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[upbeat music] What's going on, y'all? Welcome back to Blockspace Live, coming at y'all fresh on this Wednesday. Charlie, it is the sad violin edition of Blockspace Live. We have got some

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pretty unfortunate stories. Very important though.

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We're going to start off with the Prime Trust suing Zap Solutions, Strike's parent company, for nearly $150 million in assets tied to flows that were made from Prime to Strike right before the company went bankrupt.

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After that, we have Kush Pavaria back on to talk about Orange partnership with the International Continental Exchange for Compute Futures, a kind of follow-up from his segment last week.

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Then we also have Alexander Leishman of River on to talk about the Prime Trust debacle, because there are a lot of companies that Prime is trying to claw money back from. So more on this in that interview.

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We also have Glenn Cameron of Onramp to talk about their Series A, and also to talk on the Prime Trust thing, 'cause, you know, once you got an...

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If you got the CEO of an exchange, also got executives from an institutional custody platform, you gotta be talking about what happened with this whole Prime Trust thing.

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After that, for our second story of the day, we will be covering Nakamoto's reverse stock split. That's right, they are going to dodge a bullet from a d- from a NASDAQ delisting by splitting their stock 40 to one.

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And we will wrap up with news that tokenized equities are coming sooner rather than later, as the SEC prepares a framework that should drop this week. That's right. The bear market groundhog woke up and saw his shadow.

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Six more weeks of suits. We'll come back and cover this story. [laughs] Blockspace goes live Monday, Wednesday, Friday at noon Eastern, featuring quick hits on the latest in mining, AI, Bitcoin, emerging tech.

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Make sure to hit subscribe if you're on YouTube, get the notification bell to get the push notification on your phone.

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If you are listening on Coindesk right now, make sure to subscribe to the Blockspace RSS and podcast feeds. You can find that by searching Blockspace in your podcast downloader of choice.

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And if you miss the live show, which again is at noon Monday, Wednesday, Friday, it turns into a podcast anywhere podcasts are found. This show is brought to you by CleanSpark, ticker CLSK on NASDAQ.

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More on CleanSpark later on in the show. I mean, if we're talking about CleanSpark, AI, HPC stocks are up today, Colin. I'm just looking at my, uh, charts here.

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Airen, CleanSpark, Mara, Cipher, all up over from any- from 5 to 9%, as well as Arm, AMD, and some other, you know, uh, chip stocks up. Yeah, big rebound- Are- After a pretty- Yeah...

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nasty sell-off following a surge in rates on the 30-year. And if you're a Bitcoin investor, and you're wondering, "Have I been sidelined?" You have, buddy. All right. The answer is yes. You've been sidelined super hard.

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All of... Everybody's bags are going up except for yours. So- Yeah. I, I- Get on board, man...

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I, the, a thread guy had a tweet yesterday where he said, "The funny thing about Bitcoin is in 10 years it's either gonna be worth zero or a million, and in either case you'll feel like an idiot."

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[laughs] And I tweeted that like, "Yeah, actually max pain in 10 years is not zero. Max pain is we're between 75 and 100K."

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And, you know, everyone's just linking arms, singing, you know, uh, Bitcoin to 10 million in the tune of Swing Low, Sweet Chariot. [laughs] Okay. Let's go ahead and dive into the news.

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Uh, news that's eating crypto, or rather I should say Bitcoin Twitter, this morning and throughout the week.

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So this headline comes to us from yours truly at Blockspace, and it's Prime Trust Bankruptcy Estate Sues Strike Over Alleged $13.8 Million and 1,758 BTC in Transfers.

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So we covered this on the Swan Bitcoin side of things on the stream Monday, if y'all recall.

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Prime Trust is also suing Swan for nearly one billion, I believe s- 970 million in assets, including Bitcoin, stable coins, cash, and XRP.

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And this is a part of a larger story where the Prime, uh, bankruptcy trust, the Prime Litigation Trust, is suing scores of companies.

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You can see they've got Morgan Stanley, they've got Huobi, they've got Compass, they've got Zap Solutions, Strike, and also Swan Bitcoin, along with a number of other individuals and companies, as a part of a clawback attempt related to its bankruptcy.

