Gibraltar-based INX Ltd. (the Company) launched its U.S. initial public offering of INX security tokens (INX Tokens) on August 20, 2020, over two years after the July 2018 confidential filing with the Securities and Exchange Commission of its initial draft registration statement on Form F-1. The INX registration marks the first registered offering of security tokens declared effective by the Commission. Prior to INX, at least two other issuers successfully qualified security token offerings with the Commission under the Regulation A, Tier 2 offering exemption. The 130,000,000 INX Tokens are being offered directly to the public in a self-underwritten offering by officers and directors of the Company, with minimum investment requirements to participate.

Pending satisfaction of a condition requiring minimum sales proceeds, all subscription payments are transmitted to the escrow agent, Tokensoft Transfer Agent LLC. Secondary trading of the INX Tokens is proposed on an INX securities trading platform to be launched once regulatory approvals are received. As is common with any new issuance, the Company’s prospectus cautions there is no trading market for the INX Tokens in any jurisdiction currently, and one may never develop.

According to the Company’s prospectus, the Company intends to establish both a digital currency and a securities trading platform through its subsidiaries, becoming a regulated solution for trading blockchain assets. The Company emphasizes it intends to provide regulatory clarity to blockchain assets by differentiating between security and non-security blockchain asset classes and providing trading opportunities for each class. The Company also states it seeks to obtain money transmitter licenses or become qualified to operate in most U.S. states within nine months after obtaining the minimum offering amount of this offering, in addition to plans to register as a licensed broker-dealer.

Of particular note is that the INX Token (including fractions of INX Tokens) has been structured to provide holders with multiple benefits, including a fixed percentage of the Company’s cumulative net cash flow from operating activities, use of the token for payment of discounted transaction fees on the Company’s intended future securities trading platform, the Company’s proposed platform for the trading of security tokens, and other potential future promotional discounts.

It is not surprising that the proposed structure of the token and the Company’s multifaceted future business operations resulted in a two-year SEC clearance process. Now the test will be the extent to which the offering itself is successful and the platform becomes fully realized. INX Token has, however, paved the way for other tokenized securities, having worked through a number of settlement, custody, and other unique digital assets issues to satisfy concerns from the SEC. More issuers may now be more reluctant to pursue the more conservative Regulation A+ road to the market, which has proven equally as challenging without the attendant benefits of registration.

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Photo of Barbara A. Jones Barbara A. Jones

Barbara A. Jones is a member of the firm’s Global Securities practice group and serves as Co-Chair of the firm’s interdisciplinary Blockchain & Cryptocurrency practice group. She is also co-coordinator of the firm’s interdisciplinary Conflict Minerals Compliance Initiative. Barbara maintains a diverse corporate

Barbara A. Jones is a member of the firm’s Global Securities practice group and serves as Co-Chair of the firm’s interdisciplinary Blockchain & Cryptocurrency practice group. She is also co-coordinator of the firm’s interdisciplinary Conflict Minerals Compliance Initiative. Barbara maintains a diverse corporate and securities law practice across industry groups, emphasizing complex international and domestic transactions, including blockchain and cryptocurrency transactions, private and public financings (including token offerings), dual listings, mergers and acquisitions, strategic collaborations and joint ventures, and licensing transactions. Her practice includes serving as a trusted advisor to public and private company boards of directors on governance and complex regulatory reporting and compliance issues. Barbara’s clients include financial institutions, private equity and venture capital groups, and companies in blockchain, life sciences and biotechnology, information technology, energy (traditional and renewable), mining, defense and security, telecommunications, media, entertainment and sports. Barbara is also active in the representation of Olympic athletes and sports-related organizations.

Barbara practiced U.S. law in London from 1990 through 2003, and headed the international capital markets practice of a major U.S. law firm from 1999 to 2003 before relocating to Boston. From 1997 to 1999, she served as Vice-President, Assistant General Counsel and Regional Counsel for capital markets with J.P. Morgan Securities Ltd. in Europe, the Middle East and Africa. Since returning to the U.S., she has continued to actively represent public and private companies, private equity groups and investment banks in the European, Scandinavian, African and greater Asian markets, including China.

Barbara is a past chair of the ABA’s Subcommittee on International Securities Matters. She is a frequent speaker at conferences relating to cross-border securities matters and strategic alternatives.

Photo of Rebecca G. DiStefano Rebecca G. DiStefano

Rebecca DiStefano concentrates her diverse practice in the areas of securities regulation, corporate finance, and mergers and acquisitions law and serves on the firm’s Blockchain Task Force. Rebecca counsels public and private companies in areas including private placements, registrations, Regulation A+ qualifications, and

Rebecca DiStefano concentrates her diverse practice in the areas of securities regulation, corporate finance, and mergers and acquisitions law and serves on the firm’s Blockchain Task Force. Rebecca counsels public and private companies in areas including private placements, registrations, Regulation A+ qualifications, and crowdfunding under the JOBS Act of 2012 and the Securities Act of 1933. Related to these transactions, she advises companies and their boards regarding attendant corporate governance best practices, fiduciary duties, continuing disclosure and reporting requirements of Regulation A+ and the Securities Exchange Act of 1934, as well as secondary trading issues and the initial and continued listing of corporate securities on the stock exchanges and electronic quotation systems. Additionally, she structures and organizes for clients non-U.S. regulated investment vehicles including private equity funds, funds of funds, and hybrid funds. Rebecca regularly represents her clients before the U.S. Securities and Exchange Commission and FINRA.