University’s Mandarin Training Center.

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Transcript


 

Amy Wan:

Welcome to Security Token Insight brought to you by the Security Token Academy. The security token industry is here, and will provide a key foundation for the evolving financial internet. The Security Token Academy provides insights about this new era for security token enthusiasts, investors and issuers. The security token industry is here and you can get involved.

Amy Wan:

Hi, I’m Amy Wan. Adam Chapnick is on assignment in London. Coming up on today’s episode of Security Token Insight in your security token investing news, we have the latest on Facebook’s cryptocurrency that’s planned for this summer.

Amy Wan:

We have an expert interview with Alfred Ritter of US Capital Global, plus we’ll also sit down with the co-founder and CEO of BlockQuake, Antonio Brasse. Details on how you can sign up for the Security Token Edge. That and more is coming up on this episode of Security Token Insight. Now it’s time for your security token investing news.

Amy Wan:

Facebook is moving forward with its planned cryptocurrency. The company is expected to officially announce in late June. Employees who are working on the crypto project will be able to take their salary in the new currency. Facebook is also planning ATM like machines where people can buy the currency, keep it here for the latest updates.

Amy Wan:

In other news, a new STO looks to use security tokens to fund film projects. Ryan Cavanaugh’s, Proxima Media announced plans for a new STO called Proxy Coin. Investors will receive fractional ownership in film, television, music, and other projects. The Central Wealth Group of Hong Kong recently invested $100 million into the STO.

Amy Wan:

The token will be on the Fusang exchange, which is one of the first crypto exchanges in Asia to trade security tokens. The Security Token Academy attended Crypto Invest Summit in downtown Los Angeles last month. The event attracts security token and crypto enthusiasts from around the world. The Security Token Academy team was there interviewing some of the biggest names in the security token industry.

Amy Wan:

That’s where we met Alfred Ritter. He is the vice president of US Capital Global. In this expert interview, Alfred sits down with our own Adam Chapnick to discuss investment banks and security tokens. Take a look.

Adam Chapnick:

So tell everybody or tell me.

Alfred Ritter:

Sure.

Adam Chapnick:

What is U.S. Capitol and how did it come to be?

Alfred Ritter:

Well, it goes back about 20 years and it actually started off as an equipment leasing company. It’s become an investment bank and started, as I said, debt, lending money, to businesses, grow stage businesses. Then as we have an asset management division which manages funds, like GPLP funds, and also has a wealth management division. Then we have, I’m on the security side and investment banking side, so we have that whole side as well. Yeah, that’s what we are.

Adam Chapnick:

That’s what you are.

Alfred Ritter:

Right.

Adam Chapnick:

So, why would a company with that kind of pedigree end up ... or shouldn’t say why, but how and why did you end up at a place like the crypto invest summit?

Alfred Ritter:

I asked myself that. Just before I sat down. No, but no, actually what we’re really interested in ... listen, I followed blockchain for a long time and Bitcoin and at buyer and investor. I own some crypto myself. But I’m really what we’re mostly interested in is the development of security tokens, and how that affects the traditional security industry. Especially in regards to private placements and privately held companies to provide ... and funds to give liquidity to investors prior to them going public. You know, they’re waiting 10 years to go public and you invest in a venture capital fund, hopefully you’ll see an exit.

Adam Chapnick:

Yeah. Before you exit.

Alfred Ritter:

Exactly, exactly.

Adam Chapnick:

Oh, I know the pain all too well. So yeah, that’s definitely the promise of the security token or a major promise of the security token.

Alfred Ritter:

Yeah.

Adam Chapnick:

So how are you guys involved with security tokens, if at all yet?

Alfred Ritter:

Yeah, so we are involved our role primarily is as a lead underwriter as kind of like if you think of an IPO. This is an STO.

Adam Chapnick:

Yep.

Alfred Ritter:

So we’re the lead underwriters. So we’ll go in and we’ll analyze the companies, the management team, the financials, the valuation, and we’ll go through the whole package. We’ll put together a whole diligence report on those companies. We’ll provide that information then to verify it, provide it to investors.

