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[upbeat music] What is going on, y'all? Welcome back to Block Space Live. We have got a packed docket today. Kraken is shelving its IPO attempt.

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Maybe try again another day, but they say right now the market is just not ripe enough for it.

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We also have a story about a Vanity Fair hit piece on the crypto riche that depicts them exactly as you might expect, actually.

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And probably the biggest news today, the SEC is finally going to give us some guidance on what a token offering is and should be, and how developers and teams can manage these without getting their pants sued off.

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And we will close with a story on Bitrefill suffering from the Lazarus Group hack through Telegram that we discussed on the show a month or two ago, and we also have some great guests lined up today.

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We have Francis Corvino of Lagos to talk about the Blockfills bankruptcy. We've got Adam Reed of Ledn to talk about the Bitcoin lending market, and Tom Masero of Cathedra to discuss the Spear 3D merger.

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Block Space goes live on Monday, Wednesday and Friday at noon Eastern. We feature quick hits on the latest in mining, tech, AI, Bitcoin. Make sure to hit subscribe if you're watching on YouTube.

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Sorry, newsletter.blockspacemedia.com. And lastly, we have a conference this April in New York City. It's a technical conference targeted for the investors. If you're in New York City, go to opnext, O-P-N-E-X-T.D-E-V.

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Love to see you there. Info and tickets on the website. This show is brought to you by CleanSpark. Let's kick it off, Colin.

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And we'll start with a little just market update, 'cause I think this leads in well to the Kraken story.

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Bitcoin down today three point four percent after just touching, almost getting back above seventy-five thousand this week.

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Uh, we're so-- [chuckles] Well, we were up a lot more on the week up until this sell-off, but, you know, we're still above seventy K.

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I think a lot of people were surprised to see this, considering the entire world is kind of shaking right now, our world economies are shivering over the war in Iran and whether or not oil prices will grind the global economy to a halt.

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Uh, and then, yeah, actually, on Tuesday, we got almost to seventy-six thousand. So, uh, highest that we've seen since the February crash, but, you know, we'll kinda see where we go from here.

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I think some people were cautiously bullish here. Uh, market looks somewhat good, but you never know. I mean, we could have a liquidity crunch, and this could go back down to sixty in a minute. Yeah.

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I don't know why you're looking at Bitcoin. I'm looking at oil, Colin. Oil's where all the money's being made right now. Oil just almost kissed a hundred dollars yesterday. Um, it...

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So, uh, the Strait of Hormuz still, it's a will he, won't he, uh, be open or not. I've heard something about, like, some ships getting through Iran, maybe, like, letting off the gas. I don't really know.

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Everybody and their dog's got an Iran take these days, Colin. Yeah. I was about to say, you know- Yeah... everyone's a, um, an expert on the Strait of Hormuz these days. So we'll leave that where it is.

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Love to see the strait open, love to see oil prices come down just a little bit. [clears throat] But with regards to the current crypto market, Kraken is

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shelving its IPO plan, saying that right now, market conditions just aren't really good enough for it. This is a scoop from our friends at CoinDesk.

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Uh, the lead here, Kraken's parent company filed an S, uh, a draft S-1 registration statement with the SEC in November regarding the proposed public offering of its common stock.

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But right now, it is apparently putting it on hold according to two people with knowledge of the matter cited by CoinDesk. Now, Kraken, as that earlier paragraph mentioned, announced this IPO at the end of last year.

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This was-- They were probably getting the paperwork ready when Bitcoin was... I mean, these, these, these IPO, uh, registrations take a long time, multiple months of work, and I...

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They were probably putting a bow on it around October when Bitcoin was ripping.

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So you can see why when they filed this confidential prospectus, it, the, the timing was really good for it, 'cause Bitcoin was hitting an all-time high, you know, or it was just coming off of an all-time high in November.

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Things were doing great. But now, a-as Bitcoin's cut in half from that all-time high, and especially after February's brutal drawdown at the first of the month, Kraken is changing course.

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It-- From CoinDesk's article, it doesn't look like they're entirely scrapping their plans for an IPO, but they're going to hold off until market conditions improve.

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Uh, a Kraken CoinDesk, uh, spokesperson told CoinDesk, quote... Um, or Kraken spokesperson, excuse me, q-told CoinDesk, quote, "As we announced in November, we confidentially filed with the SEC.

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That is all we can share," end quote, when they were asked about whether or not this was being deferred.

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And I think that s-I think the, um, reticence of that quote and the fact that they weren't willing to divi-di-divulge more information kinda tells you everything you need to know.

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It's like, "Yeah, we filed for a prospectus, but that's all we can share." If this was really not true, they probably would've pushed back against it a little bit more. So, um- Yeah. I mean, just let's- Surprise. Yeah.

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Let's, let's recap the past year. Like, last summer was hot IPO season. You had Circle absolutely come out the gate swinging. You had, I think, Bullish had a pretty hot IPO. So, like, everybody was trying to IPO.

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Obviously, like, Kraken, uh, started sprinting in that direction. Maybe that was always the plan. Maybe it was somewhat like, "Okay, it's IPO season for these crypto companies." And then they raised, what?

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A hun- eighty mil- eight hundred million at a twenty billion valuation. Gut check, that seems fair to me. Kraken's an OG. They do a ton of volume. They're, like, a premier co- you know, company.

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And, um, they just-Uh, like what, two weeks ago, we did this story on them getting that Fed license, which was huge.

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So, um, yeah, they were kinda winning, winning, winning, and now we see them taking their foot off the gas and delaying this. Um- And, and that makes sense to me.

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You know, don't cash in your chips if they're not gonna be worth as much. And to your point, Charlie, they have been on a hot streak. They're the first crypto company to get a Fed master account. Now, it's...

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doesn't have the same benefits as a, a full-scale Fed master account. They're calling it a skinny master account.

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What this means, though, is they can access Fed pay r- payment rails for bank, and bank-to-bank settlement, but they will not be able to earn depo- uh, interest on their deposits with the Fed.

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So crucial difference there. And going back to what you were saying about last year being a hot one for IPOs, Charlie.

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According to Coindesk here, uh, there were at least 11 crypto IPOs in 2025 that raised a combined $14.6 billion. Um, big leap from the $310 million raised in 2024.

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So you gotta wonder if, if, if some people at Kraken aren't a little bit kicking themselves thinking, "Well, we kinda missed the juicy opportunity last year for this."

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But, you know, with Bitcoin down to 60 or 70k or so, this to me makes a lot of sense. And if you don't really need...

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if there's no rush to go public, I mean, obviously people would love that liquidity event, there's no reason to do it.

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And to, also for what you said, Charlie, Kraken, one of the OG exchanges, really cool to see them still out there and innovating and doing things at this stage in the game, 'cause they were one of the first, I, I would say,

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non-sketchy exchanges, or the, one of the more buttoned-up ones early on when we- Yeah, they're like the trusty exchange. Yeah. I mean, I've done business with them a long time. It's...

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And they were the first, um, I think they were the first exchange to do proof of reserves. Um, I don't think they did pro- I think...

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I'm not sure if they've done proof of liabilities, but yeah, they were, they kind of led, uh, the, the mainstream tier one exchanges, uh, in their, uh, like, proof of reserves, which is showing that they do in fact have the Bitcoin and crypto assets that they say they do.

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Um, so yeah, I mean, it's hard not to kinda like, uh, I think the founder, Jesse. Uh, he's always... He, he's kind of like one of those, like, s- more cypherpunk, uh, coded, uh, big, big name founders.

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There's a few of them still out there who are OGs who still, like, retain some, some street cred in the space. Um, you know, I'll also mention that, uh, this-- [sighs] I just have to like, I have to point out that the,

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uh, Circle chart, like if we were to talk, we wanna talk about, like, public companies. If you hadn't been watching, Circle has, uh, been soaring since their bottom in February.

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Fifty bucks per share in February, and now over 200%, $132 per share, um, probably related to the CLARITY Act, its talks going well maybe.

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But, like, you know, we do have, uh, in the market currently, like, these IPOs contuing, continuing to perform pretty well. So that, you know, it's down from...

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It-- what's funny is, like, it's technically up from where it IPO'd last summer at about $100 per share. So up 30% since then, not bad. When the rest of the market's down, like, bad, not, not too bad.

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Yeah, I mean, definitely benefiting, I think, from Bitcoin's bounce here, but I do wonder for what you said, Charlie, how much of this has to do with talks for clarity going well for stablecoin issuers?

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We covered the scoop or rumor, depending on who you wanna ask, from TFCC on Monday's show, that Coinbase is lobbying against a Bitcoin de minimis tax exemption in favor of a stablecoin de minimis tax exemption in the CLARITY Act.

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A lot of he said, she said. Some people said it was fake. Uh, Zach Shapiro from the Bitcoin Policy Institute said that they were also hearing this. Who knows what's true?

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But I do wonder, you can kind of leave Bitcoin even to the side of this if you want to divine, uh, something out of Circle's move here and its stock.

