Inside The Kore #15

The 15th issue of Inside The Kore is out!

Take a look at our latest content and have a good read!

Celebrity Endorsements of Investment Opportunities

When it comes to investing, celebrities are just like the rest of us. They need to do their research before putting their money into anything. Unfortunately, many stars have fallen victim to investment schemes in the past without doing the proper due diligence. However, an issue that is becoming even more prevalent is celebrities who use their influence and followings to promote securities, without including the proper disclosures, to unsuspecting fans and investors.?So, with the SEC cracking down on celebrities and companies, it’s important to know what you’re getting into when dealing with an investment opportunity tied to a celebrity endorsement.

Celebrity Endorsement and Investment Opportunities

The SEC’s Office of Investor Education and Advocacy (OIEA) has warned investors not to make investment decisions based solely on celebrity endorsements. While celebrity endorsements exist for a wide variety of products and services, a?celebrity endorsement does not mean that an investment is legitimate?or appropriate for all investors. As the OIEA says, “It is never a good idea to make an investment decision just because someone famous says a product or service is a good investment.”

Celebrities can be lured into participating in a fraudulent scheme or be linked to products or services without their consent. According to the SEC, even if the endorsement and investment opportunity are genuine, the investment may not be good for you. Before investing, always do your research, including these steps:

• Research the background, including registration or license status, of anyone recommending or selling an investment through the search tool on Investor.gov.
• Learn about the company’s finances, organization, and business prospects by carefully reading any prospectus and the company’s latest financial reports, which may be available through the SEC’s EDGAR database.
• Evaluate the investment’s potential costs and fees, risks, and benefits based on your personal investment goals, risk tolerance, investment horizon, net worth, existing investments and assets, debt, and tax considerations.?

Kim Kardashian and the SEC

The SEC’s announcement followed an investigation that found Kim Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account promoting EMAX tokens, a crypto asset security offered by a company called EthereumMax. The post contained a link to the EthereumMax website, which provided instructions for potential investors to purchase the tokens. Since the investigation, she has agreed to settle the charges and?pay $1.26 million?in cooperation. SEC Chair Gary Gensler noted that “investors are entitled to know whether the publicity of a security is unbiased,” and the SEC’s Director of Enforcement Gurbir S. Grewal added that “Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.”

This case highlights the need for transparency surrounding celebrity endorsements of investments. Federal securities laws are clear that any celebrity or other individual that promotes a security must disclose the nature, source, and amount of compensation they received in exchange for the promotion. Without this type of disclosure, investors cannot make informed investment decisions. The SEC’s investigation is ongoing, and it remains to be seen if any additional action will be taken in this case. This case serves as a reminder that celebrities and influencers are not above the law. When considering any investment opportunity, it is important to do your own research and consult with a financial advisor to ensure it is right for you. Be sure to ask questions and demand transparency if you are asked to invest in a security based on a celebrity endorsement.

KoreClient Spotlight: Consumer Cooperative Group

When it comes to real estate, most people think about buying and flipping properties for a quick profit. But what if you could buy a property, have the tenants already in place, and generate revenue from the time you acquired it? That’s what the Consumer Cooperative Group (CCG) is all about on a larger scale than individual properties. CCG is a cooperative of investors all across America who work together to purchase turnkey properties – including commercial, residential, and industrial – and generate revenue from the outset.

What makes CCG different from other real estate investment groups is its focus on education. “We don’t just tell you about our company; we also educate our investors at the same time because it is a requirement that our investors are not passive,” said CEO and Founder of CCG, Tanen Andrews. “There is a level of participation that we require from them because if they have equity they are part owners. So we require them to be active in what we are doing.”.

This focus on education means that CCG members are truly invested in the company and its success. “Cooperative members are the ones with the voting rights and the investors are the ones with no board voting rights but they have an opportunity to be a part of the membership to create multiple streams of income,” said Andrews. This allows for a two-way street of investment and education – both parties benefit from each other. But it’s not just about making money for CCG. They also want to make an impact on their local community. “Activating social events and making a change in a community are two separate things and we want to fund social aspirations that we want to see done and we want to be self-sufficient at the same time,” said Andrews. That’s why they focus on creating jobs as well as generating revenue.

“This is a multi-phase venture and the initial phase is the real estate. With Consumer Cooperative Group being a real estate cooperative, and we use that cooperative methodology to purchase real estate, pooling the funds of the people who could not traditionally invest in startup companies of this magnitude in exchange for equity,” said Andrews. “In addition to that, now we have access to go to Wall Street and directly list and provide liquidity for them on another level that they were never able to access,” said Andrews.?

Owning real estate is a great way to build wealth, but not everyone can or should assume the active duties of a landlord, and CCG takes that element out of it. With tenants already in the properties, they are already generating revenue from the time that they are acquired.”We can buy these turnkey properties and have something to build upon instead of building from scratch,” said Andrews. “Our business plan is wrapped around our community. We are thinking about the financial growth of our market so they can compete. That’s why I love KoreConX. KoreConX is a platform that can be used in conjunction with what we are doing to keep some type of sustainability of our growth and manage what we are doing as we progress to the next level,” said Andrews. CCG wants to make sure they are educating as they are progressing, they are trying to maximize what is already there and build upon that.