Alfred Ritter:

So it gives them ... we’re a vendor license firm, so it gives them kind of the good housekeeping seal of approval. To say that somebody actually went through this, it’s not just representation by a CEO of a company and so there’s a third party review of it.

Alfred Ritter:

So that’s what we primarily do. Then we distribute those securities. We are working on a couple tokenized products right now. One is a fund, it’s called City Block Capital.

Adam Chapnick:

We know City Block, Rob Nance, yes, friend of the show.

Alfred Ritter:

Yes. Rob Nance, City Block Capital. Yeah, exactly. So, so we’re raising money for him and we, you know, it’s gotten ... we got a listing agreement with them for on SharesPost. So secondary trading is potential, right? I mean as this works. And then we just launched a new one that’s for a company called Metals House, and it’s $150 million capital raise for an ostensibly inventory finance, for a gold trading firm. So, you have invested and they, they use that money to buy gold, and then every year that increases in terms of the amount of gold that’s backing the token.

Alfred Ritter:

And by year five it’s 100% backed, and they pay a dividend. So, they pay an annual dividend of 8%. 2% per quarter.

Adam Chapnick:

Okay.

Alfred Ritter:

So yeah, so it’s got income, it’s not ... so that’s kind of cool.

Adam Chapnick:

Nice old fashioned clip with a new twist.

Alfred Ritter:

Exactly. Exactly. So, so yeah, I like that. I like income products, especially given where we’re at in the cycle and you know, people like income.

Adam Chapnick:

So you guys kind of do an old fashioned, I hate to say that, but at a traditional review of the underpinnings of an offering, to sort of say there the fundamentals are sound. Do you have someone around that that kind of figures out the technical part of an offering? If it’s blockchain, you know, if that’s working and [inaudible] as well.

Alfred Ritter:

Yeah. So we’ll work through that and then we’ll bring in experts, depending on the field. Right? So if it was a medical device company, we’ll bring in an expert who knows something about medical devices, you know, unless we have that internal capability. And I think the same is true about digital securities or tokens, and having an audit, we’ll review the paperwork. We’ll require them to provide us with the documentation related to the smart contract and how that matches up to the actual analog contract that kind of underpins it. And we’ll work with auditing firms to do that as well.

Adam Chapnick:

Got It. And so what do you think in the future, are you guys looking to see STOs become a predominant part of your portfolio? Or is it just something that if the fundamentals are there and it happens to be offering digitally, then fine. And if not also fine.

Alfred Ritter:

I think we’ll continue to do both. And certainly in the short term ... in a lot of issuers or a lot of issuers, we’re doing an analog and a digital version. The analog can convert into the digital version. Cause there’s some institutional buyers that just aren’t going to buy a digital security right now. They’re just not ready for it. The custody, all the issues there. So, but in the future we see more and more, I mean, I equate it to like, I think somebody used this the other day, but I’ve been using it before that. But you know, you used to make a mix tape, right? It was kind of analog, right? And then, and then it went digital, you know, electronic and you have a CD and you could burn it, right? And now it’s, you can send an MP, whatever we’re at this point, to somebody or a playlist.

Alfred Ritter:

Right. So, so I see security’s going very much the same way. And I will think one day all securities will be digital.

Adam Chapnick:

Yeah. Actually that’s a great analogy because if you use that analogy, it’s just the song is either good or not. And so you need to like the song, it really kind of doesn’t matter if you hear it on the tape or the CD or the-

Alfred Ritter:

Marginally. Marginally.

Adam Chapnick:

Yeah, you’re right.

Alfred Ritter:

Well as I say, you know, a good deal is a good deal is a good deal. And so if it’s not a good deal, I don’t care what you ... how you package it, whether it’s digital or it’s a paper certificate, you know, if it’s not a good deal, it’s just plain not a good deal

Adam Chapnick:

Amen.