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Is, is, is-- are, are there actual legitimate benefits in the CLARITY Act that are being carved out right now for stablecoins? Are, are the stablecoin issuers going to get what they want in that bill?

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The biggest one, obviously, is, uh, being able to pay customers interest on their deposits in the stablecoins, which the banking industry does not want. Yeah.

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Um, while we wait to see about our next guest, Lygos, I can riff on this a bit more. Like, you know, Kraken has a bunch of different plates it's spinning.

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Um, one of the things they've been doing is, if you're familiar with Coinbase's Base, which is a Base roll-up on Ethereum, a little bit controversial, but it's been quite successful from a user standpoint. Um,

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uh, Kraken's got their own that they've been in development of called Ink.

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I'm not sure too many details have been revealed, but, you know, they are-- It's funny, like, these two companies are following really similar playbooks, 'cause, like, these playbooks work. And, um, uh, so, uh, we can,

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uh, I guess, like, uh, do a holding pattern while we wait to see where Kraken goes. Uh, I would, you know, I would love to get someone from Kraken on here to chat about this. Yeah.

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If you are with Kraken, hit up, hit up your people. Send a message in the c- in the company Slack, uh, to come on to the Blockspace Live podcast. Well, Charlie, I think that does it for this one.

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I say let's go ahead and... Oh, speak of the devil and he shall appear. Well, our first- Okay...

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guest of the day just popped into the green room.So we're gonna go ahead and bring up Francis Corvino of Lig- Lygos Finance. And- Francis, you are on the show. Welcome to Blockspace Live. Thanks. How you doing, Francis?

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I'm great. How are you guys? Pretty good, man. Thanks for joining.

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Got a few questions regarding, uh, you know, just general market, especially in the lending landscape as, you know, y'all at Lygos know very, uh, full well.

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But I, I just wanna get a quick update from you 'cause y'all have been tracking this pretty closely. What have you learned about the Blockfills bankruptcy since the initial filing hit on Sunday?

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So for those of you who have listened or haven't listened to our prior podcast, Blockfills, crypto financial services company, filed for bankruptcy on Sunday for Chapter 11 protection, and there are some new filings that came out since we've covered that on Monday.

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Francis, what is the latest on this bankruptcy? Yeah, I mean, just headlines, you got about 145 million in total unsecured claims.

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They have a collateral package still, uh, in terms of value at the company worth about 30 million. Um, and they did about 61 billion trading volume reported in 2025 with over 2,000 institutional clients.

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So this is, um, kind of one of the more quiet behemoths.

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It's not someone that everyone, uh, in the industry necessarily knows compared to like an FTX or maybe a Celsius, uh, just because they're a little bit more institutional facing than most of these, um, sort of like formal retail platforms.

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Uh, but the big thing I think that's come out is the reality that this is not a new, um, store which has opened up for Blo- uh, Blockfills, right?

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I, I think, um, you know, we had Bitcoin dip under 80K, I think on February 2nd, and a lot of people probably pointed to that as being, um, the impetus for, um, bu- you know, Blockfills entering Chapter 11.

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Um, but I think if we look behind the scenes, we can see, uh, kind of a picture of a company which has been struggling since even 2022, right?

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Um, they had, uh, a series of mining loans go bad, uh, you know, namely EXA Digital. Um, they lent 123 Bitcoin and 500 Eth to Babel Finance, which is stuck in Singapore bankruptcy.

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Um, a- a- and additionally, you know, there's been pretty much constant rumors about issues with their derivatives book. Um, so i- it's just kind of a, a continued burn for these folks. I don't think that this is, uh...

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I think what's really come out is that this wasn't a new thing. This was a hole that's been burning at the bottom of their book.

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And then Dominion recently moved, uh, one of their creditors to freeze about $4 million in Bitcoin on their platform. Um, and that was approved by the courts.

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Essentially, they put a temporary restraining order on that Bitcoin, and that likely was the trigger that had the, um, uh, you know, the, the bigger class of creditors say, "Okay, we're gonna restructure this and push this thing in Chapter 11 now.

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We're not just gonna let 4 million flow out of this entity."

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Yeah, it's interesting to see, uh, if, if the 4 million was the thing that set this off, just how little you need to get the dominoes ru- uh, you know, falling in this case.

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A few other kind of housekeeping items before I move on to my next question. In some of the filings that came out recently, you know, uh, some of them were procedural.

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Uh, you know, the, uh, holding company or parent company, Reliz, Reliz, I don't really know how to pronounce it- Mm-hmm...

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they, they decided to consolidate all four entities that are involved in this bankruptcy into one to make sure that they can just process all of the claims as one entity as they go forward through the court cases or go through, through the restructuring.

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The other interesting one was this m- motion that they were granted to use cash collateral from a loan from Celsius. Mm-hmm. Which, two things there. First of all, going back to the hole has been there for a while.

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Uh, uh, the court documents said that they had been basically in default on that loan since August of 2025- Mm-hmm... if I understand it correctly. They hadn't... That, that was the last time they made a payment.

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But I, I... My, the biggest thing for me there is like Celsius? We're, we're talking about Celsius again? Um, h- how, how is... How are they even a player in this?

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Well, I mean, you d- you're still as a retail client talking about Celsius, right?

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I think not so long ago, quite a few Celsius clients who had received USD or BTC from the platform had been, essentially had that assets, uh, attempted to, to be clawed back.

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Um, so I believe, if I remember correctly, the specific issue at hand with Celsius was sort of a botched settlement from Celsius, um, which led to there being residual value, uh, for, for Blockfills.

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And now that, that capital I think is probably supposed to be flowing back to Celsius in the not so distant future, and it, it just... Or the estate of Celsius, right? I mean, that, you know, obviously hasn't happened.

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Um, but again, I think i- it's not so much, uh, an individual, um, you know, 4.2 million as being what broke the camel's back. It, it's more like someone is no longer willing to play along with this, right?

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I think a lot of the folks who were involved in the Blockfills scenario knew what was happening from, uh, you know, f- for a while, right?

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And at some point, people recognized, hey, there's sort of two classes of creditors here. There's the larger class of creditors, and there's the smaller cl- class of creditors.

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And when that smaller class of creditors is no longer getting along with that larger class of creditors, that's when you start to trigger sort of maybe some Chapter 11 bankruptcy, which can give some of those larger creditors an, an advantage over some of the smaller guys.

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So, um, uh, my last question on this, uh, uh, I actually have a number of questions.

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We probably could do a whole podcast on this, but, uh, you know, w- are you surprised that we haven't seen more contagion from this, or do you think that that's something that will take a while to play out?

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Um, you know, I'm not, to be honest with you. Uh, I think if you look at, you know, the... These are names which you've seen before, right?

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Like SBI, I think, showed up, uh, in the last 24 hours as a, as another creditor. Like, SBI has, has dealt with worse in the past, right?

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Like this is, um, a-This is a, uh, a small avalanche, and they've dealt with avalanches at the, at the top of Everest. Um, so I, I don't necessarily think we're gonna see a whole lot of... And same goes with Nexo, right?

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Um, Nexo's a little bit more of a complicated situation here. But like Nexo, likely a situation in which, um, you know, there's been some things happening behind the scenes in the past. Uh, is this

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gonna be what tips the camel or, you know, is this gonna be the straw that breaks the camel's back for a company as large as Nexo, given all of the, um, kind of seemingly insurmountable pressure that they faced back in two thousand twenty-two with Otto Roo and the Bulgarian boys?

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Like, there was quite a lot of, um, pressure both on their withdrawals, on them via, uh, socials. And is this gonna be enough? Probably not. And my guess, this is probably gonna be an isolated event.

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[clears throat] So, uh, Blockfills, it feels like one of the first bodies to float to the surface, but it's not, like, that big in the scope of, like, bankruptcies.

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Um, do you think that there's, you know, do you think there's more of these Blockfill-type companies perhaps that, that we-- that could emerge or anything like that? Yeah.

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I mean, I, I don't think, I don't think that this alone will be a big enough trigger though. Um, I think that there are a number of firms who are still

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patching a hole from two thousand and twenty-two, which is looking more and more insurmountably large, right? Um, another, you know...

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A common thought process in the industry is, like, if bitcoin price goes up, everyone is safe.

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But the reality is, if your liability's in BTC, which for some of these guys behind the scenes it probably is, because back in two thousand twenty-two, you know, when bitcoin was in free fall, it might have made sense to change your liability into BTC.

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But if that BTC liability now is, you know, seventy-five K, and there's been significant appreciation in bitcoin, that's significant appreciation in the, in the value of your liability as well.

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So realistically, yes, I think that there are some very significant, um, sort of like background issues for a lot of these companies.

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Uh, what pushed a lot of folks into bankruptcy in twenty twenty-two beyond just losses on the balance sheet was issues with duration of the capital, right?

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You had Celsius, who had a number of trades on, like the staked ETH trade, which needed, um, essentially that ETH to be locked into that Lido smart contract until the merge event.

