[HAVELOCK] Crypto Financial (CFIG) Official Thread

[Pale Phoenix]

The reason you need 3 million dollars, I'm guessing, is because that is the minimum capital required for a bank in Panama applying for an International License.

What are your plans if your application is denied by the Superitendency of Banks of Panama? Are you familiar with the requirements for this type of license and have you started the process? Unless you have experience in banking, I think the odds are that you will be denied.

http://www.superbancos.gob.pa/documentos_ing/laws_regulations/laws_regulations/licenses/acuerdo_3-2001.pdf

Also, are you aware that the issuance of bearer shares of any licensed bank in Panama is prohibited?

I can't fault you for ambition, but have you actually retained counsel? There are many dodgy websites promising that you can easily "own your own bank in Panama" but that really doesn't seem to be the case anymore.

Let's say the $3 million is for the license. They aren't asking for $3 million. They are asking for $15 million. There's still a massive amount ($12 million) that is unaccounted for. And this is a start-up, so it's going to have problems.

Well they are only raising 3 million, but based on a 15 million valuation. I agree, the valuation is out of sight for what amounts to an idea with only a slight chance of success.

They may be completely genuine in their intent, and the idea might even work for a person or group with capital and significant banking experience, but I have a feeling they decided to raise the capital before doing the sort of due diligence this kind of enterprise requires.

[ranlo]

The reason you need 3 million dollars, I'm guessing, is because that is the minimum capital required for a bank in Panama applying for an International License.

What are your plans if your application is denied by the Superitendency of Banks of Panama? Are you familiar with the requirements for this type of license and have you started the process? Unless you have experience in banking, I think the odds are that you will be denied.

http://www.superbancos.gob.pa/documentos_ing/laws_regulations/laws_regulations/licenses/acuerdo_3-2001.pdf

Also, are you aware that the issuance of bearer shares of any licensed bank in Panama is prohibited?

I can't fault you for ambition, but have you actually retained counsel? There are many dodgy websites promising that you can easily "own your own bank in Panama" but that really doesn't seem to be the case anymore.

Let's say the $3 million is for the license. They aren't asking for $3 million. They are asking for $15 million. There's still a massive amount ($12 million) that is unaccounted for. And this is a start-up, so it's going to have problems.

Well they are only raising 3 million, but based on a 15 million valuation. I agree, the valuation is out of sight for what amounts to an idea with only a slight chance of success.

They may be completely genuine in their intent, and the idea might even work for a person or group with capital and significant banking experience, but I have a feeling they decided to raise the capital before doing the sort of due diligence this kind of enterprise requires.

The valuation is the true amount they are raising. They are saying "if you give us $3 million, we will give you 1/5 of the company. This means that what we have contributed so far is worth $12 million." In other words, they are really saying that they are raising $15 million, but that they are personally contributing something worth 12 of it, leaving 3 more for the public.

[Pale Phoenix]

Thank you for your reply and for doing your homework.
We are based in Panama and several of our board members are directly involved in the Bank industry in Panama. 
We will not operate as a "Bank" and will not be regulated by the Superitendency of Banks of Panama as we will not lend out any of our customers funds or pay interest on account.
Instead we will operate as a licensed Financial Service provider very much like a Stock Broker in the U.S that has the ability to handle third party funds and licensed as a  in partnership with our local bank here in Panama. Our Banking platform will work on top of an existing Bank.
We will just do all the leg work for AML/KYC/SAR separately so they don't have to.

OK, thank you for the clarification. So you plan to create an entity that will partner with a licensed Panamanian bank. Can you disclose the name of that bank?

I assume that bank will provide the depository framework and the financial tools you mentioned, such as accounts, ATM cards, etc. Your company will vet customers for AML / KYC compliance for the bank and serve as an intermediary between the bank and other Bitcoin exchanges?

If that is all correct, can you specify exactly why you require 3 million dollars? Also, will your company be regulated by any government agency in Panama?