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So Prime Trust went bust in 2023, and is trying to claw back funds as it settles the estate.

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Reading directly here from Blockspace, PCT Litigation Trust filed a complaint on March 2nd in Delaware Bankruptcy Court against Zap Solutions, parent company of Strike, seeking to recover no less than $13.88 million and 1,758 BTC.

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That BTC, at the time of recording, is worth about $135.95 million. Now, there is a lot to unpack here.

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In November of 2022, according to the suit, Maller's push for some structural changes in how it was working with Prime Trust.

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According to the suit, on November 18th 2022, calls show Maller's attending with Zap's general counsel, their VP of operations and VP of product, uh, with a meeting, uh, with Prime Trust.

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He pushed Prime to adopt a new model, according to the lawsuit, where Zap would control its own KYC and Prime would step back.

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Critically, Maller's reportedly repeatedly, quote, "used the argument that Prime Trust does not have bank accounts for each end user."

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And the court document says that this demonstrates that he understood Prime's omnibus commingled structure and said, quote, "That's a problem." End quote. This is a really important part of the bankruptcy lawsuit.

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Because Prime Trust's estate here, which Prime Trust is the company, it went bankrupt.

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Uh, as far as I know, no one is involved with the-Bankruptcy process, this trust is, was formed on behalf of the creditors in this bankruptcy.

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They've made the point that funds were, like, c- hopelessly commingled in such a way where they can't even make sense of individual accounts, and that's a key part of their point here in the lawsuit.

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And that commingling's really important, 'cause, like, they had spreadsheets a- according to the lawsuit for who...

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like, what they owed to whom, but the bank accounts and the crypto wallets were commingled so that there was no clear delineation between different clients.

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Really importantly here too, uh, according to Prime's argument here, they cite the master services agreement that Zap signed with Prime, quote, "The agreement does not create a partnership, franchise, joint venture, agency, fiduciary, or employment relationship between the parties.

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Nothing in the agreement, expressed or implied, is intended to give rise to any third-party beneficiary." As far as I can tell, this master services agreement, along with the omnibus commingling, is really... are...

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they're really the linchpins of this case. Because of this master services agreement, Zap is considered a creditor to Prime Trust, and Prime Trust is considered the debitor.

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If there were a fiduciary responsibility from Prime Trust to Zap, then that would basically say that Prime Trust is holding funds for Zap as a fiduciary in which they have to safeguard those assets to the benefit of Zap, and that the assets actually belone to, uh, uh, belong to Zap.

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The lawsuit is alleging that this master services agreement basically says there was no such agreement, and so there's a creditor-debtor relationship here.

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The reason why that's important is the trust is using what's called a preferential cla- a, a preferential payment clause that says these companies like Zap and Swan withdrew funds within a 90-day period before bankruptcy that had them skip the queue for other creditors.

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That, that preference cla- clause in bankruptcy s- basically says within that 90-day period, anyone who withdraws their funds could be subject to a clawback because it shows preferential treatment for some creditors over others.

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And in a bankruptcy, there's a tier in terms of which creditors get paid out first.

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And so within that 90-day period, they don't want to see anyone moving their funds to the exit because that might imply preferential treatment.

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And within the case of Swan, one of the insinuations in the lawsuit is that Corey could have been allegedly tipped off, Corey Klippstein, the CEO of Swan, could have allegedly been tipped off by a Prime Trust executive because they had, uh, DMs going back and forth in the days leading up to a critical meeting with Nevada regulators that Prime Trust had and in the months leading up to the bankruptcy.

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Now, going back to the timeline here for Strike, in, on March, in March 20, uh, 23, uh, regulatory troubles start to mount.

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Uh, Zap and Prime were actively working together to navigate regulatory crackdowns in multiple states, including Texas and Connecticut.

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Senior executives of both companies, including Mallers and Prime's CEO, met to discuss a playbook for operating under imminent regulatory shutdown.

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The litigation trust for Prime argues, quote, this gave Zap, quote, "Highly sensitive information regarding the regulatory challenges."

