ATTN: Division of Corporation Finance Office of Trade & Services
c/o Stephen Kim
c/o Theresa Brilliant
Re: Decentralized Crypto Financial Inc.
Offering Statement on Form
1-A Filed October 27, 2020
File No. 024-11353
To Whom It May Concern:
We have reviewed your official comments with respect to our
offering statement. Please find enclosed resubmission of our
Form1-A as well as our offering circular and necessary exhibits.
It is our hope that our changes and explanations fully satisfy
and incorporate your comments and concerns. Below you will find
your original comments, with our responses keyed to those
comments. In many of our responses, we are directing you to
specific locations in our offering circular where you will be
able to find our changes or amendments. We have also provided
you, when applicable, the amended language now contained in the
offering circular.
We appreciate your helpful and insightful comments, as well
as the time that you spent reviewing our original submission. We
request your favorable consideration of our adjustments. Should
you have any further questions, or if you require any additional
information, please do not hesitate in reaching out to our legal
counsel, Michael Blackburn.
Email address is:
Michael.Blackburn@Decryptofi.com
Phone Number: (516) 504-8169
We look forward to your response and in the meantime, we wish you a
happy and healthy Holiday season.
Decentralized Crypto Financial,
Inc.
Re: Offering Statement on Form 1-A filed October 27, 2020, Cover
Page
SEC Comment (1): We note that you deem the sales limitation
provided by Rule 251(d)(2)(i)(C) of Regulation A to be
inapplicable to this offering as it relates to the 125 million
shares you are offering pursuant to your Work Compensation/Stock
Compensation Plan because you are accepting non-cash
consideration for the shares. Please provide us with an
explanation as to how you determined that such limitation does
not apply to this portion of your offering.
DeCryptoFi Response: In our original offering circular
we did not intend for the sales limitation provided by
Rule 251(d)(2)(i)(C) to apply to our Work Compensation
Program. We acknowledge that our original language was
unclear, and we have removed the sentence that created
this ambiguity. The paragraph on page 2 now reads:
?GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING
IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN TEN
PERCENT (10%) OF THE GREATER OF YOUR ANNUAL INCOME OR
YOUR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED
INVESTORS AND NONNATURAL PERSONS. BEFORE MAKING ANY
REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED
APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE
251(D)(2)(I)(C) OF REGULATION A+. FOR GENERAL
INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO
WWW.INVESTOR.GOV.
SEC Comment (2): Your disclosure here and on page 27 of your
offering circular indicates that 150 million shares of your
common stock will be offered in this offering. Please reconcile
this disclosure with your disclosure in Part I of this Form 1-A,
which states that 500 million shares of your common stock will be
offered in this offering. Please also include the 50 million
additional shares that are "in reserve" and that you intend to
offer if all other shares are sold, consistent with your
disclosure on page 1, or remove the disclosure that suggests as
much. In doing so, clarify whether you will offer the shares in
reserve or conduct the Regulation S private placement, as it does
not appear that you have sufficient authorized shares to do both.
DeCryptoFi Response: We amended Form 1-A to indicate
that the total number of shares being offered is 200
million, allocated as follows: 25 million shares in our
IPO upon qualification; 125 million shares as part of
the Work Compensation Program; and 50 million authorized
shares that the Company currently holds in ?reserve.?
The chart on page 27 has been updated to reflect this
information. We also added a footnote on page 27 which
reads: ?The Company currently has 50 million authorized
shares being held in reserve. The Company intends to
issue these reserved shares if all other authorized
issued shares are sold.?
Re: Risks associated with our business, page 9
SEC Comment (3): Your disclosure in the third risk factor states
that you concluded that your stock had a fair market value of
$.10 per share as of October 13, 2020. Yet your disclosure on
pages 8 and 13 states that the offering price "bears no
relationship to [your] book or asset value"
and that there is no market for your stock. Please revise to
reconcile these statements.