[Crypto Financial]

Thank you for your reply and for doing your homework.
We are based in Panama and several of our board members are directly involved in the Bank industry in Panama.  
We will not operate as a "Bank" and will not be regulated by the Superitendency of Banks of Panama as we will not lend out any of our customers funds or pay interest on account.
Instead we will operate as a licensed Financial Service provider very much like a Stock Broker in the U.S that has the ability to handle third party funds and licensed as a  in partnership with our local bank here in Panama. Our Banking platform will work on top of an existing Bank.
We will just do all the leg work for AML/KYC/SAR separately so they don't have to.

OK, thank you for the clarification. So you plan to create an entity that will partner with a licensed Panamanian bank. Can you disclose the name of that bank?

I assume that bank will provide the depository framework and the financial tools you mentioned, such as accounts, ATM cards, etc. Your company will vet customers for AML / KYC compliance for the bank and serve as an intermediary between the bank and other Bitcoin exchanges?

If that is all correct, can you specify exactly why you require 3 million dollars? Also, will your company be regulated by any government agency in Panama?

The Bank will provide the infrastructure, while we provide all the customer service AML/KYC/SAR online Banking Platform, Debit Cards. The company will be regulated locally.
We have put in place the assets required for the company to become fully operational at more than $10 million in assets required for an International Bank.The $3 Million dollar will cover about $1.5 Million in 1st year operational cost, Office, Banking Platform, 24 Hours Customer service, tech support, accountants and a many Compliance agents, about 30 full time employees. The other $1.5 Million will provide liquidity at several Banks around the world where it will allow our customers a faster way to deposit and withdraw funds from their accounts. So if you are in the U.S you will be able to use ACH or SEPA in Europe, saving cost on International Wire Transfer. You will send funds to our Bank account with those Banks and we will be able to credit you immediately on your account with our Bank locally. Saving Time and Cost.

[Pale Phoenix]

The valuation is the true amount they are raising.

Perhaps it's just the esoteric language of finance, but that's not the generally accepted definition of either of those terms. The amount raised is the total value of the shares sold to the public and it is quite distinct from the overall valuation of the company.

Anyway, I realize that you are saying that they are creating 12 million dollars in equity out of what amounts to thin air, and that does seem to be the case.

[Pale Phoenix]

The Bank will provide the infrastructure, while we provide all the customer service AML/KYC/SAR online Banking Platform, Debit Cards. The company will be regulated locally.
We have put in place the assets required for the company to become fully operational at more than $10 million in assets required for an International Bank.

I guess I'm not following because I believe you said that you are not registering as an International Bank in Panama, yet you have placed 10 million in assets to become an operational bank? Are you saying that the bank referenced in the post above is an existing institution owned by you?

Anyway, forgive my frankness, but I think you should provide significantly more detail about your plans, partners, and finances. This is all a bit vague, and while I certainly see a need for this kind of service, your business is much more complicated than the typical mining IPO, and therefore requires more thorough disclosure.

I'll leave that to you and any other potential investors to hash out. Best of luck.

[DeathAndTaxes]

The valuation is the true amount they are raising.

Perhaps it's just the esoteric language of finance, but that's not the generally accepted definition of either of those terms. The amount raised is the total value of the shares sold to the public and it is quite distinct from the overall valuation of the company.

Anyway, I realize that you are saying that they are creating 12 million dollars in equity out of what amounts to thin air, and that does seem to be the case.

This.  They aren't raising $12M in value because by the vaulation of the company their idea/concept is ALREADY worth $12M.

(Shareholder Equity) = (Assets) - (Liabilities)

Prior to public offering
Equity (owned by founder) = Assets (idea)
$12M = $12M

After public offering
Equity (public + founder) = Assets (ideas + cash)
$15M ($3M + $12M) = $15M ($12M + $3M)

 

[ranlo]

The valuation is the true amount they are raising.