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Uh, they needed to exit that early, right? And that created sort of a lot of pressure on the staked ETH pair, and that led to a de-pegging.

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And they needed to all of a sudden, uh, serve a bunch of clients their capital back on the internet with everyone talking about it. So they couldn't really survive the trade. Same thing with GBTC, right?

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Eventually, if you're willing to pay the interest for long enough, that did become an ETF, and you could get your, your bitcoin out at, you know, pari passu. Um, but people weren't able to survive that level of duration.

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So if we see panic in the streets, that's probably gonna be the thing that is more likely to push some of these companies over the edge, because now they have capital that they're required to get to their lenders, um, in, you know, maybe three days or something like that, and that capital is locked up in, uh, you know, Singapore Bankruptcy Court, like Babel, uh, or it's locked up in some leveraged long trade that folks are trying to sort of like get themselves out of.

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Back in, I think, two thousand twenty, in March of two thousand twenty, a company which is actually on the, um, you know, Babel, who is, uh, sort of like a, a... That's a, that's where Blockfills is accredited here.

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Babel was actually caught recorded saying, "We're just gonna try and trade our way out of this. We got a hole in the balance sheet." They still got a loan after that fact from Blockfills and many, many others.

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They were still able to raise a round in two thousand twenty-one, I believe from Susquehanna, which, uh, I don't know if you noticed, is also an investor here, um, in Blockfills.

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So it, it's, uh, where exactly does the buck stop? A lot of folks are likely trying to trade out of this position.

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There's a lot of historical precedent for people trying to trade out of the position, and there's a lot of historical precedent also for other lenders and other VC funds coming in and plugging the hole temporarily in the hopes that some of these folks will be able to trade out of that position.

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So to close here, Francis, 'cause you said something really interesting that I wanted to double down on and give you a chance to expand on.

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I think a lot of people would look at this bankruptcy and say, "Well, clearly the February sell-off was the thing that finally did them under," and that's probably true.

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But you had mentioned that a lot of these companies are still trying to patch holes from twenty twenty-two. Can you expand on what you mean by that and why- Yeah... there would still be damage from that fallout?

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Yeah, I mean, for sure. Like, we already talked about the Celsius gap, right?

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Um, but we also can see, uh, like, one of the assets on the Blockfills balance sheet here is about an eight and a half million dollar claim, which is stuck in Singaporean court, right?

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So if I have a lender who has capital with me, and I need to go deliver him his capital back because he's called it from me, but I have eight and a half million dollars stuck in, you know, a Singaporean bankruptcy claim, I can't get to that capital, right?

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So that is still sort of dragging these folks down. Same thing with IXA Digital here.

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That was a Bitcoin miner, um, where Blockfills had been lending out capital sort of on behalf of Nexo, another one of the familiar characters showing up again.

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Uh, IXA essentially went into bankruptcy, paid all of their, um, paid all of their invoices off and said, you know, "Screw it, um, we're, we're done with this."

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And that, again, is like sort of a twenty twenty-two era issue, which is still a challenge for their balance sheet today, right? Those holes don't necessarily close.

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It's not super easy to make ten million dollars and just have that, uh, you know, liability wiped off the books. I mean, it just, it s- sounds like just an incestuous mess of lending.

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And I, I think it's kind of incredible that, you know, a blowup from twenty twenty-two, the hangover as these companies restructure and try to settle those debts can still be felt today, four years later, basically.

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And it, it's not just blowups too.

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It's like-The other things that were going on in the industry at the time were, you can think about like sort of the full spectrum of things that went wrong in two thousand and twenty-two.

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There's uncollateralized lending, and we got a little bit of uncollateralized lending here. There's derivatives books gone awry. We got a little bit of derivatives books gone awry here.

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There's over-allocating to Bitcoin mining. Thirty-six million deployed, uh, in January of twenty twenty-two. Also not, you know, not the best, right? Like, mining has been tough.

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Um, so they've essentially touched, uh, every single one of the hot pans in the kitchen, and at this point, like, you know, the hand is burning off, and you can only keep it behind your back until someone smells something for so long.

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Until someone sniffs that burning flesh, I guess, right? Yeah. [laughs] Francis, thank you so much for joining, man. Um, we'll have to get you back on sometime soon.

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We'll be, uh, keeping track of this closely, and we'll be writing a kinda second day take. Some of the stuff we talked about today for Friday's newsletter. So if y'all are interested, keep an eye out for that.

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Francis- See you. Nice to see you as always, sir. Have a great day. And now, a word from our sponsor, CleanSpark.

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[instrumental music] We are CleanSpark, America's Bitcoin miner, a publicly traded company with the largest operating hash rate, powered entirely by self-operated infrastructure across four states.

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This is our proof of work. We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com. Okay, let's talk SEC.

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Yeah, for our next story, light at the end of the tunnel for all of you, uh, token lovers and degens out there, because the SEC chairman, Paul Atkins, is saying that actually regulatory clarity is finally coming.

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In a speech at the DC Blockchain Summit yesterday,

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uh, Chairman Atkins was addressing the crowd saying, quote, "It is a pleasure to join you today to discuss a subject that sits at the center of American innovation, capital formation, and the enduring principles of our securities law.

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For over a decade, market participants have operated without clear guidance on a fundamental question: When does a crypto asset implicate the federal securities laws?

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Today, I am pleased to announce the SEC's persistent failure to provide clarity on this question is over. As we speak, the commission is implementing a token taxonomy and investin-investment contract interpretation."

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Now, before I get into what this means, just one housekeeping item. This is not official SEC policy yet, but they are work-- as far-- this is how I read this.

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They are working on this taxonomy and a kind of token safe harbor carve-out in existing regulation. Now, as for the timeline for when this will be enacted, who-- uh, it's anyone's guess.

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You know, I would be shocked if we didn't see it maybe sometime later this year.

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But this, for anyone who's been paying attention to a, a crypto regulation, this is a huge one-eighty from the prior guidance we got under Gary Gensler, where it was this kind of guidance by enforcement regime, where the SEC would kind of putter around, and they wouldn't really say what was and wasn't above board.

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And then companies would launch a token thinking they had done things the right way, and then boom, they'd be slapped with an investigation, with a subpoena, and then they would have to engage in some sort of litigation with the SEC.

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So the SEC would go and enforce its regulations by basically taking companies to task without giving them proper regulation and guidance beforehand.

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But now there are three pillars to what Atkins is saying the new framework will look like, and those three pillars are a startup exemption, which is a roughly four-year registration exemption, which allows developers to raise up to five million over those four years as long as they make certain public disclosures and notices and give some notices to the SEC.

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Um, this is not exclusive, so existing options like Regulation D, which allows companies to sell their securities to accredited investors without going through the, um, traditional rigmarole for issuing securities.

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There's also a fundraising exemption. So the startup exemption would be just a, a startup that's issuing a token a-and the, the, the amount that they can issue is only five million, very small.

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The fundraising exemption is for more mature companies, where over a one-year period, they can issue up to seventy-five million dollars with certain reporting obligations.

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Um, and finally, and this is the, the, the most...

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the, I think the biggest part of this is that there is now, like, legal clarity on, um, when exactly a crypto, uh, or when exactly a cryptocurrency as a security has, like, an end date.

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And by, by, by that what I mean is there's, uh, they're devising a definition for when a team can reasonably say, "We have distanced ourself from this project, and this coin should no longer be considered a security."

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So what this set means is, like, legal clarity, uh, that a crypto asset exits SEC jurisdiction once the project team's essential managerial efforts have been completed.

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And this is very similar to the argument for Ethereum post facto. You know, a lot of people said Ethereum was launched.

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You know, the SEC i-in the past has said Ethereum was launched as a security, but now it is no longer a security because it is deficient, uh, sufficiently decentralized.

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This says something similar, where there's gonna be a token safe harbor carve-out within regulation that says, "Okay, you're a team, you launch a token, you're managing the project, but here is a clear exit strategy for you."

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Once you can show that management has departed from the project and no longer has managerial control over the project, it then graduates from being a security to maybe being closer to, like, a commodity or a digital collectible.

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And that's one last thing hereThey, there are four categories that they deem not securities, digital commodities, that'd be Bitcoin, digital collectibles, NFTs, digital tools,

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I don't really know what that means, and payment stable coins under the Genius Act. So all that being said, with the speech, nothing is concrete yet, but

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Atkins is saying, "We are working on a framework that will give you more clarity than you have ever had before for launching tokens."

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And this has been-- this bit surprisingly actually seems to mirror from, from my view, basically how our industry has tried to advocate for ourselves for years. Especially the ETH case is, is a great example.

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It launched, it was very much a, you know, controlled... It was bas- very much a security by how you would view the Howey Test. But now it is not.

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Uh, you, it, the, the, there are various governing or, you know, authoritative groups, uh, don't have complete control of the protocol anymore. Revenues on chain do not directly, uh, you know, fill their coffers.

