Business Regulation

Ember Fund “Crypto Hedge Fund” App Completes SEC-Compliant SAFE Raise

This week, the completion of Ember Fund's crowdfunding campaign on popular mainstream crowdfunding platform Republic started making the rounds in the cryptoeconomy.
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Ember Fund is a startup that aims to make it simple for everyday folks to buy into managed, non-custodial cryptocurrency portfolios. That mission is now closer than ever to happening upon the company’s recent Securities and Exchange Commission (SEC)-compliant raise.

This week, the completion of Ember Fund’s crowdfunding campaign on popular mainstream crowdfunding platform Republic started making the rounds in the cryptoeconomy.

What’s crowdfunding, you ask? It’s the practice of raising a modest amount of money from non-accredited public investors. Back in 2016, the SEC — America’s top securities watchdog — notably implemented the “Reg CF” rule, giving startups a non-rigorous process to raise up to $1 million USD for the first time ever.

Ember Fund

This kind of offering is optimal for young startups to bootstrap themselves ahead of larger future raises, but why’s this precisely matter for crypto? That’s because legal analysts have said for years that options like equity crowdfunding, e.g. Reg CF raises, were vastly sounder routes than initial coin offerings (ICOs) legally-speaking.

ICOs peaked in the cryptoeconomy’s infamous 2017 bull run as many of us remember, yet these offerings have been on the decline since then and in no small part because their legal implications have become clearer as time’s gone on. Teams have simply started wising up on the main, in other words.

Accordingly, Ember Fund’s fresh Reg CF raise to the tune of $700,000 is the most contemporary example that there are legitimate and safer options beyond ICOs for any crypto plays looking to raise money. Ember Fund took the safer route, and thus the startup will be another interesting case study to track going forward.

Can a Reg CF crypto company eventually hit the big time like ICO projects have previously, then? Perhaps we’ll soon find out. Ember Fund joins the likes Blockstack, which raised $23 million through the SEC’s more permissive Reg A+ crowdfunding rule, as crypto projects to watch in the arena.

A SAFE, Not an ICO

Ember Fund knew it intended to sell securities, so it registered with the SEC. The exact type of security that the startup sold is what’s known as a Crowd SAFE, or a “Simple Agreement for Future Equity.”

In a Reg CF Crowd SAFE sale, public investors invest cash into a startup in exchange for receiving an equitable amount of company stock later.

This route means Ember Fund was only able to raise just over $1 million for its crypto hedge fund app for now, but it doesn’t preclude the startup raising more funds in separate offerings later, either.

On the other hand, what Ember Fund has missed out on when it comes to a potential ICO windfall, it’s saved on potential legal expenses.

Consider the case of the Enigma blockchain privacy project, which was slapped with a $500,000 penalty from the SEC earlier this year in connection with a 2017 ICO the SEC deemed an unregistered securities offering. It’s obviously cheaper and clearer to go the opposite direction with regard to registering.

What Ember Fund Plans to Do

The startup’s co-founder and chief executive officer Alex Wang said in an interview with Crowdfund Insider earlier this year that the firm plans to use the funds it has raised via Republic on scaling up their app’s reach:

“We’ve spent this past year building the infrastructure and various investment products. We’ve processed millions of dollars, hundreds of thousands of transactions and have tens of thousands of happy users. Our only goal is to deploy as much of this capital on acquiring more users as profitably as possible. What this means is testing new marketing channels and scaling up some existing channels that are already working for us.”



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William M. Peaster is a professional writer and editor who specializes in the Ethereum, Dai, and Bitcoin beats in the cryptoeconomy. He's appeared in Blockonomi, Binance Academy, Bitsonline, and more. He enjoys tracking smart contracts, DAOs, dApps, and the Lightning Network. He's learning Solidity, too! Contact him on Telegram at @wmpeaster

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