Perhaps it's just the esoteric language of finance, but that's not the generally accepted definition of either of those terms. The amount raised is the total value of the shares sold to the public and it is quite distinct from the overall valuation of the company.

Anyway, I realize that you are saying that they are creating 12 million dollars in equity out of what amounts to thin air, and that does seem to be the case.

This.  They aren't raising $12M in value because by the vaulation of the company their idea/concept is ALREADY worth $12M.

(Shareholder Equity) = (Assets) - (Liabilities)

Prior to public offering
Equity (owned by founder) = Assets (idea)
$12M = $12M

After public offering
Equity (public + founder) = Assets (ideas + cash)
$15M ($3M + $12M) = $15M ($12M + $3M)

 

Ask any real investor. Ideas are a dime a dozen. An idea has absolutely 0 value until it has shown it is viable in the real world. People come up with excellent ideas all the time that fail due to lack of knowledge and/or execution issues. Therefore, they are saying that the equity (at this point nothing at all) is worth $12 mil. They are bringing nothing to the table right now but an idea. Thus they are saying that they are effectively raising 15 million. Were they to have documentation showing $12 million in true assets this would be different, in that they would still be "raising" 15 million but THEY would be fronting the first 12 of it prior to going public (leaving 3 million left for investors). This simply isn't the case.

Far too many people on these forums are investing in crap without any knowledge of how anything works other than saying "OMG I CAN THROW IN MONEY AND I MAY MAKE MORE" and then they get pissed off when they lose money as a result. It's a little disheartening, to say the least.

[DeathAndTaxes]

Ask any real investor. Ideas are a dime a dozen. An idea has absolutely 0 value until it has shown it is viable in the real world. People come up with excellent ideas all the time that fail due to lack of knowledge and/or execution issues. Therefore, they are saying that the equity (at this point nothing at all) is worth $12 mil.

I wasn't saying it is a good deal, it isn't.  It would be beyond stupid to put $3M for a mere 20% of a company which currently exists as only an idea.  I was just correcting that the term "raising equity" refers to what is added to the company.  The fact that their evaluation of the existing equity being worth $12M is just stupid doesn't change the fact that they are only RAISING $3M in capital.

Take a real company, one which has real assets, real customers, real products and is looking to expand.  Say a trusted third party evaluates that the company is currently worth $10M and the company is looking for $5M to expand production.  The company would offer a 1/3rd equity stake to new investors to raise $5M in equity.  After the equity sale is complete the company would have a fair value of $15M and would rise or fall base ond the success of management, future sales, etc.  The fact that after the equity sale is complete the company is worth $15M doesn't change the fact that the company is only raising $5M.

Simple version:
The founders are claiming their existing company is worth $12M.  They are looking to raise an additional $3M in exchange for 20% of the company.  They are only raising $3M but it only makes sense if one believes the existing company (w/o IPO capital) is worth $12M.  It obviously isn't but that doesn't change the amount of equity they are raising.

[ranlo]

Take a real company, one which has real assets, real customers, real products and is looking to expand.  Say a trusted third party evaluates that the company is currently worth $10M and the company is looking for $5M to expand production.  The company would offer a 1/3rd equity stake to new investors to raise $5M in equity.

And there lies the difference. One is a real company with tangible assets. Thus their contribution is worth $10 million. In essence they are "raising" $15 million but are contributing 2/3 of that on their own with existing resources. The investors are asked to contribute the other 1/3.

I guess it really depends on how you look at it. The best way is to view it is (Company Value = Company's Investment, Investor's Amount = Investment, CI + I = Company Valuation = Total Raised).

[DeathAndTaxes]

Take a real company, one which has real assets, real customers, real products and is looking to expand.  Say a trusted third party evaluates that the company is currently worth $10M and the company is looking for $5M to expand production.  The company would offer a 1/3rd equity stake to new investors to raise $5M in equity.