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So, uh, yeah, love to see it. I'll also note, you know, the SEC defined as of the startup exemption being five million, the fundraising exemption being seventy-five million annually.

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Um, in like broader crypto assets, there are, uh, there's always kind of a moving target for what, um, like a fair value of a cryptocurrency is, and what are the major thresholds.

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For your meme coins, it used to be like the billion-dollar mar-market cap. Your, your meme coin would graduate into the big boys.

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And there would be, you know, lower thresholds at maybe fifty thousand or a hundred thousand market cap. Does, does it get out of the trenches?

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So it's funny because SEC almost like defines the new thresholds, uh, uh, these are the new de facto, uh, market cap thresholds, at least as far as issuance of the token by the, uh, company building these assets can be- Yeah, and one more thing to note on the carve-outs for exemptions for the fundraising and for startups.

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Interestingly, and I, I, I'm really curious to see where the SEC lands on this, Atkins didn't touch on accredited versus non-accredited investors in that.

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So accredited investors are qualified investors who have the ability to buy into security sales that most people don't. I, I'm not totally sure what the threshold is.

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I think it's like you have to have like one million in assets or may- and/or maybe two hundred, two hundred and fifty thousand dollars in annual income to be considered an accredited investor.

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There's a certain threshold that you have to meet.

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But Atkins did not mention anything specifically in this speech as to whether or not accredited investors only will be able to buy into these exempted token sales, basically.

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And I think that's really important for where this regulation lands, because if they do open it to n- unaccredited investors, that is a pretty liberal stance to take in terms of opening up token sales to retail investors.

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You know, that's always been the argument against letting companies just issue whatever tokens they want, is that some schmuck who doesn't know anything about blockchain, let alone finance, and then they're gonna buy, you know, uh,

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Harry Potter Sonic Shiba Inu token, um, and think that they're gonna get rich from it, and they end up immiserating themselves because the token crashes.

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So I'd be curious to see where they land on that, 'cause there's a part of me that says, "Yeah, you should open it up to everyone," but then there's a part of me that says, "Actually, a lot of people are really bad at managing their money, and they'll probably lose it," you know?

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Yeah, we have a, uh, comment in the live stream chat on YouTube. Uh, the fact that accredited investors is a thing I find baffling. You and me both, man. You and me both.

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Well, uh, um, let's move on to, I think, the, the, the fun- The spiciest story today... the spicy part of the episode. And this,

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this is the spiritual successor to a twenty seventeen, twenty eighteen, circa twenty eighteen New York Times article called Everyone Is Getting Hilariously Rich and You Are Not.

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I think the only difference, though, is that was a very bullish headline, and this one is more bearish, at least in terms of how it is presenting the, the industry.

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This is a Vanity Fair exposé feature piece, whatever you wanna call it, called Crypto's True Believers Demand to Be Taken Seriously.

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So you can already see this is framed as the, the crypto riche are, are, are much like petulant children that need to be herded, you know, appropriately into their,

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i-i-into, you know, a space where they can be controlled, you know, but they demand to be taken seriously. They're like children.

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You know, we don't wanna quite give them any sort of, uh, consideration, but they're asking for it. And this article really profiles a lot of very well-known people in the space.

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As you can see from this header image, we've got Mike Novogratz, the CEO of Galaxy Digital.

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We've got Meltem Demirors of Crucible Capital, formerly of CoinShares, and, um, Cathie Wood of ARK as well, um, the founder of OpenSea, um, not, not that interesting to me. I'm sorry, it's just not.

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And, uh, uh, [chuckles] Carson Wee, who I, I actually don't know very much about, but we'll get into it in a second. I just wanna highlight some of the bangers from this.

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And, and just to kinda drive this point home, at this point, I think most people in crypto are used to the media dragging them. This, though, is a special type of dragging- Yeah...

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because it's dressed up as being positive. Yeah. This is press.

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We're gonna take this glamorous photo shoot inside this really nice hotel, inside this luxurious bar, but we're also going to kinda give you backhanded coverage and undermine you-...

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stylistically every way we can in the actual prose and with the photography at the event. Yeah.

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I'll, I'll say th- so this- yeah, the piece profiles a number of like longstanding, well-known people within our industry and broader crypto, and the piece is not written, uh, s- so obviously to be a hit piece.

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However, if you're in the know, it feels like a mean girls play where, uh, like they, they, you know, lined you up thinking that you're going to get to be in, uh, in a, in a lauding, uh, you know, piece on how cool your industry is.

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We brought a photographer, went with-- to a cool venue in New York City and had you take a lot of great style photos, but then it reads all underhanded, and y- if you are not in our industry, it looks terrible.

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What's funny is, I'll note, that a lot of the comments that they'll make, especially like Meltem will make in this piece, many of which are bangers, I, uh, I, I, I think are like very insightful [chuckles] and I'm like, "Yeah, that, that, that's probably pretty true."

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But to the outside, which is the majority of the readers of this piece, the majority of the audience of Vanity Fair, it reads like the height of vanity and delusion and cult. So, um, what are- Yeah...

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some of your favorite- The height of vanity and delusion and cult- Yeah... mentality, I, I think is perfect here. And, and here, just some of the quotes speak for themselves. The other thing I would say is

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the way this is framed, they stuck these entrepreneurs in a room together and just let them talk, and the journalist probably was just sitting there listening and would take things completely out of context and quote them.

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Yeah. I mean, like, that's, that's kind of par for the course for a lot of these things. But like for instance, this one seems like there's probably a lot more context to it.

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This is from Meltem Demirors, "Technology without belief, technology without spirituality is nothing. What we are building-- What we were building was a religious movement."

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Also curious in terms of the tense as though like the, the, the movement's over. It's- Yeah... it's done, guys. But to what Charlie was saying, that's perfect in terms of if you...

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Like, if you're a, a crypto person and you've been immersed in this for long enough, you're a Bitcoin maximalist, a lot of this stuff does feel religiously charged with the conviction that some people have, and there are some real zealots in this space.

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If you're a normal person reading that, if you weren't going to invest in crypto before, you're probably not going to regardless of this, but you're really not going to be interested in it now. And then this is- Yeah...

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also-- Oh, sorry, go ahead. Oh, another good Meltem quote, um, quote, uh, the-- So, uh, "The Crucible Capital Meltem founder judges potential investments on a sliding scale of rizz and Tizz, charisma and autism."

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Here she says, "Here's the secret to lasting a really long time. You never become the main character. Everybody knows who I am, but nobody really knows why." That is such an underhanded way to frame that comment.

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Again, um, with a picture of her, um, looking disdainfully down at the camera. It seems like she's abs... It looks like she's absolutely out to fleece you, um, and- Yeah.

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They, they really- The thing, everybody in our industry knows that she's being sar- she's using sardonic language and tone.

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She's being sarcastic because underneath charisma and, and Tizz, if you will, are like actual metrics, such as like how well do you think you can market and how, like what does your tech stack look like?

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That's what she actually means. Yeah. It's, it's, it's a good point, and it's this kind of sarcasm that reads very caustically if you don't- Mm-hmm... have the context of the rest of the industry.

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I mean, but e-even though framing, you know, her investments on a scale of rizz to Tizz is very, is, is very much a chronically online person thing to do. Yeah. Um, oh my gosh. Okay, this is fantastic.

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I'm not on Blue Sky, but Blue Sky thinks it's a puff piece.

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This is really interesting, and this is probably for another podcast topic entirely, but at a certain point, your information silos on the internet become so isolated that you can only see things through your cognitive bias.

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So my cognitive bias with this is like they are making these people look freaking ridiculous. They are making the...

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They are dressing these people up as vain money mongers, and that, that, there's no other takeaway from that.

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But it's funny to think that, uh, the people who are kind of maybe already biased towards crypto, like in the Blue Sky sphere, they see this as lauding them, you know, for whatever reason. Yeah.

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But th-this, this photo of- Yeah. So I wanna hear you- Yeah. Let's get this, th-this tweet up. This is a really interesting- Yeah... diagnosis from a photographer of what's going on here. So yeah, you found this tweet.

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This is from Denison Bertram. Quote, "I was a fashion photographer for, for over a decade before crypto. I worked for magazines like Elle, Cosmopolitan, brands like Louis Vuitton and Gucci."

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Quote, "The Vanity article was a setup to mock crypto and those it depicted," um, definitely reads that way because look at this picture of Cathy Wood. She's sitting there. She looks, um, small. She looks scrunched up.

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Yeah. She looks scrunched up. And that's one thing that he points out in that tweet is the angle for this shot is elevated, it's upward, it's meant to look down on her and make her look smaller, right? And he also...

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Go, go back to the tweet thread, Charlie, 'cause he's got some other- Yeah... really good, um... He's got some other really good...

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Like of Carson Wei here, who I had no idea who this guy was, but apparently he's pretty well known, um, the Bitcoin playboy.

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And you know, he doesn't really have, uh, Denison doesn't have any comments here, but when you look at this, g-go back to Carson Wei. When you look at- Yeah... this photo, he kinda just looks crazy. Yeah.