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Going back to the November meeting, they're saying this gives him insider information, Zach- Jack Mallers, as for what's going on. Now, this is also crucial.

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On May 25th, 2023, allegedly there was a contract renegotiation.

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The day before Prime executives were scheduled to meet with Nevada's Financial Institutions Division regulators, Mallers demanded significant amendments to Zap's API agreement, specifically converting to a month-to-month contract and reducing Zap's capacity blocks from Prime from four to one, essentially allowing them to move more funds out and at a more rapid pace.

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Prime agreed to Mallers' demands on the same day.

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According to the lawsuit, uh, Zap is likely going to argue that the funds were held in trust, not as a debtor-creditor relationship, and therefore not estate property to begin with.

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While going back to the MSA, the, uh, Prime Litigation Trust preemptively attacks this by citing the master services agreement explicit disclaimer of any fiduciary relationship and the court's prior distribution opinions finding no such relationship existed.

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Now, again, that really to me seems to be the crux of this whole thing with that master services agreement, is if the court finds that that did not create a fiduciary, uh, agreement with Prime and Strike, regardless of the laws on the books for the state of Nevada or other states, they're going to make the argument that there's a clear creditor-debtor relationship here, therefore the clawback according to the preference period of 90 days should be valid.

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But we'll see how it shakes out in court.

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You are far deeper down the rabbit hole here than I am, because, like, for the listener context, this s- this, uh, the, the, the documents on Strike were unsealed last night, 500 pages, it, it appears.

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So there's a lot to go through here.

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Um, you know, if you've been around the block, you've been watching, Prime Trust has, um, an interesting and entertaining history, uh, involving, uh, maybe some more gray area markets before they began custodying crypto assets.

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It makes you wonder, uh, why were so many companies using Prime Trust as counterparty? I can p- speak to this a little bit. Like, there were very few options.

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Like, it was very, very difficult to get any type of custodian or counterparty, um, one reason why custodians still remain a pretty concentrated, narrow field to this day. Um,

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you say, Colin, that the linchpin here might be the master service agreement.

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It's also, like, a- as I understand, like, a lot of their, a lot of the argument here is, um, when Prime Trust is, like, looking at, say, Swan or Strike or other, these other parties-They are claiming that these other par- that these counterparties had, quote, "Highly sensitive information regarding the regulatory challenges."

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So I think that's kind of the other, like, side of this, which is how can they... How much can they prove that there is, uh, s- sensitive information? How much could they prove is, uh,

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uh, stuff that is, uh, that let them pull their assets early, and what kind of argument do they have? So, I mean, we'll see. I, I didn't realize, yesterday when we were looking, I thought that this...

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I think a lot of people thought that the Strike exposure was maybe, like, 10 million, but for it to be 1,700 some odd Bitcoin, that brings it to nine figures. That's way bigger than what I anticipated originally, so.

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Right. And I, I wanna, um, clarify something. I kind of, uh, I, I misrepresented something just then. Um, Z- Zap's is considered a creditor.

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All of these depositors are considered creditors, and that's actually the problem.

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Because, because of that, they can fall within the preference period as they're trying to get their money out, rather than owning the assets outright.

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So I, I wanted to clear that up because, uh, th- th- I, I kinda got my, uh, my terms and my understanding there flipped. But if Strike, uh, or Zap wasn't considered a creditor, then there would be no problem here.

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Um, you, you... They would own the assets outright. Um, it would be a trust beneficiary scenario.

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But because they are considered a creditor according to the master services agreement, um, that's why the 90-day preference period, uh, can result in a clawback. So really sticky, uh, situation here.

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Kinda puts not your key is not your coins really into perspective, right? And, and also, you know, as Alex, uh, Leichman pointed out in a tweet,

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you know, a lot of people thought that Prime was going to be fine or it's, like, good place to park money because they're regulated, but it just goes to show that you really have to dig into the details, um, of the actual services agreement and see what you're actually legally protected against.

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Um, and so the rest of the... Most of the stuff we're talking about today is all kind of clouded in this type of, uh, you know, these people going bankrupt, it's the proceedings, it's takes on those bankruptcies.

