Overstock’s tZERO Starts Sending its Security Tokens to Investors
The project expects to allow free reselling of the assets in August 2019, a year after its security token offering saw 26,228,711 coins purchased by investors.
The upcoming crypto trading platform tZERO, owned by US retail giant Overstock, began on Thursday the distribution of its security tokens to their purchasers. However, the secondary market for the assets is still not opened, the company public roadmap shows.
In August 2018, tZERO completed its security token offering (STO) with $134 million raised from around 1,000 investors worldwide. The STO was conducted in compliance with the US Federal Securities Act after Overstock had obtained an exemption from the Securities and Exchange Commission (SEC). In October 2018, tZERO issued 26,228,711 tokens, which were locked up for 90 days as part of the firm’s legal obligation. The period expired on January 10.
The token holders can now decide whether to transfer the assets to their own wallets with a two-step verification process, or create an account with tZERO’s official broker partner. The company has not disclosed the name of the broker yet, but some media publications named it as Dinosaur Financial Group.
“Beginning August 6, 2019 (one year after the consummation of the STO), we expect that most holders’ tokens may be freely resold to all investors on an approved trading platform that we designate,” tZERO says on its website.
“In the future, we may register the securities under U.S. securities laws to enable secondary trading in more robust trading environments, such as the domestic (USA) exchange we are building in partnership with BOX Digital Markets, and international securities exchanges as well (with whom such discussions are underway).”
STO is a new form of crypto crowdfunding model that has become very popular in recent months because of the problems with the Initial Coin Offering (ICO) model. Several major crypto and blockchain players bet on STO as a way to restart the token-based process of raising capital after lots of fraudulent activities related to ICOs were revealed by regulators around the globe and due to the highly polarized debate whether ICO coins are securities. Under the STO process, a company recognizes that its tokens would be financial securities backed by tangible assets or the firm’s revenue.
Overstock decided to use STO as it is a new legitimate form of crowdfunding, according to its memorandum with SEC.
“Initial coin offerings have, by some accounts, recently surpassed traditional early-stage venture capital funding, and, as a result, have drawn a substantial amount of attention, including from U.S. regulators intensely focused on the securities law compliance of such offerings. There is a deep market need for legitimate venues to support security token offerings,” the memorandum reads.
tZERO is part of Overstock’ blockchain investment arm Medici Ventures.