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And the way that he is, the composition of this photo does kind of depict himAnd just an unflattering light, man. Yeah. I mean, just, you know what I mean? Like, it seems so- He looks like he's on year five of a bender.

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Yeah. Yeah, exactly. And then if you scroll down- Which he might be, but [laughs] but then we have Kathy Wood here. Yeah, there's he- there's the one about Kathy Wood, and then- Look at, look at this...

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there- The camera looks down at her, frames her to minimize her stature. In the background is a disheveled curtain. Her legs are crossed at the ankle in deliberate inclusion of a bellhop trolley.

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So it, it, yeah, very disconcerting photo. And then you have, um, Devin and Kuo, I believe, Coinbase, uh, OpenSea, uh, founder, deliberately set to look like pillars about to topple. The lines are all crooked.

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The perspective's off. That's correct. For me, the one that you and I really loved was, I say loved- And then you had to scroll up... where is Novogratz? Yeah. This one. Yeah.

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Th- this looks- Novogratz- This looks like you're approaching a mob boss who's about- Mm... to ask you for your entire family's wealth in payment of a debt, or he's gonna break your kneecaps or worse. Yeah.

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I mean, they, they really did Novogratz dirty in this one. Yeah. You know? He looks like the, the villain from Eastern Promises. Um, and [laughs] uh, but yeah, like, look at that lighting.

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It's, it's not, it's, it's, uh, direct s- you know, splotched lighting on his face, um, a very intense look and glare. His, his attire is all red suit.

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Um, you know, he's a former fighter, so he's always gonna look intense. Uh, but- Novogratz?... you know, if you're reading it... Yeah, I think he's, like, a former wrestler or fighter. Yeah, definitely.

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This man, this man has, has been in the arena in multiple ways. Um, so yeah. Uh, we could probably keep going, but we do wanna keep, we do wanna get on to our next segment. [laughs] Um- Yeah. We, uh...

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L- let's a few more notes on this, um, before we, we hop to, uh, before we hop to Adam from Ledn. I just wanna read a few more quotes here. Um,

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quote, "They're all pussies," end quote, says Meltem Demirors, an early crypto investor [laughs] who now runs her own firm, Crucible Capital, of her panicked peers.

252
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And then just going back to the flourishes in this that shows that the author does have, uh, maybe not disdain, but wants to paint them in a certain light.

253
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She is layered in diamond crosses and wearing a black sweatsuit with her firm slogan, "Believe in something," bedazzled across the ass. For the first time in years, she is buying Bitcoin again.

254
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I do have to say, as a writer, it's, it's, it, it's, it's a very good polemic for what it's trying to do. It's like, it's like a soft core polemic, you know?

255
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They're not really going out and taking the deep plunging jabs with the knife end of the pen, but they are, they're probing a little bit, you know? They're, they're looking for the weak spots. Uh, another one,

256
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unlike Jesus's followers who doubted his resurrection, crypto's true disciples aren't losing faith. Really, Demirors says, what we're building was a religious moment. Talked about that earlier.

257
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And then I, I, I just wanna do this one too because I think this is so good. This is the, one of the lead-in, um, lead-ins to one of the latter sections.

258
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The morning of the photo shoot, Wood doesn't recognize Demirors who she, whom she hasn't seen in decade. A dec- a decade. "You somehow look younger," Wood said, pulling her into a hug.

259
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"It's because I'm rich now," Demirors responded with a smirk. Carlson Oui introduces himself to Wood with the sweet docility of a young boy meeting his hero.

260
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They immediately dive into conversation, blah, blah, blah, blah, blah. Um, they, uh, they lightly skirt the reality that crypto is down nearly 50% from three months ago.

261
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Uh, Novogratz, this one is incredible, swaggers in wearing a full-length silver puffer jacket, greeting everyone warmly before announcing that he really wishes he weren't on a day two of a gnarly hangover.

262
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He then proceeds to describe a Saturday night that climaxes with a 4:00 AM trip to the, to the Burning Man-inspired New York nightclub Gospel, which he hopes his 30-year-old daughter and her new husband, who live nearby, did not witness.

263
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I mean, it's just like you just, you, you're trying to make these look like the most degenerate people ever because they're in a degener- degenerate industry.

264
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Like, that's just particularly- Look, we're not, we're not denying that everybody knows Novogratz likes to go out to the club.

265
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Um, but he also is a very, uh, visionary, uh, you know, asset manager and is absolutely killing it in the AI data center game. Yeah, he's a CEO- Yeah... of a multi-billion dollar company. Yeah. I get it.

266
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You don't, may not like how he made his money, but anyway. Um, so- L- We'll leave this where it is for now. Go check out the article. I think for anyone in crypto, it's a good reminder that

267
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a lot of the media, a lot of the mainstream media, they're not your friends. We're your friends. [laughs] Yeah. Don't talk to journalists except for us. Only talk to us. [laughs] We're the only journalists you talk to.

268
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[laughs] So, uh- And on- Let's move on to the next segment. Yeah, on that note, we will bring up Adam Reid, CEO of Ledn, to talk about the current state of the lending market. Adam, welcome to the show, sir. Welcome.

269
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How's it going, guys? How are you? Great to be here. Pretty good. Thank you for joining. I really appreciate it. Lot of news to chew through.

270
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Um, you know, we had Francis Corvino on of Lagos to talk about the Blockfills blow up.

271
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We will not bring that up with you, but we do have to ask, um, given L- uh, Ledn, uh, Ledn's, you know, business, uh, financial services, uh, lending and borrowing, all that kind of stuff, how has the current market and, and the current dynamics we've seen since the February sell-off affected business at all on y'all's side of the world, or just in the industry in total?

272
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Yeah, I mean, within the lending segment, I mean, the, the, the nice thing about loans is people use them, you know, in, in any market condition, right?

273
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You know, when you- when the Bitcoin price is lower, it's an even more reason not to sell your Bitcoin, to take a loan instead.

274
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Uh, when the price is higher, all, you know, our, our clients are, are wealthier in fiat terms, uh, so can borrow more and, and can do more, uh, with, with their Bitcoin assets to diversify.

275
00:48:47.372 --> 00:48:50.092
So we're still seeing, you know, fairly strong originations.

276
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You know, admittedly not the origination level, um, or growth level that we saw in the, in the second half of last year when, when, you know, Bitcoin was really growing rapidly.

277
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Uh, but we're, we're, we're, I, I think, you know, comparing with prior downturns, uh, much more stable.So I think, you know, there, there hasn't really been, you know, any major catalyst, right, of this downturn.

278
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There's no FTX, there's no major, uh...

279
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You know, obviously we-- the BlockFi was one bankruptcy, but relatively, um, uh, small as far as overall market structure, uh, and, and, and today quite isolated, so no, no major events or catalysts causing anything.

280
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Yeah, I mean, that was kinda one of our, our questions to Francis, is whether or not he was surprised to see more contagion from this BlockFi's blowup.

281
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'Cause I mean, that was really the story of twenty-twenty two, I think, right?

282
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Terra Luna went bust, bunch of people were overexposed to that, and then you kinda had this cascading effect that eventually affected everyone from Celsius to FTX.

283
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Now granted, that-that's like kind of a simplification of what happened, but there was a lot of, you know, th-there was, there was a lot of cross-contamination, I think, in, in terms of who owned, who, uh, owed what to whom, and we ended up getting this kinda domino effect.

284
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And we asked Francis like, is he, c- are you surprised to not see more of, of that happening? And he said, "No, not really." And, um, just kind of a, a second or a follow-up question on that same line to you.

285
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Do, do you think a lot of the industry participants have kind of learned from twenty-twenty two? Like, are we seeing safer lending practices for most of the practitioners in this space?

286
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Um, are, are there more guardrails, would you say, or not at all? Uh, certainly clients are, are more educated and smarter.

287
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I think, you know, they're, they're asking more of the right questions as far as how are, uh, companies like Ledn handling their Bitcoin? Where is it during the process of a loan?

288
00:50:43.144 --> 00:50:51.764
And forcing things like, you know, Ledn does proof of reserves, right? So one example of, uh, showing clients the, the transparency of, of how their Bitcoin is handled behind the scenes.

289
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So I think, you know, because many clients have been through that prior cycle, uh, some unfortunately experienced losses. You know, they don't wanna see that happen again.

290
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So that forces companies like Ledn to bring a better product to market. Uh, so I think that that, uh, you know, uh, upgrade in the level of, of service and transparency and, and security around Bitcoin, uh, is welcome.

291
00:51:13.983 --> 00:51:20.324
Uh, I think there also is, you know, less of, uh, you know, certain trades in market that, uh, were unsustainable, right?

292
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We don't have the GBTC trade happening this cycle where, you know, you-- it was, you know, there was leverage cycling and cycling and cycling and doing things that were re-really reliant on certain trades going this way.