DeCryptoFi Response: Our offering price was
independently determined, and we have amended our
language to reflect this. The language contained in our
circular now reads: ?The subscription price of our
common stock has been determined by the Company's
management without regard to the Company's assets or
earnings or the lack thereof, or book value and does not
represent nor is it intended to imply that the Shares
being offered have a market value or could be resold at
that price, even if a sale were permissible. The
valuation was determined by the Company, and not by an
independent third party applying a specified valuation
criterion.?
SEC Comment (4): Your disclosure on page 13 suggests that you will
be using "joint book- running managers" in connection with this
offering. However, your disclosure throughout the remainder of
your filing indicates that you will not be using an underwriter in
connection with this offering and that this offering will be
conducted exclusively by you through your online platform that is
currently being developed. Please revise to reconcile these
discrepancies.
DeCryptoFi Response: We thank you for pointing out this
discrepancy and have reconciled such statements. It is true
that we do not intend to use any underwriter in connection
with this offering. The offering will be conducted
exclusively through our online platform. Any language
pertaining to the usage of ?joint book-running managers?
has been removed.
Re: Risks specific to this offering, page 11
SEC Comment (5): Revise your tabular disclosure about the number
of shares you intend to issue each year pursuant to your Stock
Compensation Plan to explain how you have arrived at these
amounts and how you know the number of shares you intend to issue
in the future. In this regard, clarify whether the shares to be
issued pursuant to this plan are the same as those to be issued
in this offering pursuant to the Work Compensation Plan, as you
seem to use these terms interchangeably. In this regard, you
direct readers to the "Stock Compensation Plan" section for
additional information, however, that section does not provide
sufficient detail around the terms of your plan(s). Please
revise.
DeCryptoFi Response: We are in agreement that this language
and the tabular initially included was unclear and could
lead to investor confusion. As such, we have opted to remove
the tabular disclosure in its entirety as we believe that
the rest of the document is clear on this issue.
Re: Terms of this Offering, page 16
SEC Comment (6): Your disclosure on page 16 suggests that you
may permit payment for your common stock to be made by credit
card and by foreign currency. Once known, please add disclosure
explaining how you will process subscriptions made by these
methods, including who will process these subscriptions, the
amount of processing fees or other charges, and whether the
company or investors will pay such fees.
DeCryptoFi Response: After consideration, we decided that we
will not accept foreign currency as payment. We added
relevant language to this section (as well as to our
Subscription Agreement) regarding payment fees and that the
Subscriber shall bear these costs. The language now reads:
?Subscriber acknowledges that he or she will incur
additional processing fees, depending on Subscriber?s
payment method. The Company is equipped to accept payment
from two payment processors, Braintree and Bitpay.
Braintree?s fee structure is 2.9% + $.30 per transaction.
There is also a 1% fee applied when the Subscriber?s credit
card is issued outside the United States, and a $15.00 fee
when someone initiates a chargeback through the Subscriber?s
credit card. For ACH payments, Braintree charges a .75% per
transaction fee, capped at a maximum of $5.00.
Bitpay charges a 1% fee for all transactions. Subscriber
understands that he or she shall incur the cost(s) of these
fees.?
SEC Comment (7): We note your disclosure that you will be
offering up to 125 million shares as stock for non-cash
consideration in exchange for certain goods and services. Please,
confirm through additional disclosure that you will value any
non-cash consideration according to the Note to Rule 251(a)(1) of
Regulation A. In this regard, please clearly disclose that the
aggregate offering price is based on the for-cash price and the
valuation of any non-cash consideration will be ?reasonable at
the time made.?
DeCryptoFi Response: We amended the language in the
disclosure to read, in part: ?We are offering up to
125,000,000 shares of stock through our Stock Compensation
Plan. For non-cash consideration, the aggregate offering
price or aggregate sales will be based on the value of the
consideration as established by bona fide sales of that
consideration made within a reasonable time, or, in the
absence of sales, on the fair value as determined by an
accepted standard. Valuations of all non-cash consideration
will be reasonable at the time made.?