And there lies the difference. One is a real company with tangible assets. Thus their contribution is worth $10 million. In essence they are "raising" $15 million but are contributing 2/3 of that on their own with existing resources. The investors are asked to contribute the other 1/3.

I guess it really depends on how you look at it. The best way is to view it is (Company Value = Company's Investment, Investor's Amount = Investment, CI + I = Company Valuation = Total Raised).

No once again they would be raising $5M.  Words don't have meaning when you try to use an existing word and create a new definition.   Language works because people agree to the same definition for the same words or expression.

In that example:
The hypothetical company is raising $5M.  
The hypothetical company is being valued (possibly correctly, possibly incorrectly that is up for investors to decide) at $10M prior to the equity sale.
The hypothetical company is being valued at $10M + $5M = $15M after the equity sale.

The amount raised is still only $5M.

Also I would point out it isn't necessary for a company to have "tangible assets" of $x.  A company valued at $10M doesn't have $10M in tangible assets.   If you add up the value of all of google's servers, and desk chairs, and company laptops it won't come anywhere near the value of the company.  Companies are generally evaluated on the net present value of future cashflow. 

Note: none of this should be taken that this paper company is worth the $12M in self valuation.  It isn't.  It likely isn't worth 5% of that but it doesn't make your statements any more accurate.

[bvt]

Seems overvalued at $15m as a startup. Unless some oversight over market research, company valuation reasoning, budget and other operational details are shared I can't see it's even worth half of current claimed value.

[canth]

Can you describe in more detail what is meant by "We have put in place the assets required for the company to become fully operational at more than $10 million in assets required for an International Bank."

Is this capital that the founders have contributed and if so, what is the source of these funds?

[zefyr0s]

Can you describe in more detail what is meant by "We have put in place the assets required for the company to become fully operational at more than $10 million in assets required for an International Bank."

Is this capital that the founders have contributed and if so, what is the source of these funds?

Sounds like he means they have determined the amount that would be required of an international bank.

Not that they are becoming one, just a comparison. They will be transferring money similarly to a bank,
but without investing their account holders' money.

[Duffer1]

We have put in place the assets required for the company to become fully operational at more than $10 million in assets required for an International Bank.

What assets and from whom?  From the details you've given out so far it sounds like you're trying to build your $15,000,000 idea with only $3,000,000 raised from the Bitcoin community, and are only offering them a 20% stake.  Am I wrong?  If I am then please tell me specifically what assets Crypto Financial controls that are realistically valued at 10-12 million dollars.

The other $1.5 Million will provide liquidity at several Banks around the world where it will allow our customers a faster way to deposit and withdraw funds from their accounts. So if you are in the U.S you will be able to use ACH or SEPA in Europe, saving cost on International Wire Transfer.

If you succeed (I hope you do) then please consider doing business with non-traditional U.S. banking institutions like the Internet Credit Union (https://iafcu.org/).

[DeathAndTaxes]

What assets and from whom?  From the details you've given out so far it sounds like you're trying to build your $15,000,000 idea with only $3,000,000 raised from the Bitcoin community, and are only offering them a 20% stake.  Am I wrong?  If I am then please tell me specifically what assets Crypto Financial controls that are realistically valued at 10-12 million dollars.

Good idea + powerpoints = $12 M.

[burnside]

The $3 Million dollar will cover about $1.5 Million in 1st year operational cost, Office, Banking Platform, 24 Hours Customer service, tech support, accountants and a many Compliance agents, about 30 full time employees.

I read the prospectus.  I didn't see much in there about how you are planning to generate revenue?  Eg, if you take 3% of all transfers (in/out/debit/etc) that'd mean you would need to do $50 Million in transfers to break even?  I think we need to see the actual plan (fee structure?) to be able to judge your potential for success.