“We have a Reg A going through the process right now after we went Reg CF first. Most people have never heard of the JOBS Act and most are jumping into traditional capital raising platforms, and I feel that is confusing. What we try to do is focus specifically on the JOBS Act so that we can eventually qualify for listing. We do not want to just make investors and members but we also want to create real entrepreneurs, we want to show them how to create a real viable business and repeat the process,” said Andrews. CCG provides those who did not always have the opportunity the means to be a part of business ownership.

Regulation CF Disclaimer

This communication may be deemed to be a solicitation of interest under Regulation CF under the Securities Act of 1933, in which case the following applies:

• No money or other consideration is being solicited, and if sent in response, will not be accepted;
• No offer to buy the securities can be accepted, and no part of the purchase price can be received until the offering statement is qualified, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date;
• A person’s indication of interest involves no obligation or commitment of any kind; and
• An offering statement, which would include a preliminary offering circular, has not yet been filed with the SEC.

How Much Can I Invest in a Company with RegCF?

As Regulation Crowdfunding offerings continue to grow in popularity, more and more investors are looking to get involved. RegCF gives investors the ability to invest smaller amounts of money into early-stage companies as non-accredited investors. This is why investors put $1.1 billion into RegCF offerings in 2021 and this is?predicted to double in 2022. But what exactly is Regulation Crowdfunding? And how much can you invest in a RegCF offering?

Why Invest in RegCF?

Reg CF allows you to invest in some of the newest and most innovative companies. This is because early-stage startups often have a difficult time accessing traditional forms of funding, such as venture capital.?Other offerings have fairly large minimum investment amounts, which non-accredited investors might have trouble affording (since this prime directive of investing is never to invest more than you can afford to lose). This traditional approach to capital raising meant that only wealthy investors could afford to participate.

Since RegCF is specifically set up around the crowdfunding paradigm, the minimum investment amount is more affordable to more people.?This is why in 2021 over 540,000 investors put their money into?over 1,500 Reg CF offerings, double the number of offerings in 2019 and 2020 combined. This showcases the clear and continued interest in this type of investment from the public.

Investing in a RegCF Raise

Regulation Crowdfunding is a process through which companies can offer and sell securities to the general public. This process was created by the JOBS Act, and it allows companies to raise up to $5 million per year from non-accredited investors. So what does this mean for investors? Well, basically, it means that you have the opportunity to invest in some of the newest and most exciting startups, even if you’re not an accredited investor. And while you can’t sell your shares for the first year, there are several other benefits of investing in a RegCF company, but you must be aware of how much you can invest before doing so. Because of the inherent risk of investing, the SEC has placed limits on how much nonaccredited investors can invest within any 12-month period.

In a 12-month period, nonaccredited investors are limited in the amount they can invest in a RegCF offering. This limit is based on the investor’s annual income or net worth, whichever is greater. If an investor’s annual income or net worth is less than $124,000, then the investor can invest?up to the greater of $2,500 or 5% of the greater of their annual income or net worth. If both an investor’s annual income and net worth are more than $124,000, then the investor can invest up to 10% of their annual income or net worth, whichever is greater. However, the total amount invested in RegCF offerings during a 12-month period?cannot exceed $124,000.

Accredited investors have no limit to how much they can invest in RegCF offerings and are defined as individuals that meet at least one of the following criteria:

• Annual income greater than $200,000 (or $300,000 with a spouse or spousal equivalent);
• Net worth of over $1 million (with or without a spouse and excluding the value of the individual’s primary residence);
• OR holds certain professional certifications, designations, or credentials in good standing, including a Series 7, 65, or 82 license.

Calculating Net Worth

To determine how much an individual can invest in securities through crowdfunding, it is vital to understand how Regulation Crowdfunding defines net worth. There are a few ways to calculate net worth, but the most common is to add up all your assets and subtract all your liabilities,?according to the SEC. The value of an individual’s primary residence is not included in the calculation of their net worth, and neither is any loan against the residence up to its fair market value. Any increase in the loan amount in the 60 days before the purchase of securities will also be disregarded, to prevent artificially inflated net worth.

For joint calculations, you can also determine your combined net worth or annual income by adding your spouse’s income and assets to the calculation, even if the assets are not owned jointly. In these cases, the maximum investment cannot exceed that of an individual with the same net worth.?

Once you understand how much you can invest, the only thing left is to do your due diligence! You’ll want to review the provided disclosures so that you can get the full picture of the investment’s risk to ensure it aligns with your level of risk tolerance.?

KoreTalkX #16

Our next KoreTalkX is happening today, and you can join this awesome conversation between our KorePartner Curtis Spears , President and CEO at Andes Capital Group , and Rafael Gon?alves , our Communications Coordinator, as you will get to know more about his own?journey and the differences between an industry-agnostic BD and specialists.

Click on the banner to attend!

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