Re: Description of Business, page 18
SEC Comment (8): Enhance your disclosure to explain how your
business will help small and medium business owners remain
"fully compliant with SEC regulations" and/or be a "fully
compliant reporting company or exempt reporting company," in
order to understand how your software and services will achieve
these statements. Clarify whether your services are exclusive to
raising capital or extend beyond a company's desire to conduct
an offering.
DeCryptoFi Response: The techniques that DeCryptoFi has
developed will assist companies with identifying options
for raising capital that make sense given their current
business circumstances. Companies interested in raising
capital will be able to use our portal and software
allowing us to assist them in the various options available
to them to raise capital that they otherwise may not have
known exist or to have been possible. In addition,
DeCryptoFi seeks to be able to automate the initial and
ongoing required
regulatory filings (depending on the type of offering a user
chooses) on the customers behalf. Lastly, DeCrytpoFi seeks
to be able to facilitate and automate the necessary
documentation that companies are required to provide its
investors. In this day and age where investor protection,
preservation of personal identifying information, and
complete transparency with respect to businesses is
paramount, our goal is to assist companies with this
evolving landscape. Further, as the importance of combating
money-laundering continues to be a top priority for all
institutions, DeCryptoFi will facilitate and assist with the
compliance of Anti-Money Laundering (?AML?) regulations. The
language on page 18 in our circular now reads, in part, ?Our
goal is to tap into this market and assist small and medium
size companies that want to pursue a public offering or an
alternative acceptable private offering and properly
navigating through the confounding but necessary SEC
regulations. Our techniques will allow small and mid-sized
companies to better understand the initial and ongoing
regulatory filings with respect to the public and private
offering processes. Our main goal can be summed up in one
word? simplification. We strive to make the overlooked
alternative methods of raising capital easy to achieve,
easier to comprehend, and for many aspects of the process,
completely automated. The SEC has long struggled with how to
assist small and medium size businesses get access to the
public market; we are here to help! As an early-stage
financial technology company, we have created techniques and
processes which will allow small and mid-sized
companies to fully understand the complexities surrounding
initial public offerings, private placement offerings, and
other exempt offerings. Our focus is on companies that seek
alternatives to the issuance of bank loans in order to raise
capital. Our company allows for the automation of various
Self-Regulatory Organizations (SRO) initial and ongoing
regulatory reporting and filings and assists companies that
lack the relevant expertise and/or personnel to stay up to
date with relevant compliance obligations as well as the
need for the proper investor disclosures, privacy
notifications, and Anti-Money Laundering (AML) regulations.
DeCryptoFi has the capability to track various asset classes
and automate investor documentation, such as proxy
statements, dividend payments, and GDPR notifications.
Users working with DeCryptoFi will better understand the
user?s business and what attainable capital raising methods
the user may be overlooking. Topics for information sharing
will include, but are not limited to, how much capital the
company seeks to raise, who the company?s target investors
will be, current and past revenue, profitability, growth
rate, what its organizational structure is like, etc. In
turn, businesses will be able to streamline the structuring
of a potential business capitalization and the regulatory
safeguards associated with these capital raising options.
Once a business owner fully comprehends the types of
offerings available and decides which to pursue, DeCryptoFi?s
will assist in automating filings and much more.?
? Please provide us with your legal analysis with citations to
proper authorities supporting your conclusion that you are
not required to register your online platform and its
software as an exchange or ATS. In this regard, please tell
us what consideration you have given to the applicability of
Exchange Act Rule 3b-16 or Regulation ATS to your online
platform and software.
