How a Pre-IPO Deal Works

Every Binaryx pre-IPO deal runs through the same structure. It is built so that your ownership is documented at each step, from the moment you buy a token to the moment proceeds are distributed. This page walks through it.

The structure, step by step

A dedicated Wyoming DAO LLC issues the tokens for the deal and collects investors' funds. The one-time entry fee is deducted on the way in; the rest becomes the deal's working capital.
Once the raise closes, that DAO LLC becomes the sole member of a dedicated series of Binaryx Private Equity Fund Series LLC, our fund, created specifically for that project. The DAO LLC and the series sign a subscription agreement.
The DAO LLC transfers the working capital to the series, which holds it in its own segregated bank account, not pooled with other series.
The manager, acting for the series, signs a share purchase agreement with the seller and buys the company's pre-IPO stake.
Once the purchase settles, the shares are held in the series' account at a licensed broker, and the series is recorded on the company's cap table as the shareholder. That is documented proof of ownership.
When the stake is eventually sold at a profit, the proceeds flow back to the series, then under the subscription agreement back to the DAO LLC, and are distributed among token holders according to the waterfall below.

The entities involved

Two registered Delaware entities sit behind every deal:

Binaryx Capital LLC is the manager, the asset-management company that operates the fund and administers the DAO LLC. Delaware Certificate of Formation, File #10654293.
Binaryx Private Equity Fund Series LLC is the fund itself. It holds each deal in its own dedicated series under Delaware's series statute (6 Del. C. §18-215), so one deal's assets and liabilities are legally walled off from another's. If one series performs badly, the others are unaffected. Delaware Certificate of Formation, File #10675267.

A per-deal DAO LLC, formed in Wyoming under that state's DAO statute (W.S. 17-31-101 et seq.), is the vehicle you interact with directly: it issues the tokens, collects funds, and later distributes proceeds. Both fund entities are state-filed Delaware companies whose formation certificates are public record; Binaryx publishes them alongside the full deal documentation in the data room before a deal closes.

Where the shares come from

Stakes are bought on licensed secondary marketplaces for private-company shares, such as Forge Global (an SEC-registered broker-dealer) and Hiive. These platforms verify that the shares are genuine, check the seller's legal right to sell, and paper the transaction as a share purchase agreement. If the provenance or the transfer rights cannot be verified, the manager does not enter the deal.

What you actually own

You own tokens issued by the DAO LLC. This is tokenized equity: each token is a membership interest in the DAO LLC, set out in its Operating Agreement and recognised under Wyoming law, and it represents your proportional economic stake in the company's shares for that specific deal. You are not buying the shares directly; you hold an on-chain economic interest in the structure that owns them. Your rights come from two documents: the DAO LLC Operating Agreement and the subscription agreement between the DAO LLC and the fund series.

Fees

Minimum investment: $250.
Entry fee: up to 5%, taken once, when your capital arrives.
Carried interest: up to 20%, taken only on the net profit realized at exit, and only after 100% of investors' capital has been returned.
No annual management fee. There is no recurring charge for holding the position, including during any extension of the term.
No deal fee, exit fee or subscription fee.

Exact fees for a given deal are shown on the deal page before you invest. Fees reduce returns. If a deal loses money, the manager receives nothing beyond the entry fee already taken.

How proceeds are distributed

When a liquidity event happens, the net proceeds are distributed in three steps, in this order:

Investors get their capital back first. 100% of the working capital is returned to token holders before the manager receives any share of the profit.
Carried interest. The manager then takes up to 20% of the net profit. Net profit means the proceeds minus the returned capital minus the series' expenses.
The remaining 80% of net profit goes to token holders, pro-rata by the number of tokens held.

A worked example, using round numbers:

Raised: $1,000,000. Entry fee at 5%: $50,000. Working capital: $950,000.
The stake is later sold for $1,330,000. Series expenses: $20,000. Net proceeds: $1,310,000.
Step 1: $950,000 returned to investors. Net profit: $360,000.
Step 2: carried interest at 20%: $72,000 to the manager.
Step 3: the remaining $288,000 to investors.
Investors receive $1,238,000 in total, a return of +23.8% on the $1,000,000 originally invested.

This is an illustration of the mechanics, not a projection. Actual outcomes depend entirely on the exit price, and a total loss is possible.

The term

The target holding period for a deal is 12 to 24 months, ending in a liquidity event. If an IPO or sale takes longer, the manager may extend the series by up to two further periods of 12 months without seeking investor consent, so the maximum term runs to roughly four years. No additional fees are charged during an extension. The exact term is set per deal and stated in the deal documents.

While you hold, you receive a quarterly update on the company covering status, news, valuation and progress toward an exit, and an annual Schedule K-1 for tax reporting. See Pre-IPO Taxes.

Liquidity and exit

Pre-IPO stakes are illiquid, and this structure does not change that. The tokens are security tokens: they are not listed or traded on any public exchange, and the fund does not offer early redemption. A transfer to another investor is possible only with the Administrator's consent, and only to a non-US investor who has completed KYC. Treat any early transfer as a possibility, not a plan.

Three events can return capital to the deal: a future IPO of the company, an acquisition, or a secondary sale of the series' stake on a platform such as Forge or Hiive. When one happens and the stake is sold, proceeds follow the waterfall above and reach investors within about 30 days of settlement.

Protections for investors

Capital goes to the series' own account, never to a personal account of the manager, and leaves it only to pay the seller under a share purchase agreement.
Each series is legally separate, so one deal's losses cannot reach another deal's assets.
The manager can decide operational matters alone, but any change to investors' economic rights requires written consent. On a material change you are notified and have 10 days to exit with your capital returned (Fund Operating Agreement, Section 13.1).
You receive a Schedule K-1 each year the deal is open, so your holding is documented for tax purposes.

This page is general information, not investment, legal or tax advice. Pre-IPO investments are speculative and illiquid, and are suitable only for investors who can afford to lose the full amount invested.