Alfred Ritter:

You shouldn’t invest in it. And so, I see it very much the same. Right? And, and you know, the cool thing is just the liquidity potential, right? As this trading develops and I call it a potential, it’s not a foregone conclusion, right. There’s plenty of publicly traded companies on pink sheets and over the counter that, that don’t trade. Not a lot of liquidity. So it’s not a guarantee by any stretch of the imagination.

Adam Chapnick:

Yeah. Now, what you said was interesting though, bout the sort of the dual offering. Do you think that’s a model that’s a good sort of bridge from here to when we have the actual volume?

Alfred Ritter:

I think it’s a model until the institutional investors feel comfortable putting their money in. So, if you’re 100% not going institutional, right, it’s all going to be family office, high net worth individuals, and you’re going to be selling to that market, then maybe you don’t need the paper product as well. But I think it’s a stop gap for right now, until the institutions really get on board. And I think offering four is, is a reasonable approach to that. And we council most of our clients to do so. Unless, again, unless it’s clear that it’s going to just go to high net worth individuals and more individual investors, who are interested in buying a token and are good with that. So,

Adam Chapnick:

So interesting. It makes perfect sense, to me at least. So, okay, US Capitol in the next six to nine months, the remainder of 2019, what can we expect from you guys?

Alfred Ritter:

I would expect that we’ll have more offerings right? Coming to market. We should be announcing some closings on these deals, right. And raising, you know, couple of hundred million dollars hopefully for our different issuers. I think those will then be positioned to start trading. Obviously, you know, most of the deals we’re doing are Reg D, Reg S, so internationally they could start trading, and after 40 days. So as long as they’re not coming back here. So I would expect that, you know, we have relationships with a lot of the different trading platforms and the tokens that we originate and that we distribute, we’ll then start trading in the secondary market.

Amy Wan:

We have the full interview with Alfred on our Website securitytokenacademy.com. I want to remind viewers that if you have any questions about security tokens, be sure to email us, and we could answer them right here on a future episode of Security Token Insight. The address is [email protected] Be sure to include your name, with your question. One more time, the address is [email protected] We have another interview for you today. This one is with the co-founder and CEO of BlockQuake, Antonio Brasse. Adam Chapnick caught up with him at CIS to get an update on the company’s plan to become a broker dealer and more. Take a look

Adam Chapnick:

For everybody who hasn’t heard of BlockQuake.

Antonio Brasse:

Yeah.

Adam Chapnick:

Why don’t we start off with a quick rub-a-dub one two three about what is BlockQuake? Why do you exist?

Antonio Brasse:

Yeah, so BlockQuake, we’re rolling out a centralized digital asset exchange, on a global scale. So we’re opening up end of May. Just very globally. We’re going to have seven fiat’s onboarded immediately. We’re using qualified custodians. We have a transfer agent. We were created just out of our own frustrations with the market, particularly in 2017, a year end where just platforms are inefficient, crashing, or they just didn’t have a lot of the features that I’m used to, myself and my team, we’re from traditional financial services who traded stocks, options for X. I’m like , you know, we’re accustomed to complex order types, a better speed and efficiency, and just a lot of that was lot lacking.

Antonio Brasse:

So that’s how BlockQuake was born.

Adam Chapnick:

Fantastic. So, I understand you have something specific involved. We are the Security Token Academy.

Antonio Brasse:

Yep.

Adam Chapnick:

You have some, perhaps, news to share about security tokens and BlockQuake?

Antonio Brasse:

Yes. So we are actually pursuing our broker dealer, ATS, currently.

Adam Chapnick:

Very exciting.

Antonio Brasse:

We believe we’ll have it in about six months. Our attorneys are the same attorneys that a number of the other platforms that have their ATS use. So, they’ve got the process down at this point. Right. So we’re pretty confident. Yeah, and we’re also launching our own loyalty token. Probably within the next week or two. We’re doing a Reg S first, overseas.

Adam Chapnick:

Oh, interesting. Starting with an S. Okay.

Antonio Brasse:

Yeah, yeah. There’s been a significant demand overseas for US projects.

