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How are Ondo tokenized stocks structured legally?

An Ondo tokenized stock is a structured note: a debt instrument issued by Ondo Global Markets (BVI) Limited (known as the “Issuer”), a bankruptcy-remote special purpose vehicle (SPV) organized in the British Virgin Islands (BVI). Tokenholder rights and obligations are governed by Swiss law under the Issuer’s Sales Terms. Ondo tokenized stocks are designed such that amount payable to the token (note) holder changes in value based upon the change in value of the corresponding underlying asset, including any corporate actions such as dividends, spin-offs, acquisitions, etc. These tokens are fully backed on a 1:1 basis (plus a buffer) by the corresponding underlying securities held via a regulated custodial broker-dealer (and cash in transit). The Security Agent holds a first-priority security interest in these underlying securities for the benefit of tokenholders.

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Does this mean the tokenholder does not actually own the underlying asset?

Ondo tokenized stocks are backed by specific assets that the Issuer holds through a regulated custodial broker-dealer, with safeguards in place to protect tokenholders’ claims. Like with brokerage accounts, you will not see your name on the share register for the underlying assets — they are held in the name of, or for the benefit of, the Issuer. In a traditional brokerage account, you might still be considered the beneficial owner with certain rights, such as receiving dividends, voting on corporate matters, and accessing shareholder communications. Ondo tokenized stocks are different: while you have the right to redeem your tokens for the then-value of the underlying assets, and while you benefit from a first-priority perfected security interest in those assets, you do not have shareholder voting rights, shareholder information rights or other shareholder rights from the issuer of the underlying securities.Whether tokenholders might be considered the beneficial owner of the underlying assets for purposes such as reduced withholding tax rates depends on their particular situation and local laws, and they should consult their own tax advisor.

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How do you structure Ondo tokenized stocks and their offering to satisfy legal/compliance requirements?

Ondo Global Markets (BVI) Limited (“OGM”) structures its tokenized stock offerings to comply with applicable securities, AML/CFT, and other regulatory requirements in the jurisdictions in which it operates. OGM only offers and sells the tokens in reliance on the exemption provided by Regulation S under the US Securities Act of 1933, as amended. To that end, OGM offers and sells the tokens only to persons who are (i) located outside the United States, (ii) not “US persons” as defined in Rule 902 of Regulation S, (iii) not acting for the account or benefit of any US person, and (iv) not originating a buy order in the United States. Tokens may not be resold to any US person or into the United States unless pursuant to an effective registration statement or a valid exemption from registration and in compliance with the OGM Sales Terms (which you will receive a copy of once you successfully complete KYC onboarding).OGM also imposes jurisdictional and eligibility restrictions to comply with sanctions, anti-money laundering, counter financing of terrorism, securities and other laws in the United States and other jurisdictions. OGM also takes technical and operational measures to achieve compliance requirements and best practices. For example, persons who purchase tokens from OGM or redeem tokens to OGM must first successfully complete OGM’s onboarding process, which includes know-your-customer (KYC) review; and OGM employs technical tools for wallet and transaction screening.

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Who owns Ondo Global Markets (BVI) Limited?

Ondo Global Markets (BVI) Limited, the issuer of Ondo tokenized stocks, is 90.01% owned by Flux Finance Inc. (a wholly owned subsidiary of the Ondo Foundation) and 9.99% owned by Ondo Finance Inc.