293
00:51:31.404 --> 00:51:36.484
I think most people are taking Bitcoin-backed loans now to make real-world investments, right?

294
00:51:36.604 --> 00:51:50.743
So you're not, you're not doing it to, uh, you know, cycle within the, the, uh, Bitcoin or broader, uh, crypto-specific, uh, trades, uh, that have this kind of like massive spiral effect down when everything goes, um, the wrong direction together.

295
00:51:51.204 --> 00:51:56.764
So I think there's, there's that, um, disconnect. You know, also the type of lending is, is very different, right?

296
00:51:56.864 --> 00:52:06.224
When you're, when you're taking a Bitcoin-backed loan, you're over-collateralizing it, you're putting up Bitcoin. Um, when you're running yield accounts, that's where there's the opportunity to, you know, loop it, right?

297
00:52:06.344 --> 00:52:19.083
Where, you know, you're offering a certain yield that's being lent to another, another entity or protocol, uncollateralized, uncollateralized, uncollateralized, uncollateralized, that, that, that causes, again, some, some massive leverage in market.

298
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Um, w-we, we look at this all the time.

299
00:52:20.884 --> 00:52:29.584
Like, I think, you know, again, when we think about just the consumer segment of, of Bitcoin-backed lend-loans, it's actually really, really small compared to the overall size of Bitcoin, right?

300
00:52:29.664 --> 00:52:37.724
We estimate it at three to four billion of consum-- you know, individuals, when I say consumers. I, I, we always talk retail versus high net worth, so I just like to say consumers.

301
00:52:38.084 --> 00:52:44.264
So I think the consumer market for Bitcoin-backed loans is three to four billion on a one point three trillion dollar asset, right?

302
00:52:44.824 --> 00:52:57.394
Um, so that type of lending is again, just done in a very simple way, over-collateralized Bitcoin, so I don't see it, uh, suspect to the same, you know, issues of market structure that existed before when a lot of individuals were running yield accounts.

303
00:52:59.184 --> 00:53:13.964
So, Adam, we had a previous guest on this call, the call Ledn's, uh, Bitcoin-backed ABS the most significant thing to happen in Bitcoin in years. I believe it was a hundred and eighty-eight million.

304
00:53:14.604 --> 00:53:27.464
Um, tell us a bit about that and who is buying these. Of course. Well, well, thanks. I'm flattered to hear that, uh, that comment. You know, we've got-- our teams were working really hard on it for, for over a year.

305
00:53:27.584 --> 00:53:38.184
Uh, who's buying it is investors that were previously on the sidelines of Bitcoin coming into it, right? And that's exactly why we, we worked hard to develop this structure.

306
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When we got it rated by S&P Global, uh, that opened up a universe of a whole new, uh, different types of participants that aren't in this market today because we put it in the same framework that credit card loans, auto loans, even residential mortgages are done.

307
00:53:52.944 --> 00:53:57.844
And now that it's rated and put in the structure that they're used to, uh, different types of institutions can buy it.

308
00:53:58.024 --> 00:54:09.944
Um, those institutions are, uh, we had a large reinsurance company participate in the senior tranche of the debt. Uh, we also had, uh, a lot of hedge funds and traditional credit funds participate.

309
00:54:10.064 --> 00:54:19.744
Um, obviously, you know, credit funds, you know, that's a broad name, but, you know, that would be pension funds behind that, you know, maybe life insurance companies as well investing in these types of, of credit vehicles.

310
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We had, uh, over fifty different, uh, roadshow meetings to, to market the asset-backed, uh, securitization. Uh, so back-to-back meetings both in person a-and virtual.

311
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And then we had fifteen different institutions actually participate and buy it.

312
00:54:33.644 --> 00:54:45.674
So, um, Jefferies was the, the lead underwriter of the deal, and, and they actually, uh, told us that they've never seen as much interest as they saw in this ABS Bitcoin structure as their, in their entire career.

313
00:54:45.824 --> 00:54:54.864
So we were, we were thrilled with that, and, uh, hopefully it's something that, you know, a lot of other, uh, participants can, can grow and, and perhaps replicate as well, so it's good for the overall industry.

314
00:54:58.384 --> 00:55:09.008
You're muted, Colin. Yeah, sorry. So for kind of double-tapping on this-The institutions that are interested in this, what, what exactly is interesting to them about it?

315
00:55:09.048 --> 00:55:17.008
Like, how does this differentiate from other kind of crypto Bitcoin securities or equities that they could invest in? Why this product specifically?

316
00:55:17.948 --> 00:55:28.968
Yeah, I, I think, um, you know, the, the fact again that, uh, we, we kind of put it in the same box that they're already doing other types of financing.

317
00:55:29.108 --> 00:55:34.648
So, you know, I always joke that the best way to get something approved is, like, only change one variable at a time, right?

318
00:55:34.728 --> 00:55:43.548
So, like, i-if you wanna get, uh, someone that's not doing something now to do something new, don't intro-introduce them to five new things. So what do we do?

319
00:55:43.848 --> 00:55:48.288
Uh, we put Bitcoin in Fidelity as the custodian, so they're familiar with Fidelity as a name.

320
00:55:48.588 --> 00:55:57.528
Uh, that was helpful 'cause when they-- when obviously they hear that brand and reputation, like, okay, you know, understand, don't need to think too much about that. That's, that's a risk we, we understand.

321
00:55:58.088 --> 00:56:05.888
Um, they have other products rated by S&P Global. So again, a rating agency that they can, uh, you know, rely on, understand, uh, check.

322
00:56:06.408 --> 00:56:18.128
Uh, and then even, you know, the, the trust servicer, the backup servicer, all of these things were other pieces of the puzzle that they were already familiar with. It was just Bitcoin as the asset that was new.

323
00:56:18.228 --> 00:56:25.158
Uh, and again, they had the, the backup of S&P Global explaining it, understanding it, analyzing it, that they could rely on.

324
00:56:25.188 --> 00:56:33.628
So I think it was really that piece that, again, fitting in a very similar structure, uh, that they're already, uh, uh, used to that allowed us to come in.

325
00:56:33.648 --> 00:56:42.438
And we actually did this more for the fact that we needed to open up this type of instrument to more investors than to get a better rate, right?

326
00:56:42.488 --> 00:56:52.008
Obviously, we're doing our best to drive down the rates of Bitcoin-backed loans. We, we wanna see the rates as low as possible to increase adoption, bring more clients into this type of product.

327
00:56:52.628 --> 00:56:58.048
Uh, but we were concerned that there just isn't enough dollar capital coming into the Bitcoin lending space, right?

328
00:56:58.088 --> 00:57:07.368
Like I, I shared before, you know, there's three to four billion, um, you know, obviously, you know, Tethers, um, you know, an investor in Ledn, you know, they're a big participant in the, in the lending space.

329
00:57:07.668 --> 00:57:18.037
There's other crypto-friendly banks like Signum, others in market. But there just isn't, you know, hundreds of billions of dollars of dollar capital that says, "I wanted, I want to do Bitcoin-backed loans today."

330
00:57:18.528 --> 00:57:25.568
So we had to figure out a way to get that, uh, type of investor into the market because we see this as, as exactly that size.

331
00:57:25.608 --> 00:57:35.607
We see this developing like residential mortgages, where there's literally like hundreds of billions of dollars happening every year and broadening out, uh, not just in the US, but also, of course, globally as well.

332
00:57:37.288 --> 00:57:51.208
So it's m-- is it-- is it a helpful way to look at this more, uh, so-- like you said, sourcing more liquidity and potentially making it easier to actually match, uh, uh, lenders, uh, and, and, uh, um, and borrowers in this case?

333
00:57:51.708 --> 00:58:03.688
Because I was looking at, uh, I was looking at Ledn's website, and one of the things that I think is interesting with the platform is you can both lend through, uh, Ledn or you can borrow, and the lending interest rates are, are pretty, uh, healthy.

334
00:58:04.068 --> 00:58:10.028
And I, I assume part of that is because the borrowing rates are, are pretty high, and that's where that, uh, or, or where that income's coming from.

335
00:58:10.408 --> 00:58:19.148
So is, is one way to read this, just it, it opens up a new avenue of liquidity that makes it a lot, lot easier to actually manage who is borrowing and who's lending on the platform? Yeah.

336
00:58:19.228 --> 00:58:30.708
We view our job as simplifying and providing, uh, comfort and I guess, you know, what's the right word? Peace of mind, uh, when people take a Bitcoin-backed loan. Uh, right?

337
00:58:30.868 --> 00:58:40.728
So, um, the best thing about Ledn's product is the rate is fixed, and you have that available for a year. You can auto-renew the no-- the loan every year if you'd like to take it longer.

338
00:58:41.108 --> 00:58:46.688
But when you take a Ledn loan, you know exactly what you're getting. You know your liquidation thresholds, you know the interest rate you're paying for that year.

339
00:58:47.208 --> 00:58:54.928
Uh, and our job behind the scenes is to make sure that capital is available and to make sure that we can drive the, the best rate possible.