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But our next story and next guest is a fun one. It's a big deal. We're bringing on Kush Baveria again. You remember him from last week. I'm gonna tee him up here. Kush, Kush, welcome back to the show. Hey, guys.

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How are you? It's only been, uh, it's been, like, five days. [laughs] I think I did it last- Yeah, yeah, I think so... Tuesday, so this is exciting. Yeah, it's 'cause you guys keep, uh, you guys keep putting stuff out.

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Um, this time, uh, just yesterday you announced Oren and ICE, the Internon- Intercontinental Exchange, to launch GPU Compute futures contracts. Congrats. What is this deal? Explain what's happening here.

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So we're partnering with ICE to launch GPU futures and options in all of ICE's exchanges. Um, we're gonna start with the US, then go through, uh, many of their exchanges.

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All this subject to, uh, regulatory approval, but, uh, I think we have a really good shot at getting this out in the next few months hopefully.

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So it's gonna be exciting to let anyone in the world basically trade Compute futures and what we've been building.

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So, uh, if in my kinda cursory looking around, it looks like we had, like, early proto versions of these futures markets, but they're on, like, Kalshi or, like, Robinhood or, like, prediction markets. Um,

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is, does ICE, does this ICE more, like, major regulated market, does it bring, like, more credibility?

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What is different about this than the, uh, stuff we had over the past or- Nothing, nothing against Kalshi or Polymarket. I, I think Tarik and Lana and, uh, Shane are incredible people, and they've done an incredible job.

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But it's just there's a huge volume difference between ICE and many of the prediction markets. And if you look at it, most of the world's oil trades through ICE, and the, it's the largest exchange in the world.

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So I think the volume is 1,000X larger than you could probably get from any other marketplace. So it's huge given that these are now going mainstream and will sit alongside other commodities like electricity and oil.

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Yeah. And, you know, uh, maybe it goes without saying, maybe it doesn't, but, like, institutions with hundreds of millions of dollars to place bets are not gonna do that through Polymarket [laughs] and Kalshi, right?

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I mean, that's very clearly a retail product, you know. Of course. I mean, at least not today.

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And I think having a partnership with ICE just gets us into the more of the institutional players that wanna hedge a lot of their commercial risk, right?

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Today, you see trillions of dollars, and, uh, I guess at this point it's billions of dollars being poured into OpenAI, Anthropic, Gemini, all of these AI lab companies, and there's no way to sort of hedge their exposure and risk to these models and compute costs in general.

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S- so, Kush, that leads me to a question that I have for this, 'cause I, I used to work at, at Luxor Technologies, and they launched, you know, the first hash rate forwards. Um, they also had a futures product.

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Uh, with Bitnomic getting bought out, I'm not really sure what's gonna happen with that. But

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one of the things that I always got asked when I was at, at Luxor, 'cause I was on the, on the marketing and media side, is, okay, obviously miners are gonna wanna sell forward their hash rate so they can lock in revenue.

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But who's on the other side buying this? So for a product like this, the, the, the seller to me is obviously very clear. Data center companies, they want- [laughs]... to make sure that they have access to.

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It's almost like a form of financing, 'cause you can have your, your revenue locked in for a specific period, and you know that you're gonna make payroll, as you know you're gonna meet your debt obligations.

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But who's the natural buyer of a product like this? It, it's funny you say this, 'cause yesterday someone was like, "Who's the natural seller? I think everyone's gonna buy in this market."

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It's literally the exact opposite thing that you told me just now.

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Uh, but, uh, I think a lot of buyers wanna hedge their costs of compute prices going up.If you think about it in a market, right, every single enterprise today is exposed to compute costs, given how, how much they're integrating with all these AI tools, and everyone's training their own model, post-training stuff on top of open source models.

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There's a wide variety of things that happens, and many of these enterprises run inference locally and run it on their own data centers, and all these costs somehow need to be hedged given that these are large scale, uh, costs that they're taking on as a business based off of, like, prices of compute that change very rapidly based on supply and demand.

