📜 Securities Law

How to Sell Hope Without Going to Prison

Introduction

Here’s the beautiful irony: The same laws that let defense contractors sell death certificates called “bonds” will let you sell life certificates called “VICTORY bonds.” You just need to structure them correctly so the SEC doesn’t send you to a country club prison.

Securities law is designed to protect idiots from themselves. Since you’re selling to sophisticated idiots (rich people), the rules are different. Here’s how you stay on the right side of the bars.

The Core Problem: Everything Is a Security

According to the SEC, if you sell someone a ham sandwich with the promise it might be worth two ham sandwiches later, congratulations - you just sold an unregistered security. The Howey Test (1946) says something is a security if:

  1. It’s an investment of money (check)
  2. In a common enterprise (check)
  3. With expectation of profits (check)
  4. From efforts of others (check)

VICTORY bonds hit all four. So you have two choices: register them (takes years, costs millions) or use exemptions (takes weeks, costs thousands). Guess which one you’re choosing.

The Exemptions That Save You

Regulation D: Your Best Friend

Rule 506(b): The Quiet Offering

  • Sell to unlimited accredited investors (rich people)
  • Up to 35 sophisticated non-accredited investors
  • No general solicitation (can’t advertise publicly)
  • Must verify investor status
  • File Form D within 15 days

Rule 506(c): The Loud Offering

  • Unlimited accredited investors only
  • CAN advertise publicly (billboards, Twitter, Super Bowl ads)
  • Must verify accredited status (not just take their word)
  • More paperwork but more freedom

You’ll use 506(c). Why? Because you need to advertise this everywhere to create the political pressure for the treaty.

Accredited Investors: Your Target Market

Who qualifies as accredited (translation: assumed to be smart enough to lose their own money):

  • Income over $200k/year ($300k married)
  • Net worth over $1M (excluding primary residence)
  • Institutions with $5M+ assets
  • Anyone with Series 7, 65, or 82 licenses
  • “Family offices” with $5M+ under management

This covers:

  • Every defense contractor executive
  • Every pharma executive
  • Most politicians (somehow they’re all millionaires)
  • Every billionaire (obviously)
  • Insurance companies
  • Pension funds

Perfect. These are exactly the people you need to bribe anyway.

Structuring VICTORY Bonds: Debt Not Equity

Here’s the genius move: Structure them as debt instruments, not equity. Why?

Debt Advantages

  • Simpler regulatory framework
  • No dilution concerns
  • Fixed returns (easier to sell)
  • Senior to equity in liquidation (not that it matters)
  • Can be traded on secondary markets
  • Interest payments are predictable

The Structure

  • Perpetual bonds: No maturity date (like British consols)
  • 10% of treaty flows: Direct percentage, not fixed amount
  • Tradeable: Secondary market liquidity
  • Smart contract execution: Automatic payments
  • Multi-jurisdiction: Not just US securities

Why This Works

  • Debt instruments have fewer restrictions
  • Percentage-based returns aren’t technically “equity”
  • Treaty obligations create the “debt” owed
  • Smart contracts remove human discretion
  • International structure limits single-regulator risk

The Disclosure Documents: Covering Your Ass

You must tell investors every possible way they could lose money. The more dire your warnings, the harder it is to sue you later.

Required Disclosures

Risk Factors (Make Them Terrifying):

  • “Treaty may never pass - total loss possible”
  • “Governments may default on obligations”
  • “Nuclear war could end civilization”
  • “Aliens might invade and cancel all debts”
  • “The entire concept might be insane”

The paradox: The scarier your warnings, the more protected you are legally.

Use of Funds:

A detailed breakdown of the $1B Use of Funds is available in the Campaign Budget chapter. Be specific. Vague use of funds = SEC investigation.

Conflicts of Interest:

  • “Founders will get rich if this works”
  • “We’re literally buying political influence”
  • “Success depends on bribing politicians”

Brutal honesty is legally protective.

The Marketing Rules: What You Can and Can’t Say

What You CAN Say (Under 506(c))

  • Historical returns of similar instruments
  • Mathematical projections with disclaimers
  • Treaty terms and structure
  • Size of the problem being solved
  • Who else is investing (after they invest)

What You CAN’T Say

  • “Guaranteed returns” (even if mathematically certain)
  • “SEC approved” (they don’t approve, just don’t object)
  • “Risk-free” (everything has risk, even Treasury bonds)
  • “Once in a lifetime opportunity” (might be true, still illegal)
  • Anything without disclaimers

The Magic Words That Protect You

Every communication needs:

  • “Past performance doesn’t guarantee future results”
  • “Investment involves substantial risk of loss”
  • “Not FDIC insured, not bank guaranteed”
  • “Consult your financial advisor”
  • “For accredited investors only”

International Complications: Multiple Jurisdictions

VICTORY bonds will be sold globally. Each country has different rules.