340
00:58:55.388 --> 00:59:01.788
So this, this goes into that latter piece is the, the great thing about an ABS structure is that it was, it was actually a three-year financing.

341
00:59:02.208 --> 00:59:12.748
So it gave us certainty, and therefore gives us client certainty that we can provide a fixed rate for a certain amount of time, right? Clients are using Ledn loans to make real estate investments.

342
00:59:13.068 --> 00:59:19.618
Uh, they're using it to pay down other hi-higher cost debt. They wanna know what they're paying throughout the life of the loan, right?

343
00:59:19.648 --> 00:59:27.828
We, we do compete against other types of financing in DeFi, but ninety-nine percent of loans through decentralized finance are variable.

344
00:59:28.288 --> 00:59:36.288
So you might be paying four and a half percent today, but if Bitcoin rips and there's more demand in that pool, you might be paying thirty-five percent tomorrow.

345
00:59:36.988 --> 00:59:43.058
So, uh, you know, that's, that's the piece is like everything we do is to give clients that peace of mind, right?

346
00:59:43.088 --> 00:59:52.208
The proof of reserves to tell us, you know, clients what you're doing with your Bitcoin, and the fact that it's a fix-fixed rate product. So all of this plays into that, in making sure we can deliver on that me-mission.

347
00:59:53.748 --> 01:00:03.308
I think it's incredible to see how much innovation is still happening within this space, and it reminds me that, honestly, Bitcoin credit industry is so young and still so early, right? Absolutely.

348
01:00:03.908 --> 01:00:13.988
You look back to like twenty seventeen, and so-- a-and even twenty twenty-one, and some of the fly-by-night lending practices that ended up going horribly, obviously, for a lot of companies.

349
01:00:14.088 --> 01:00:25.228
That-- Those are starting to be pushed to the wayside, and now we actually have like, you know, S&P-rated bonds out there for, for this landscape. It, it's pretty exciting to see. But Adam- Yeah, it's amazing.

350
01:00:25.348 --> 01:00:33.768
I mean, uh, you know, I, I joked actually when we created it. We started Ledn in Canada, and going back eight years ago, we could barely get a bank account open for our company, right?

351
01:00:33.828 --> 01:00:42.678
And now we've got, you know, S&P Global. Uh, they actually just did a webinar this morning on the product. So it was, it was pretty great to see them, them talking about, um, how it's developing.

352
01:00:42.708 --> 01:00:51.078
And as I said, you know, I hope it gets replicated. I hope the whole industry can benefit it. So we're all in this mission together. Well, congrats on pioneering it, and we will be keeping an eye on- Yeah.

353
01:00:51.078 --> 01:00:59.568
Congrats, Adam... development for sure. Thank you, guys. Adam, thank you so much for joining. Have a great week, man. Thanks for having me on. You too. Thanks, guys. See ya. All right.

354
01:00:59.768 --> 01:01:12.454
And then we have Tom Massero coming up next. But before that, quick note from our sponsor, Lygos.Hedge funds are getting liquidated, and other funds as well, other companies, as we [chuckles] covered earlier.

355
01:01:12.884 --> 01:01:23.244
[laughs] Is your Bitcoin safe? It's not just Bitcoin's price drying up. Big whales, hedge funds, and lending desks are going under after the notorious 1010 and 25 liquidations.

356
01:01:23.804 --> 01:01:32.064
Counterparty risk is rampant, so it's more important than ever to understand who actually controls your Bitcoin. Don't be the next FTX or Celsius victim.

357
01:01:32.084 --> 01:01:40.164
If you're working with another loan provider, do yourself a favor before it's too late and check out Lagos Finance, our preferred non-custodial Bitcoin lender.

358
01:01:40.224 --> 01:01:45.264
That's right, you heard that right, non-custodial, using Bitcoin native smart contracts to protect your stack.

359
01:01:45.654 --> 01:01:58.904
With Lagos, you always know where your Bitcoin is, hold your keys, no wrapping, no bridging, no rehypothecation. Get competitive rates as low as ten percent APR. Go to lagos.finance to learn more.

360
01:02:00.044 --> 01:02:10.244
Yeah, no wrapping, no bridging, no rehypothecation. That's true. Also, Lagos sent me- No Tom Foolery. No Tom Foolery, but we're gonna have Tom Masiero here.

361
01:02:10.494 --> 01:02:26.644
[laughs] Lagos sent me this cool, uh, iPhone to, uh, demo their, uh, product. So, uh, I'm a fan and an enthusiastic user of their products. But enough about that. Let's get our boy Tom Masiero up on stage.

362
01:02:26.664 --> 01:02:39.384
Tom, welcome to the Block Says live show. Hey, gents. How's it going? Pretty good, man. Welcome back. A short segment this time. We had a longer show with you in Nashville, one of our better shows to start the year.

363
01:02:39.504 --> 01:02:49.724
And now we've got some big news from y'all. So Tom is head of strategy at Cathedral, director of strategy at Cathedral Bitcoin, and y'all just announced a merger with Sphere3D.

364
01:02:50.364 --> 01:02:57.644
I believe this was a, a week or two ago when this news came out. Tom, give us a quick rundown of how all of this developed.

365
01:02:59.024 --> 01:03:06.324
Yeah, I mean, uh, just like anything in this industry, it's, it's based on relationships, and usually long-lasting ones or, or business ones.

366
01:03:06.354 --> 01:03:17.664
And so, um, you know, we were fortunate to develop a relationship with Sphere, uh, earlier this past fall where they became a hosting customer for us and [clears throat]

367
01:03:18.144 --> 01:03:43.634
you know s- you know, basically developed that relationship, uh, through that period and, you know, became apparent that there were a lot of, I don't wanna overuse this word, but synergies between, you know, sort of our infrastructure-heavy business and, and their business as being, you know, having a lot of machines, having the capital markets kind of exposure on their end, and obviously having the listing where, um, you know, made a lot of sense for us to think about, uh, combining forces.

368
01:03:47.604 --> 01:03:58.364
[laughs] Sorry, we had to go for a call. Yeah, here, let me... I wanna get this, get this up. Joey, let's just leave it like this. Um, you mentioned synergies, Tom. W-what kind of synergies exactly?

369
01:03:58.424 --> 01:04:08.054
Like, what is Cathedral bringing to the table for Sphere and vice versa? Sure thing. Yeah, we're, we're, we're bringing essentially a vertically integrated, uh, power infrastructure.

370
01:04:08.164 --> 01:04:21.344
So, you know, we, we build, develop sites mostly here in TVA. Um, we tr- we very much focus on cheap, reliable power at scale and, um, you know, we build these sites, we develop them.

371
01:04:21.424 --> 01:04:30.544
We host for some of, you know, I would say some of the top tier, um, you know, institutional customers that are in the United States. We've had them for a really long period of time.

372
01:04:30.624 --> 01:04:44.284
We've hosted for ASIC manufacturers, uh, going back years. And so, uh, they bring a lot of, uh, new machines as well as capital markets and, uh, we're excited to, uh, take that, uh, to the next step.

373
01:04:44.304 --> 01:04:55.244
I think they, you know, most recently had some- somewhere near twenty-five hundred new generation S21, you know, variants, uh, that they've deployed, most of them with us.

374
01:04:55.864 --> 01:05:07.084
And, uh, you know, we believe that, uh, you know, with those machines, as well as, um, you know, the ability to continue to grow out, um, our, our infrastructure, it makes, it makes for a great match.

375
01:05:09.244 --> 01:05:24.044
Uh, yeah, and I'll point out that you guys say that you are pursuing, quote, "one hundred megawatts of expansion opportunities," uh, that's huge, most of which I understand probably AI HPC.

376
01:05:24.364 --> 01:05:30.414
Far cry from where we all were five years ago. Can you kinda rehash this, this major industry trend and your role in it?

377
01:05:31.944 --> 01:05:36.824
Yeah, I mean, really, it's just, it's just a ch- It's-- I think, I'm trying to remember who, who made the statement.

378
01:05:37.064 --> 01:05:45.264
Uh, you know, s-somehow we got categorized as energy pirates back in the day, and, you know, to, to a certain extent, we still are.

379
01:05:45.324 --> 01:05:57.744
And I think the, the big difference between, you know, five, six, seven years ago and today is now there's two potential buyers for that, that stranded energy, and it's eight-- you know, it's HPC AI, and then it's Bitcoin.

380
01:05:57.844 --> 01:06:11.724
And, um, you know, primarily where I've had focused most of my time, uh, since leaving Great American Mining was on these smaller, I would say dispersed off-grid opportunities, I'm sorry, on-grid opportunities that are like sub-twenty megawatts.

381
01:06:12.364 --> 01:06:17.044
And [clears throat] you know, for the most part, we could just sort of do our thing there with Bitcoin mining.

382
01:06:17.644 --> 01:06:24.724
But just up until maybe the last six months, um, you know, the HPC AI, uh, opportunities are starting to come down market.