DeCryptoFi Response: Regulation ATS and Rule
240.3b16 of the Exchange Act requires
registration for any organization, association,
or group of persons who maintain or provide ?a
market place or facilities for bringing together
purchasers and sellers of securities or for
otherwise performing with respect to securities
the functions commonly performed by a stock
exchange if such organization, association, or
group of persons: (a) Brings together the orders
for securities of multiple buyers and sellers;
and (b) Uses established, non-discretionary
methods (whether by providing a trading facility
or by setting rules) under which such orders
interact with each other, and the buyers and
sellers entering such orders agree to the terms
of a trade.?
We have updated our language on pages 22-23 to
explain why neither our online platform nor our
software operators should be required to register
as an exchange or an Alternative Trading System
(ATS). Specifically, we have updated our
disclosure to read: ?We have taken the position
that DeCryptoFi?s platform and its software not
be viewed as an exchange or an ATS because
neither will ?bring together? anyone by sorting
or organizing orders in the Company?s securities
in a consolidated way or by receiving orders for
processing and execution of transactions in the
Company?s shares. Rather, each proposed
transaction involving DeCryptoFi?s stock will be
individually negotiated and implemented
without DeCryptoFi?s involvement. DeCryptoFi?s
software will maintain a list of shareholders to
ensure the company knows whom to send shareholder
notifications required under the SEC. It is
possible that the SEC or another regulator would
disagree with our position. If so, we could be
forced to register the platform and/or our
software as an exchange or ATS and comply with
applicable law, which could lead to significant
costs to DeCryptoFi and could force it to change
or cease its operations. Any of these
developments could decrease the value of the
securities sold in this offering.?
? Lastly, please provide us with your legal analysis with
citations to proper authorities supporting your conclusion
that you and the operators of your software are not broker-
dealers. In this regard, please tell us why you do not
believe that you, in offering the platform and conducting
related services, should be a registered broker- dealer and
disclose whether you or any persons affiliated with your
company are relying upon Rule 3a4-1 in connection with this
offering. We may have additional comments following the
review of your response.
DeCryptoFi Response: Under the Exchange Act, a
?broker? is a person engaged in the business of
effecting transactions in securities for the
account of others. We believe that our software
operators do not fit under this definition and we
have updated our disclosure language on page 23
to reflect the basis for this conclusion. Our
disclosure now reads, in part: ?[O]ur software is
responsible for recording shareholder information
so that DeCryptoFi has an accurate list of
current shareholders at any point in time. It
does not and is not capable of operate as a
broker - buying and selling securities for its
own account or on behalf of any customer. It is
also not capable of acting as a deal and
executing orders on behalf of any client which it
has none. This does not change regardless of whom
a Software Operator may be. As such operators
should not be considered broker-dealers, because
they do not buy or sell a security on anyone?s
behalf, they simply operate our software that is
responsible for keeping an up-to-date list of
security owners on behalf of DeCrytpoFi in order
for the company to facilitate its regulatory
compliance. Payment amounts made through
DeCryptoFi?s Work Compensation Plan are preset,
do not fluctuate from a predetermined amount and
are not transaction-based compensation. As such,
it is DeCryptoFi?s view that recording
shareholder information on behalf of the company
does not constitute a broker dealer.
Further, the Company has given weight to Rule
3a4-1, ?Associated Persons of an Issuer Deemed
Not to be Brokers? and believe that the
Company?s software operators qualify for such an
exemption, since they will not have been s
subject to a statutory disqualification as
defined in section 3(a)(39) of the Act, and they
will not be compensated in the form of
commissions or other remuneration based directly
or indirectly on transactions in securities and
their work is more ministerial and clerical in
nature with respect to effecting any potential
securities transaction.?
SEC Comment (10): We note your disclosure about your intent to
retire a certain amount of stock periodically. Please revise
to explain the purpose of the retirement of stock and how you
will determine the stock eligible for retirement by the
holders of your securities. We may have further comment about
how your intentions implicate Regulation M.
