Ong’anya Ombo Legal Consultants

P.O. Box 15598 – 00400,

Nairobi, Kenya
e: duncanombo@gmail.com
m: +254 724 026 355
Ong’anya Ombo Legal Consultants

The Legal Analysis of CloudMind White Paper

⦁
Strictly Confidential and served for the use by CloudMind and only in relation to the CloudMind ICO White Paper

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DISCLAIMER
We, Ong’anya Ombo Legal Consultants, do not take any form of liability
as provided by any law during the period before, when, and after the
drafting of this legal opinion that was solely requested by the CloudMind.
The information herein is in tandem with the resources acquired during
the period, February 18, 2018, when this legal opinion was drafted,
further, the legal opinion came into place prior to the official operation
of the CloudMind; hence, the sentiments herein refer to the form of the
CloudMind as it appears on paper, which is the White Paper and not in
substance.

It is agreed that the contents of the legal opinion is to serve only the
CloudMind, and not anybody else, therefore confidential. The
information shall not be shared with anybody without requesting such
consent from Ong’anya Ombo Legal Consultants.

We note that the CloudMind intends to share the information with its
prospective investors, and or subscribers of whatsoever description, and
of which we agree on condition that we are strangers to any legal action
that may be instituted by any person, thus, juridical, natural, and
unincorporated. This disclaimer is in rem.

The information herein is to inform the reader of the topical issues

arising within the use of tokens, and other incidentals like blockchain as
shaped by the White Paper of CloudMind and nothing else.

Ombo Malumbe
Ong’anya Ombo Legal Consultants

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GOAL
The CloudMind ICO will be useful in providing Decentralised Applications
(DApp), which a significant aspect of Ethereum Blockchain technology, to enable
its users, individuals and businesses, to harness the use of Cloud based services.
The use of DApp in CloudMind will reduce costs, time and improve the data
transfer, and security as compared to the centralised traditional Cloud services,
as is. Importantly to note, CloudMind will harness Artificial Intelligence (AI)
technology to make its platform more user friendly in terms of data
management.
RISKS
Legal Risks: this is based on the simple fact that the laws of the Country might
change and make it hard to operate or certain areas of operation to be
immensely affected.
Cyber Security: there are measures in place to develop the best security
features. However, we understand that despite such efforts, the likelihood to be
affected by various forms of cyber-attacks is always a real threat to any
technology based entity.
GENERAL
If there is any word or words that seem to be inconsistent with CloudMind ICO
White Paper, then the words of the White Paper shall supersede.
The use of cryptocurrency or tokens in relation to securities laws or regulation
has not been extensively been addressed over the world, but various
Governments have adopted various principles such as the Pacific Coin Test,
Howey Test, and Hawaii Test (and their respective legislations) to establish
whether Initial Coin Offering or Initial Token Offering among others fall under
the purview of securities laws and regulations. In light of that, the foretasted
tests are extensively addressed with a view of assessing CloudMind ICO White
Paper.
The results of the analysis of these principles show that CloudMind ICO White
Paper is not a securities exchange, cannot, and will not be regarded as such
unless the regulatory framework takes a different dimension.

Materialising: it is clear that the project is not a promise or guarantee that it

shall be successful, therefore, should one experience any loses, CloudMind will
not at any time, directly or indirectly, be liable to any person of any nature
whether natural or juristic, incorporated or not.

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Legal Analysis on whether CloudMind ICO amounts to Securities Exchange

To answer whether issuance of CMD Tokens amounts to securities, we rely on the development of the Howey Test as per Securities and Exchange Commission v.
W. J. Howey Co., 328 U.S. 293 [1946] and Pacific Coin Test as per Pacific Coast Coin Exchange v. Ontario Securities Commission [1978] 2 SCR 112. The Pacific
Coin Test is the Canadian adoption of the Howey Test, which is as follows, whether there is investment of money, whether there is common enterprise, whether there is
making of profit, and the profit is from other people’s efforts.

Principle One: Investment of Explanation White Paper’s Context

money
Is there investment of money Is the law of the Country define cryptocurrency, or This depends on the Jurisdiction that the product is
(legal tender)? tokens as money or legal tender for whatever registered
purpose?

Principle Two: Common

Enterprise
Does it fall under Horizontal It takes place when the investors pool together There is pooling together of funds but there are no
Approach? funds with a view of sharing profits. Therefore, if profits to be attained. The issuance of tokens serve as
there is no sharing of funds, then there is no ‘key’ for the purchaser to utilise the platform.
Common Enterprise.