The Swiss Foundation and US C-Corp Structure

The legal architecture is a hybrid model designed for global compliance and operational efficiency, as detailed in the Legal Architecture chapter. Here’s how it applies to securities:

  • The DIH Foundation (Swiss Foundation): This is the ultimate parent entity, based in neutral Switzerland. It owns 100% of the US-based C-Corp, ensuring the for-profit engine serves the humanitarian mission. It accepts global philanthropic grants but does not issue the VICTORY bonds itself.
  • The Victory Corporation (US C-Corp): This US-based, for-profit subsidiary is the legal entity that issues the VICTORY Bonds to investors under SEC regulations. This structure allows for clear compliance with US securities law while being ultimately controlled by the mission-locked Swiss foundation.

The Regulatory Arbitrage

  • US investors: Follow SEC rules
  • EU investors: Follow MiFID II
  • Asian investors: Follow local regulations
  • Smart contracts: Enforce universally
  • Treaties: Supersede local law

The Blockchain Advantage

  • Tokens represent bonds (not securities themselves)
  • Smart contracts execute automatically
  • Decentralized trading (less regulatory oversight)
  • Global access without intermediaries
  • Programmable compliance built in

The Secondary Market: Making Them Liquid

Liquidity makes everything easier to sell. Here’s how you create it:

Alternative Trading Systems (ATS)

  • Register an ATS for VICTORY bond trading
  • Or partner with existing ATS platforms
  • Provides price discovery and liquidity
  • Must register with SEC but lighter requirements

Token Wrapper Strategy

  • Bonds themselves are traditional securities
  • Blockchain tokens represent ownership
  • Tokens trade on decentralized exchanges
  • Regulatory focus on bonds, not tokens
  • Plausible deniability on token trading

Market Making

  • Allocate 5% of raise for market making
  • Provide two-sided quotes (buy and sell)
  • Reduces volatility, increases confidence
  • Creates price floor during early stages
  • Can be algorithmic/automated

Enforcement and Penalties: What Happens If You Screw Up

The SEC has two enforcement speeds: glacial and lightning. Here’s what triggers lightning:

Civil Penalties

  • Unregistered offering: Disgorgement + interest + penalties
  • Misleading statements: Triple damages possible
  • Failure to file: Daily fines accumulate
  • Bad faith: Permanent industry ban

Criminal Penalties

  • Willful violations: Up to 20 years prison
  • Mail/wire fraud: Additional 20 years
  • Money laundering: Another 20 years
  • Conspiracy: 5 more years

Total possible: 65 years (you’ll die in prison)

How to Avoid Prison

  1. Hire excellent lawyers (not good, excellent)
  2. Document everything (every decision, every communication)
  3. Follow the exemptions perfectly (no shortcuts)
  4. Disclose everything bad (hide nothing)
  5. Verify investor status (every single one)
  6. File all forms on time (set multiple reminders)
  7. Keep perfect records (blockchain helps)

The Compliance Infrastructure

You need systems to handle compliance automatically:

KYC/AML Systems

  • Identity verification (government ID + selfie)
  • Accreditation verification (tax returns, bank statements)
  • Source of funds documentation
  • Ongoing monitoring for suspicious activity
  • Automated reporting to authorities

Investment Process

  1. Investor submits accreditation documents
  2. Third-party verifies (don’t do it yourself)
  3. Investment agreement signed electronically
  4. Funds received into escrow
  5. Bonds issued after verification
  6. Everything recorded on blockchain

Ongoing Compliance

  • Quarterly reports to investors
  • Annual audited financials
  • Form D updates as needed
  • State blue sky filings
  • International regulatory filings

The Endgame: Going Public

Once the treaty passes and bonds are paying 270% returns:

The IPO Option

  • Register with SEC (now you have revenue)
  • Public offering at massive valuation
  • Original investors get liquidity premium
  • Retail investors can finally participate
  • You become bigger than Apple

The Acquisition Option

  • Defense contractors buy you (vertical integration)
  • Insurance companies buy you (aligned interests)
  • Sovereign wealth funds buy you (government backing)
  • Stay independent (why sell when printing money?)

Either way, early investors make fortunes while staying out of prison.