DeCryptoFi Response: We intend to retire 2% of our stock
every four years. The Company understands that once stock
is retired, it can no longer be sold and is to be taken
out of the market circulation, thereby permanently
reducing DeCryptoFi?s total share count over time. In
turn, the remaining shares in circulation will increase
shareholder ownership, as well as profits and dividends
(if offered). In addition, the remaining stock?s earnings
per share will increase while the price-to-earnings ratio
decreases. DeCryptoFi will follow Accounting for Stock
Buyback and Retirement (ASC 505-30-30-8) which reads in
part: ?30-8 When a corporation's stock is retired or
repurchased for constructive retirement (with or without an
intention to retire the stock formally in accordance with
applicable laws), an excess of repurchase price over par or
stated value may be allocated between additional paid-in
capital and retained earnings. Alternatively, the excess
may be charged entirely to retained earnings in recognition
of the fact that a corporation can always capitalize or
allocate retained earnings for such purposes. If a portion
of the excess is allocated to additional paid-in capital,
it shall be limited to the sum of both of the following:
a. All additional paid-in capital arising from
previous retirements and net gains on sales of
treasury stock of the same issue.
b. The pro rata portion of additional paid-in capital,
voluntary transfers of retained earnings,
capitalization of stock dividends, and so forth, on
the same issue. For this purpose, any remaining
additional paid-in capital applicable to issues
fully retired (formal or constructive) is deemed to
be applicable pro rata to shares of common stock.?
Re: Management's Discussion and Analysis of Financial
Condition and Results of Operations, page 30
SEC Comment (11): Please revise your Management's Discussion
and Analysis section to discuss your plan of operation for the
twelve months following commencement of the proposed offering,
or if this information is not available, please disclose the
reasons for its unavailability. Please ensure your revised
disclosure addresses how your plan of operations would differ
assuming 25%, 50%, 75%, and 100% of the shares being offered
are sold. Lastly, please clarify whether, in your opinion, the
proceeds from your offering will satisfy your cash requirements
or whether you anticipate it will be necessary to raise
additional funds in the next six months in order to implement
your plan of operations. Refer to Item 9(c) to Part II of Form
1-A.
DeCryptoFi Response: With very little overhead, the
Company will utilize software operators in a 1099 capacity
to further assist with automating the navigation of public
and private offerings, as well as the applicable
regulatory and compliance components for the Company?s
prospective clients. These software operators will be
compensated via the Stock Compensation Plan, and although
they will not be employees of DeCryptoFi, any and all
rules and regulations applied to DeCryptoFi shall directly
apply to our software operators to the same extent the
applicable rules and regulations apply to DeCryptoFi
itself.
We do not anticipate any change to our operations if 25%,
50%, 75% or 100% of our offering is sold. We believe that
the Company has the necessary foundation and key
components to fully maintain operations until 100% of the
offering is sold. Further, the proceeds from the initial
offering will satisfy the Company?s cash requirements. As
such, there will be no need to raise additional funds
within the first six (6) months that the Offering becomes
qualified.
Re: Independent Auditor's Report, page 35
SEC Comment (12): We note that the auditor's report lacks the
city and state of issuance, and the date. Please have your
auditor revise the report. Refer to Part F/S(c)(1) and (b)(2)
of Form 1-A, and Rule 2-02 of Regulation S-X.
DeCryptoFi Response: Our Independent Auditor, Chesapeake
Financial Corporation, completed the proper amendments in
the financials section of the updated offering circular.
Re: Financial Information Section Consolidated Financial
Statements, page 36
SEC Comment (13): We note certain financial statements are
missing the date of, or period covered by the financial
statement. Please revise.
DeCryptoFi Response: Our Independent Auditor, Chesapeake
Financial Corporation, completed the proper amendments in
the financials section of the updated offering circular.
SEC Comment (14): You disclose throughout the filing that 300
million shares of your common stock are issued, outstanding,
and currently owned by your Chief Executive Officer. However,
the financial statements do not reflect these issued and
outstanding shares. Please revise to fully reflect the issuance
of these shares in your financial statements, including
required disclosures in accordance with ASC 505 in the notes to
the financial statements. In addition, revise to include
required EPS presentation on the face of the income statement
and other required disclosures in accordance with ASC 260.