The other $1.5 Million will provide liquidity at several Banks around the world where it will allow our customers a faster way to deposit and withdraw funds from their accounts. So if you are in the U.S you will be able to use ACH or SEPA in Europe, saving cost on International Wire Transfer. You will send funds to our Bank account with those Banks and we will be able to credit you immediately on your account with our Bank locally. Saving Time and Cost.

Worked great for Gox.  (Though yes, I realize they screwed up a bit as well.)

I'm not exactly a financial services regulations wizard, but I do kind of wonder why you can't get this sort of thing already.  There must be some reason the banks throw up all the walls when dealing with things internationally?  Eg, if I open an HSBC or a TD account in the states, I can't access it at branches in Canada.  Why do they do that?  Must be some regulatory reason for making things a pain for their customers, and that's what worries me about this.  $15 Million would be nothing to a bank to be able to merge all their accounts internationally.  Yet they don't do it...

[LorenzoMoney]

You said:
"The Bank will provide the infrastructure, while we provide all the customer service AML/KYC/SAR online Banking Platform, Debit Cards. The company will be regulated locally.
We have put in place the assets required for the company to become fully operational at more than $10 million in assets required for an International Bank.The $3 Million dollar will cover about $1.5 Million in 1st year operational cost, Office, Banking Platform, 24 Hours Customer service, tech support, accountants and a many Compliance agents, about 30 full time employees. The other $1.5 Million will provide liquidity at several Banks around the world where it will allow our customers a faster way to deposit and withdraw funds from their accounts. So if you are in the U.S you will be able to use ACH or SEPA in Europe, saving cost on International Wire Transfer. You will send funds to our Bank account with those Banks and we will be able to credit you immediately on your account with our Bank locally. Saving Time and Cost.
"



Am not in the banking business, but I got through college, so maybe there is something I am missing. You also said you are not loaning out money to make money, as most banks do. So, from my understanding of what you wrote, this "bank" is not really a bank, but a financial exchange services which will affiliate itself with an existing bank. It sounds like you are going to find some way to offer international credit cards, ACH->SEPA, SEPA->ACH exchanges, and other services banks provide. 

Guess I will read your Havelock prospectus now. If ANYONE can get a credit up and running that is back by a deposit of bitcoin, but is recognized by the existing Credit Card network, they could have something interesting. If anyone figured out a way to easily transfer money between SEPA and ACH, they could have something I would be interested in.

The problem is bitcoin financial institutions tend to be incestuous. They loan for bitcoin businesses which are primarily either mining or ASIC manufacturing. Until a bitcoin based bank finds a way to make loans for real world, non bitcoin projects, it will go nowhere.

[xchrisxsays]

Is there another place where these people are actually answering the questions raised of the company? Their IPO is in a few days and they haven't answered, with even a  modicum of detail, any of the serious concerns. I'm a bit surprised, honestly. If I was a company in their situation, I'd be doing everything in my power to make everything as clear as possible to potential investors. I'd be very wary of this security until there is a lot more transparancy (Name of the bank they are working with, ACTUAL business model with numbers, ACTUAL current cash on hand, etc...). Good luck, I hope you can come through!

[Korbman]

Most of the immediate questions I had after reading the Prospectus were already posed in this thread (though not answered in detail of course), except one.

@Crypto Financial - What's your name and background?

It's a fairly simple question, and realistically it's one I shouldn't have to ask given you're looking to build an international financial services company. I'd expect someone serious about this venture to be completely wholehearted, upfront, and honest with any questions, comments, or concerns about their idea. What you're looking to build requires a team of experienced people, not to mention a lot of time and effort.

Other than that, I do like the concept...but this plan is holier than Swiss cheese...or a colander...or something else that has a lot of holes in it. I'll probably write up something brief addressing a few questions I have, but I'll try to keep it to one question at a time so I can tell which ones you answer and which ones you avoid. There were a number of good questions already posed so far, but all I've seen are copy-paste responses from your Prospectus, or just avoidance altogether.