Does it fall under Narrow Vertical It refers to the event that the profits of the investor The profits, if any, will not be tied up to the investors.
Approach? are tied up to the promoter of the company.

Does it fall under the Broad
Vertical Approach?
This is whereby the success of the investor is
depends on the owners prowess in that activity.
The Partners in the project are skilled. However, they
will not control the process as that will be under the
Ethereum Blockchain self-executing codes and
Artificial Intelligence, therefore, the Partners will not
be in control.

In general, can CloudMind be
referred to as Common
Enterprise?
In general and consideration of the White Paper As per the test therein, it is likely, however, there being
can it be inferred that due to certain factors such as no initiative by the Government to define or consider
using the amount received from the Pre-Sale and the cryptocurrency as any form of Securities products,
ICO to develop the platform among other amount then it does not amount to common enterprise.
to Common Enterprise.
See Pacific Coast Coin Exchange v. Ontario
Securities Commission (supra).

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Principle Three: Expectation of
profit
Is there expectation of profits by
the Investors during the ICO?
Principle Four: Profit is from
other people’s efforts
Is the profit dependant on other
people’s effort – for investors?
Miscellaneous
Is there a timeline for purchasing
the tokens?
Securities laws’ apply?
Substance over form principle is
safe from being described as that
under Securities Law
Is there risk capital approach
This concerns whether the Investors who provides
their ETH during the ICO will receive any profits
from it.
This concerns whether the purchase of CloudMind
tokens and the reward is based on other people
who will be working hard to generate the profits or
rewards.
This concerns whether there are timelines
provided for issuance of the tokens’ – which serve
as a right for one to utilise the platform to attain a
certain commercial goals.
If the CloudMind ICO meets the four-part test then
the Security laws’ and regulations will apply.
Substance over form is about the actual practice
and not what the White Paper states.
This is referred as the Hawaii Test that was adopted
in State of Hawaii v. Hawaii Marker Center,
Inc., 485 P. 2d 105 and quoted in Pacific Coast
Coin Exchange v. Ontario Securities Commission
(supra). The possibility of losing the funds
contributed to the investment:
a) The funds are raised for capital venture or
enterprise.
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There are no expected profits other than one having an
asset that will enable them to utilise the platform.
CloudMind intends to develop an DApp ecosystem that
will lower down the costs and time. The tokens issued
are for use in accessing the various packages that will
be offered on the platform.
Private Sale
Pre-Sale
Main Sale
The four-part test ought to be realised in full. Therefore,
it is not considered as that which falls under securities.
The actual reading of the law can link the ICO to
Securities, however, since the Government has not
shown interest in exerting the laws towards the project,
then it has no risk.
There risks involved, and they will not take any
responsibility for the same.
The country of operation does not recognise altcoins as
legal tender, for any reason even for purposes of
 Ong’anya Ombo Legal Consultants

regulating ICOs, therefore, this is not considered as

raise for funds.

b) The offer is made indiscriminately to the public Yes, it is made indiscriminately.

at large.

c) the investors are substantially powerless to Yes, the investors do not have any control on the
effect the success of the enterprise. success of the entity.

d) the investor’s money is substantially at risk Though the law does not consider tokens, assets, as
because it is inadequately secured. money, then it is impossible to assert that money is at
risk. However, there are reasonable measures in place
to mitigate similar risks.

SCALE
Perilous
Grey Area
Safe

DISCLAIMER: The legality of CloudMind and or the Initial Coin Offering (ICO) and the subsequent tokens that shall be issued during various phases of the ICO at
whatever virtual currency shall not be considered as issuance of securities under any law. Therefore, this does not apply to anyone, be it as a natural person or juristic
person (whether incorporated or not) who is from a Country that does not have similar legal standing as that envisioned herein, which is demonstrated herein
through the detailed legal opinion. In that regard, any statutory compliance other than that indicated herein shall not be adhered to, and we shall not take any
responsibility directly or indirectly for any civil or criminal proceedings that shall be effected against anyone who utilises our platform, directly or indirectly. In
addition, you will be liable to CloudMind for any loses, law suits, and damages that may arise due to your conduct, whether directly or not. It is agreed that upon
accessing our website, be it a subdomain, domain, and or mobile application of any nature you agree to have read and understood (regardless of not reading or
understanding) the Disclaimer, Terms of Service, Privacy Policy, Cookie Policy, Acceptable Use Policy, and the Know Your Customer notice and that they bind you
without any reservations.

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