DeCryptoFi Response: Our Independent Auditor, Chesapeake
Financial Corporation, has amended the financials section
to adequately address the issuance of the aforementioned
300 million shares and the necessary disclosures in
accordance with ASC 505 and ASC 260.
Re: Exhibits
SEC Comment (15): Please file a consent from your auditor
as an exhibit in accordance with Part III Item 17.11(a) and
(b) of Form 1-A.
DeCryptoFi Response: Our independent auditor has provided
us with the necessary consent form, which we will file an
exhibit in accordance with Part III Form 1-A.
SEC Comment (16): Please file as exhibits to the offering
statement the appropriate documents as required by Part III,
Item 17 of Form 1-A, including for example only and without
limitation, your form of subscription agreement, certificate of
incorporation, bylaws, legality opinion, and any material
contracts.
DeCryptoFi Response: The following Exhibits are complete
and will immediately be filed as Exhibits to this offering
statement:
a) Subscription Agreement
b) Certificate of Incorporation
c) By-laws of DeCryptoFi
d) Legal Opinion
e) Certificate of Conversion
f) Action of Sole Organizer
g) Consent of Chesapeake Financial Corporation
h) Draft offering statement previously submitted
Re: General
SEC Comment (17): We note that your website, which you will use
as an online portal and information management tool in
connection with this offering, is currently inoperative. Please
tell us when you expect the website to be accessible.
DeCryptoFi Response: We will officially launch
DeCryptoFi.com as a publicly available website upon SEC
qualification. This is intended to ensure that the
website does not disclose DeCryptoFi?s intent to conduct
a Stock Offering ahead of SEC qualification of our Reg A
filing. We have also included this information on page 6
of the offering circular.
SEC Comment (18): Please revise your disclosure to provide a
factual basis for your claim that you are "aggressively growing
[y]our business through a combination of organic growth,
licensing and distribution arrangements, acquisitions, and
strategic relationships."
DeCryptoFi Response: After internal discussions, we
recognize that this statement was premature. While we can
foresee growing our business through a multitude of organic
and inorganic opportunities, and/or a combination of some
form, at this time we cannot state such growth.
Accordingly, this language has been removed from the
offering circular.
SEC Comment (19): We note that Part I of the Form 1-A indicates
that you have not used solicitation of interest communications
in connection with the proposed offering pursuant to Rule 255
of Regulation A whereas Part II suggests that you have and that
you intend to do so in the future. Please clarify if you have
used the types communications contemplated by Rule 255 and
revise to clarify that such information will be filed with the
offering circular pursuant to Item 17(13) of Part III of Form
1-A or advise. Please also revise the check box in Item 4 of
Part I of Form 1-A to reflect that you have used solicitations
of interest communications in connection with the proposed
offering or tell us why this is not applicable.
DeCryptoFi Response: Rule 255 of Regulation A states,
?[A]t any time before the qualification of an offering
statement, including before the non-public submission
or public filing of such offering statement, an
issuer or any person authorized to act on behalf of
an issuer may communicate orally or in writing to
determine whether there is any interest in a
contemplated securities offering. Such communications
are deemed to be an offer of a security for sale for
purposes of the antifraud provisions of the federal
securities laws. No solicitation or acceptance of money
or other consideration, nor of any commitment, binding
or otherwise, from any person is permitted until
qualification of the offering statement,? so long as
certain conditions are met. DeCryptoFi has not used any
forms of solicitation of interest in order to ?test the
waters,? and does not intend to do so until this
offering statement is qualified by the Commission. The
language in our offering circular has been updated to
clear up any ambiguity. We have incorporated
disclosures, where relevant, that read: ?[S]hould the
Company decide to ?test the waters? prior to this
circular becoming qualified, all solicitating materials
will be properly filed with the Commission before its
intended use.?