Kraken has opened its doors to small investors with an offering listed on the Bnk to the Future crowdfunding platform. The San Francisco-based exchange was originally hoping to raise $10 million through the campaign. However, it recently raised its funding maximum to just under $15.5 million, having passed $9 million within two days of inviting its users to invest.
That’s good news for the crypto exchange–but as Crypto Briefing learned firsthand, they’re not being picky about their investors.
Feeling Sophisticated? For $1,000 You Can Be!
Kraken had a funding round late last year, offering shares in the company to investors with a minimum of a hundred thousand dollars to spend. It has retained the same valuation for this more retail-friendly round at $4 billion. The 15-million-dollar raise offers a fraction of the company for sale: 0.3862 percent, to be exact. The offering is for B Shares with no voting rights.
The exchange is proudly boasting its democratic credentials by offering equity starting from such low minimum investment levels, which is slightly cheeky given its previous fundraising endeavors.
We are always looking for ways to democratize access to our equity, allowing more of our valued clients to become valued investors. To that end, we partnered with @BankToTheFuture to create an opportunity to invest in Kraken: https://t.co/DZA1nYFPqe
— Kraken Exchange (@krakenfx) May 20, 2019
Kraken Under Pressure Is Not The Powell Way
Currently the 47th largest exchange in the world by reported volume, Kraken has a unique reputation and a risky approach to branding. On the one hand, it is highly regarded for its security, having never been breached. Yet, it has never been far from controversy. The exchange got into a war of words with Bloomberg last July, responding with a fiery blog post to a story accusing it of market manipulation.
The Blockchain Transparency Institute recently called Kraken the “cleanest” exchange in terms of reported trading volume. Yet, it also sails close to the shores when it comes to its relationship with U.S. regulators. Responding to a New York Attorney General’s office report that identified Kraken, alongside three other exchanges, as being in “potential violation of New York’s virtual currency regulations,” the exchange elected confrontation when the path of least resistance might have led to a more conciliatory stance.
Kraken was typically uncooperative with New York regulators and found itself being targeted. CEO Jesse Powell fired off a particularly fierce tweet to keep the company in the regulator’s line of sight:
NY is that abusive, controlling ex you broke up with 3 years ago but they keep stalking you, throwing shade on your new relationships, unable to accept that you have happily moved on and are better off without them. #getoverit https://t.co/DC5S1WyRnp
— Jesse Powell (@jespow) September 19, 2018
A Very Democratic Investment
It is this very attitude of jovial irreverence that appeals to Kraken fans. When a smaller exchange plays the part of the anti-establishment role model, a libertarian-leaning crypto public may be inclined to feel empowered.
Companies of Kraken’s size – at a $4 billion pre-money valuation – typically attract private venture capital, and Kraken made a fistful of it in December. But as its invitation-to-invest email of yesterday says:
“We will continue to look for ways to democratize access to our equity.”
In that spirit, by partnering with Bnk to the Future, Kraken has tapped a Cayman Islands-based crowdfunding platform on which the “steps for compliance verification and accreditation” are little more than entering a name and email address and self-identifying as a sophisticated investor.
In fact, as Crypto Briefing discovered, you can even invest anonymously. Most crowdfunding sites allow investors to self-declare their levels of sophistication and their financial capacity to wear a loss. To get any further into the investment documents, however, they require you to prove who you are.
That does not appear to be the case on the Bnk to the Future platform:
To be fair to the platform, investor profiles will be listed as “incomplete” until they upload documents for third-party verification. However, that doesn’t appear to stop a self-certified investor from committing to an investment (at least one who chooses to remain anonymous and uses crypto to make the investment).
Of Mice And Men
Bnk To The Future takes the democratization of investment opportunities to a whole new level. Using a fake name and address and investing with bitcoin or ether, crypto enthusiasts can (apparently) get in on the offering without anyone knowing who they are:
Now… that is a path of least resistance.
Kraken could inadvertently place itself under more regulatory pressure if, for example, an unaccredited American citizen uses false credentials to make an investment in the exchange. People might also begin to demand that Brandon put a face to the name.
The Kraken approach to doing business is a rebellious one. In this case, it is also one that tempts fate…and regulators. By explicitly asking investors if they would like to remain anonymous, with nothing but a click of the (Micky) mouse, Bnk to the Future is a crowdfunding living on the edge. On the Cayman Islands, you can do that.
Nevertheless, Kraken’s retail raise is proving a whopping success and they deserve a hat-tip. Perhaps this is the beginning of an era where seed and venture capital fall to the wayside in favor of crowd-based models, where the self-certified masses can make whatever investment decisions they like.
Nanny state, be warned: you may be becoming obsolete. Until self-certified fake people start losing their self-certified shirts, that is.