383
01:06:24.984 --> 01:06:42.034
Uh, NVIDIA has, you know, launched some initiatives where they're focused on developing a distributed, you know, cloud, I would say, like infrastructure for GPUs, and they want to, you know, make sure that the- they're represented in, within sub-fifty megawatt tranches.

384
01:06:42.084 --> 01:06:57.224
And so that opens up a lot of opportunities for, for folks like our size to, uh, to be able to accommodate that. Tom, on that note, you know, as we see all of these miners moving towards AI and HPC,

385
01:06:59.944 --> 01:07:09.364
we, we've come back to this question a lot, and I actually asked you on our full show, but w-we'll rehash it again here. W-what does that mean for the-- for Bitcoin mining writ large?

386
01:07:09.424 --> 01:07:18.024
I mean, like, what's your reading on the current state of Bitcoin mining, specifically with hash price like hovering near all-time lows, uh, hash rate kind of stagnating?

387
01:07:18.054 --> 01:07:31.084
And, and what do you think is the future of this industry in the United States specifically?Hmm. Well, I know I have more gray hair than, uh, than I've had, uh, in the past, and, um, I- it's just a bear market.

388
01:07:31.184 --> 01:07:41.164
You just gotta deal with it. Um, I think, you know, like what you and I talked about, Colin, the last time was this, this weird kind of, uh,

389
01:07:42.104 --> 01:07:54.924
you know, I guess like two things happening at the same time, which is lots of really decent machines are hitting the market, flooding the market, um, but yet at the same time, this depressed price and depressed profitability that's out there.

390
01:07:54.934 --> 01:08:16.344
And so it's made it sort of unique because in prior cycles when price and profitability are, um, at, at the areas that they typically are, mining sort of like dries out and then, you know, the, the ASIC manufacturers will sort of start developing relationships with hosting cust- or, uh, hosting providers like ourself and self-host machines until the market kind of picks up.

391
01:08:17.124 --> 01:08:21.264
That's really not taking place this time around. Um, and so

392
01:08:22.484 --> 01:08:41.724
I think like overall there's a little bit of an identity crisis for a lot of, um, I don't wanna call 'em miners, but people who are into Bitcoin mining, uh, along with, you know, doing AI and HPC, and I, I really just think they're two different customers, and they are still very valuable for a specific type of, um, load.

393
01:08:41.804 --> 01:08:45.624
For example, we just built a 15-megawatt site in TVA.

394
01:08:46.204 --> 01:09:00.244
It's an off-peak only site, so for 83% uptime, we get very, very favorable rates, and because there's this influx of very cheap machines out there, um, you know, it, it makes mining profitable.

395
01:09:00.274 --> 01:09:10.424
It allows us to, uh, continue to build that, uh, that business. There are all these like different shoulder times that are very, um, you know... Th- they're built for Bitcoin mining.

396
01:09:10.464 --> 01:09:23.204
And so, uh, I, I think, you know, whereas HPC/AI, it's, it's much more, you know, you need, you need more stable uptime. You have to have a lot of more redundancy. There's more permitting that's required.

397
01:09:23.524 --> 01:09:30.744
Um, and so that's great. That's better for bigger chunks that maybe k- uh, will need that type of investment.

398
01:09:30.764 --> 01:09:38.744
But for a lot of these like shoulder opportunities to take place, uh, Bitcoin mining, I think is still gonna be, um, you know, still a viable thing.

399
01:09:38.844 --> 01:09:51.384
Uh, I just think we're moving from the scale of, or the age of mega miners into a more distributed, uh, side of things. And, you know, like what, what do things look like two years from now when you've got...

400
01:09:51.404 --> 01:10:11.684
You know, you and I talked about a little bit of the, about this, uh, Colin, was you're gonna have a lot of these mega miners who are now mega HPC/AI, um, providers, but at their core, they were Bitcoiners, um, you know, in two or three years or five years, and they're still gonna look at things the same way they did when they first got in.

401
01:10:11.724 --> 01:10:20.524
And so I also, I honestly think there'll be a re- a, a renaissance when it comes to a lot of Bitcoin mining in a couple years. This is very cyclical right now. Yeah.

402
01:10:21.124 --> 01:10:31.744
Uh, each Bitcoin mining meta looks totally different from the previous one. So, uh, the one thing we can be certain of is that it'll look very different in four years than it does today.

403
01:10:32.284 --> 01:10:41.214
Uh, so very few- And I, I hope you're- Well- Yeah, I hope you're right about that, Tom, 'cause I would love to cover more Bitcoin mining in the future, but we will leave it there.

404
01:10:41.244 --> 01:10:52.253
Tom Ascero, thank you so much for joining. Hope you have a good day, man. Always good to talk to you. Appreciate it, gents. Thanks so much. See you, Matt. See you. Okay. All right. La- last segment.

405
01:10:52.384 --> 01:11:04.693
Bit of a cry corner this time. Uh- Yeah. A, uh, a pretty big cry corner- Yeah... and it's one that actually relates to some reporting that we've done. We'll keep this brief 'cause we're running, uh- Yeah...

406
01:11:04.724 --> 01:11:13.604
pretty long here. But Bitrefill has suffered from the Telegram hack that is being perpetrated by the Lazarus Group in North Korea.

407
01:11:13.644 --> 01:11:21.024
So we did a podcast on this, um, about a month or two ago with Taylor Monahan of Meta Mask.

408
01:11:21.544 --> 01:11:36.744
The TLDR is, uh, Lazarus Group hackers, a hacking syndicate in North Korea that is tied to a lot of crypto hacks, is going around and tricking people to download malware by impersonating people on their contact list through Telegram.

409
01:11:37.124 --> 01:11:47.354
They're doing this so well that when you pop onto one of these Zoom chats with someone who's being impersonated, it will actually have a video of the person that you think that you're talking to.

410
01:11:47.824 --> 01:11:57.924
So you can have a buddy that sends you a Telegram chat from a chat that you've had with this person for years, as long as your chat history goes back, 'cause it's their actual Telegram account, it's not a fake account.

411
01:11:57.934 --> 01:12:07.164
They will get you on Zoom, and they will actually have a recording of that person that will trick you into downloading malware to your computer. Bitrefill fell victim to this.

412
01:12:07.264 --> 01:12:13.744
It's the first big crypto company that- that's at least reported falling victim to this that we know of. That we know. That we know of. The first one that's reported.

413
01:12:13.804 --> 01:12:17.524
So it was disclosed of a Mar- it was a March 1st incident.

414
01:12:17.554 --> 01:12:31.083
They disclosed it yesterday, confirmed that it looks like the Lazarus or Bluenoroff group, and it, uh, originated, quote, "through a comprised employee laptop from which a legacy credential was exfiltrated."

415
01:12:31.764 --> 01:12:44.304
So- So basically an employee got hacked, and then Lazarus Group was able to then go through Bitrefill databases and company websites, et cetera, wallets as a result. Yeah.

416
01:12:44.364 --> 01:12:52.724
And also- Uh, they have not disclosed how much money has been stolen. Yeah. It, um, they did disclose that about 18,500 purchase records were accessed.

417
01:12:53.104 --> 01:13:00.204
Those records contain limited customer information such as email addresses, crypto payment addresses, and metadata, including IP addresses. Yeah.

418
01:13:00.264 --> 01:13:10.304
So, um, hopefully I can still use Bitrefill, one of my favorite companies in the space- Love Bitrefill... I've used it for, for forever. If you're not aware... Oh, Bitrefill, sponsor the show. Please hit us up.

419
01:13:12.004 --> 01:13:19.844
[laughs] No, Bitrefill's awesome. You just, uh, send Bitcoin, and you get, uh, gift cards. So- It's, yeah, it's a great service... Amazon. You can buy gift cards, preloaded Visa cards.

420
01:13:19.964 --> 01:13:31.804
Um, you know, you can get SIM cards from them, you know, temp SIM cards and things like that. Yeah. And you can also get free Bitcoin if you're from North Korea. Yeah. Great service. Um- [laughs] I'm sorry.

421
01:13:32.324 --> 01:13:42.884
No, that was great. I'm sorry. It, it's a great service. Hate to see this happen. One last note just on the complexity of this hack. Jimmy Song also allegedly was hacked. I think he tweeted- God...

422
01:13:42.893 --> 01:13:52.314
something about it recently. This, this is seasoned Bitcoin developer and evangelist Jimmy Song, and that just goes to show this is a very... This is the most sophisticated

423
01:13:53.224 --> 01:14:01.143
phishing and hacking attempt that I have ever seen in crypto, and they are actually taking control of people's real Telegram accounts through this.

424
01:14:01.644 --> 01:14:06.954
So if you see a message asking for a Zoom link from someone that you know and have contacted a lot,

425
01:14:08.044 --> 01:14:23.784
double-check with that person through another communication method to make sure that it's actually them and not a North Korean hacker. And with that, we will close. Thank y'all for tuning in. [outro music]