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Boosty Labs Case Study: Structuring a Legal Model For a New DAO Venture

March 18, 2022

Summary

Boosty Labs is a leading blockchain-developing company and a long-term client of Legal Nodes. Boosty Labs needed legal support for a new venture, the “Boosty Labs project”, and asked us for help setting up a legal structure for a decentralized project. They wanted their project to be able to attract investments, generate IP, and become a Decentralized Autonomous Organization in the future. Legal Nodes assembled and managed a virtual legal team operating across 3 countries to ensure a successful registration for both an operational company and a token-issuing company.

About the company

The Boosty Labs project is a blockchain project, developing a legally wrapped version of the well-known cryptocurrency. The idea is to instigate the advancement of such cryptocurrency by using liquidity to generate additional value and distribute it amongst members. The final goal of the project is to become a DAO, where members are actively involved in decision-making.

Challenge: marrying the blockchain infrastructure with investment requirements

Earlier this year, the Boosty Labs team took the deck for its project to an investment fund, which was keen on investing in the idea of experienced blockchain developers. The founders signed a Term Sheet with the fund, which read that the project could only receive funding after being legally structured.

This requirement is not surprising, as without a legal entity (and sometimes more than one legal entity), any project’s ability to legally interact with the outside world is largely limited.

To receive investments for it’s new venture project, Boosty Labs needed to legally structure a model that would:

  • be fundable and meet investors fundraising requirements;
  • have a clear founders’ share structure; and
  • legalize relations with the team members to concentrate their intellectual property into the project.

Solution: legal strategic sessions and a multi-jurisdictional virtual legal team

Since many founders of blockchain projects do not have a background in law, legal expertise is often required to better understand the legal landscapes for DAO to operate within. Legal Nodes first helped the Boosty Labs team understand what they needed to do and translate that into a request for legal services. Our experts did this by organizing several legal strategic sessions with the project founders and their investors to clarify their legal needs. Together, we ascertained the following information:

  • how the founders and investors hoped the business would develop in the foreseeable future;
  • what the characteristics of the native token would be; and
  • what expectations the investors had about the corporate structure.

Next, using this information, we prepared a detailed legal roadmap for the Boosty Labs project. It comprised the following steps:

  • Incorporating an operational company, which is usually set up in a country that either houses the core team or is IP/IT friendly. For the Boosty Labs project, it was decided to proceed with Cyprus as an IP haven;
  • Incorporating a company for issuing tokens, which required additional clarifications about future DAO characteristics, including governance structure, assets to be owned by the DAO, and members acceptance procedures. After a careful analysis, it was decided to register a company on the Cayman Islands, as it offers a special legal regime for Virtual Asset Service Providers (VASP); and
  • Incorporating a DAO “legal wrapper”, once the project is ready to become a DAO.

To execute this roadmap, Legal Nodes assembled a team of providers from its network, picking the best-fit lawyers from the U.S., Cyprus, and the Cayman Islands to do the job. As a result, the Boosty Labs project now has:

  • An operational company in Cyprus with an open bank account and a clear ownership structure amongst founders;
  • Signed contracts with its’ team, which allows the generation of IP for the project;
  • A company in the Cayman Islands founded by investors and ready to issue tokens; and
  • Bespoke investment agreements, according to which the investor receives not only a share in the Cyprus company but also project tokens. 

Using a carefully structured roadmap and a specially selected virtual legal team, Legal Nodes transformed a complex international legal challenge with multiple moving parts into a simple set of steps. With the support of the Legal Nodes tech platform, these steps were presented as easy-to-track tasks, managed by our experts in a single virtual space. The Boosty Labs team continued their work in parallel with the roadmap created and executed by Legal Nodes. By outsourcing their legal challenges to a virtual, specialized team the Boosty Labs team could watch their complex legal tasks being solved, eliminating concerns that legal requirements and pitfalls could hinder the project’s progress. 

Viktor Ihnatiuk, Co-Founder of the Boosty Labs project, has said:

We are lucky to have Legal Nodes by our side. The legal interview sessions we had with them showed that they have a profound understanding of the blockchain market. The virtual legal team they assembled worked more efficiently than big in-house departments.

Nestor Dubnevych, COO & Co-Founder of Legal Nodes, has said:

Legal Nodes was beyond delighted to help the Boosty Labs team with such an interesting and challenging case. We hope they achieve their goal in building a DAO and we are pleased to have been able to support them on their journey.

If you are considering creating a DAO, Legal Nodes can create a virtual legal team, tailored for the needs of your blockchain project. We can manage the workload of the legal team, leaving you to focus on your business. Start with a Legal DIscovery Session (1 hour at $100) to learn more about our what DAO legal wrapper could work for your project and get intro to token legal design.

Nestor is a Co-founder & COO of Legal Nodes. Having over seven years of legal consulting experience, Nestor loves working with innovative startups, helping them scale on global markets.

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