Adam Chapnick:

Yeah.

Antonio Brasse:

Because of the fact that we have our securities laws that are pretty tight. Right? Oh, there’s just a ton of interest.

Antonio Brasse:

Were in South Korea last week, and yeah, they told us they’re looking at our project because you know, they find those US projects to be more transparent, more regulatory friendly. So there is a huge demand for security token projects globally.

Adam Chapnick:

That is fascinating. So do you think that what a lot of the American companies complain about, which is all of the overbearing, the regulations from the SEC, actually may make them more fundable, because they’re Reg S [inaudible]

Antonio Brasse:

Which is so ironic. Yeah. Like we complained so much that there’s all these barriers on which we have to go through. But I mean the international markets love that. Like, all right, if they can get through with their Reg D, Reg S, whatever it is, they’ve got to be legit. So you know, it’s a sign of legitimacy to the international markets that want to fund projects here.

Adam Chapnick:

Wow. That is hilarious to me.

Antonio Brasse:

Yeah.

Adam Chapnick:

I think it’s kind of great. So where do you think-

Antonio Brasse:

It’s like , you know, the Frank Sinatra’s song for New York? Because I’m from New York, right?

Adam Chapnick:

Yes.

Antonio Brasse:

Yeah. If you can make it here, you can make it anywhere.

Adam Chapnick:

That’s right. If you can make through the SEC regulations here, you can do it anywhere. I love it. So, what do you think is going to be the impact of having companies or other assets, I guess, available in securitized tokenizations? How is that going to impact either issuers or maybe international investors?

Antonio Brasse:

Yeah, it’s going to add massive liquidity to a lot of the private markets. Right. Just coming from financial services, I talked to a lot of my old colleagues. They’re excited. You know, some of these OTC companies or other private companies, they can tokenize and get a lot of traders and investors in that way.

Antonio Brasse:

Debt offering instruments. There’s a lot of private debt out there.

Adam Chapnick:

Yeah.

Antonio Brasse:

They can tokenize as well. You know, stable coins, whether it’s gold, silver, silver back coins. It’s a great way to just add a lot of liquidity to asset classes that aren’t naturally liquid. Yeah.

Adam Chapnick:

I think ... where do you think that’s going to have the biggest impact on the investor side? Do you think ... the liquidity is obviously sort of the holy grail, but it doesn’t really exist yet.

Antonio Brasse:

Yeah.

Adam Chapnick:

So, do you think that’s going to come from lots of regular people getting involved, or is it going to become from just institutions piling in and boom, there it is. Yeah. I think definitely institutions first because they’re looking for this, but at some point you’ll see the retail crowd get involved too. I think about real estate. Like the little person can’t really get in on a real estate deal in Manhattan. Right? We were actually talking to a Blockchain project that’s tokenizing real estate in Manhattan, a couple months ago. They’re doing it ... also so, you know, obviously institutional money. Well they want to give like the normal person a chance to buy into some of these properties and get involved.

Antonio Brasse:

Yeah, that’s exciting.

Amy Wan:

We have the full interview with Antonio on our website securitytokenacademy.com. Did you know that you can get the latest industry updates in our free weekly newsletter, the Security Token Edge. The newsletter is packed full of insightful information about the security token industry. To subscribe and get your free weekly copy, go to our website securitytokenacademy.com. We also invite you to check out the digital wrapper on Medium. It’s our new behind the scenes series for the teams building out the security token industry. These are in depth interviews covering a wide variety of topics. You can view these when you follow us on Medium. You can find more information on our website securitytokenacademy.com. In a first of its kind more multi city webinar on the tokenization of commercial real estate, Crest, a project of the security token academy, provided a detailed case study on the tokenization of the St. Regis Aspen resort. Learn how the webinar explore the disruptive forces that are emerging in commercial real estate or CRE financing. Here’s your preview.

Adam Chapnick:

Disruption in commercial real estate has been appearing in lots of different ways. Certainly in the office category of commercial real estate, also known as CRE. The appearance of coworking companies such as WeWork is a major new trend. Also the appearance of technology companies that strive to improve property operating efficiency, through prop tech, or property technology, is another area of CRE disruption. But there is a new type of disruption emerging in the area of CRE financing. It’s a way to raise money via a new solution which is compliant with US SEC regulations. It’s called tokenization, and it is based on security tokens. This wave is barely just beginning, but examples are starting to emerge and that’s why we’re here today, as we cover the tokenization of the St Regis Aspen resort.

Amy Wan:

I wanted to help our viewers take a closer look at this iconic hotel. So while I was there I had the opportunity to meet with the hotels, general manager, Heather Steenge-Hart. Let’s take a look at what she had to say. This is a gorgeous property. Can you tell me a bit about it?

Heather Steenge-Hart:

I’d love to. We have 179 guest rooms, 30 suites. This is one of our three specialty suites. And then we also have 25 residences, two and three bedrooms, which our fractional ownership has.

Amy Wan:

Fantastic. What else should we know about this property?

Heather Steenge-Hart:

Well, the rooms and our public spaces were designed by Lauren Rote, and she was wanting to make sure that we’re bringing the outside light into the hotel. That it was like a mountain side manor. That it was contemporary yet very, very comfortable because after you go skiing, you just want to relax.

Amy Wan:

Chillax. Yeah.

Heather Steenge-Hart:

So, I think she really did a lovely job in portraying those goals overall.

Adam Chapnick:

Regarding this specific property, you had the listing of JLL and sold it to Stefan in elevated returns. What’s the backstory on that?

Jeffrey Davis:

Yeah, 2010 we had the property on the market and we had reached out to a number of offshore investors, and had gotten in touch with OptAsia. We had been in touch with them on previous transactions before, and we sold the asset to OptAsia, Stephane, 2010.

Adam Chapnick:

And the $19 million of tokens that were raised, what were those funds used for?

Stephane De Baets:

Well, I mean that was a return of capital to the owners. So effectively, the tokenization is a two sale of ownership into the property. So the current owner decided that the maximum they were willing to give away at that valuation was 18.9%, so that’s what we put for sale, and we were happy enough to fill up the entire stack. So the way that it works is that you actually sell the property into an operating partnership. You create interest, out of the partnership, and you capitalize the read through the sale of smart contract. Smart contract is effectively a digital share certificate, so rather than to have the old fashioned paper share certificate, you have a digital form of it. It’s a beautiful instrument because all the securities regulation are actually embedded into the contract itself, and it’s cheaper, it’s faster to transact, and it offers also the ability to have a global product trading on multiple exchanges.

Jay Bernstein:

We got involved with elevated returns, first helping Stephane in trying to liquefy in a different format, in a registered format, a traditional listed read format, the St Regis Aspen, and then helped him transition his project to a tokenized solution. Prior to helping Stephane, we’ve also been very active in the whole idea of creating liquidity around non-traditional liquidity solutions, around single asset real estate, and so it was a natural for us to help Elevated Returns and Stephane with their project.

Henry Elder:

Everything is going to get tokenized. Your identity will be tokenized, your title will be tokenized, your mortgage will be tokenized, your equity will be tokenized. I mean that is the future, when everything is running on this integrated, efficient, immutable Blockchain system.

Amy Wan:

To watch the full webinar, just go to crest.io to register. Registration is free. All right, that’s it for today’s episode. Be sure to follow us on Twitter, Facebook, telegram and Medium. And don’t forget to subscribe to our YouTube page so you don’t miss out on any of our videos and expert interviews. I’m Amy Wan, and before we go a big thank you to our platinum corporate member, Merrill Lynch, and all of our gold corporate members as well. We invite you to learn more about our corporate members by clicking on our website. For everyone here at Security Token Academy, thank you for watching.

Adam Chapnick:

You want to learn more about security tokens from the top leaders in the industry? Be sure to visit our website securitytokenacademy.com and click on the interviews tab so you can stay connected.