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Uh, if I'm looking into this market, I'm understanding it correctly, and again, I'm still getting my feet wet on the world of commodities trading, um, uh, you mentioned ICE trades electricity, which is interesting because it's like a non-storable commodity and GPU hours are kind of like that.

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And it, it, it appears that the, the, that the market is modeled after electricity. Can you describe this and dive in this a bit more for me? Yeah.

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I mean, if you look at, um, electricity futures, they trade based off of different nodes throughout, um, the US especially. I could talk about that. There's different sort of style futures that exist.

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I think a popular one is Asian style futures where you basically could trade, one, you average the past days of index, um, and then you settle based off of that price as a futures contract. That's one way these trade.

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And also there's day ahead markets.

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You basically trade electricity a day before and it's time sensitive given that how, uh, as you just said, like electricity's not really sto- It is storable in the sense that you could have, you have batteries today, but like when it started, it wasn't really...

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It's still kind of not really storable, um, just given how the scale of things are. But there's definitely uniqueness as to how, like, compute and electricity trade. I think they're very same...

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We, we call it a very similar good, whether it's time sensitive and it's a flow good, not a stock good. And we've seen that it's, I mean, you know, and we...

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I look at like data center companies here in the central and southwestern US, the day ahead markets for electricity are pretty core to the suc- success of their business models.

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Um, do you see like similar types of strategies, day ahead markets for GPU hours as being unlocked by this, and what are the implications of that?

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So I think there's gonna be a lot of day ahead markets on the GPUs as time goes on, right?

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I mean, we're very, still very early into all of this, and I think as more people try to use GPU hours in their enterprises and all these different things, it becomes very similar to electricity, right?

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There's, there's a lot of like, it trades on a day ahead market, but some people... You don't see the cost of electricity going up and down at home, right?

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There's a utility provider that does all of this for you, and you just get the electricity cost. So there's gonna be different market structures that play along to get this how it is.

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M- my question is, at what point does this compress? Like when the CapEx cycle that we're in concludes? I mean, I, it's kind...

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I'm asking you to kind of look into a crystal ball because like, you know, the CapEx cycle could conclude and we could have, you know, 10 more gigawatts of AI data centers, but then demand could go up and outpace the actual supply of GPUs.

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So like how do y'all think about that when you're I think- approaching the problem?...

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the, the truth is nobody knows what the answer is, and there's a lot of people that wanna basically understand what the answer is, and that's why the futures market for this exists, right?

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It's like, is demand going to outpace supply? Is supply going to catch up to demand? There's all sorts of questions that exist in the market. Obviously like we don't really, we, we build the market, right?

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We don't take on any opinions on this, but the whole point of the market is to explicitly express that opinion.

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Recently, obviously, demand has outpaced supply by like quite a lot, and that's seen prices go up on all sorts of compute, and you can clearly see that through the chart.

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And I think many sort of startups and enterprises are facing this issue now where compute costs have gotten up. They're trying to figure out ways to sort of solve this issue as well, so.

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So I'm curious about like how you even bring this to market. I mean, we've asked, I've asked you various questions like this before, but like what are the regulatory hurdles? I mean, how do you...

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You know, I know that the deal, I think the deal with ICE is still kind of pending some rubber stamps it seems. But like

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what did you need to do in order to jump through the hoops to get this deal, and what are the regulatory challenges here?

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Um, I think it's just proving that the index is accurate and tracks, uh, traded price of compute, and I think part of that's we've done that clearly through many of our other sort of partnerships before this as well.

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That's the main thing.

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And I think also, um, working through, I mean, there's a lot of regulation that goes on in this industry, and making sure that none of our index is manipulatable and all these sorts of other things that come along with it.

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And I think we've done an incredible job so far making sure that's true. And, and that's because you take, I believe, uh, actual traded like- Yes... GPU- It's cleared prices. Yes. Exactly.

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It's the same way oil is tracked where we track like traded prices of what the compute is actually being bought and sold for, rather than it being indicative pricing.

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And maybe for the person who doesn't buy GPU compute, where does this stuff trade? How do you get this data? Where There's- Yeah... there's multiple different people that we work with.

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So we work with many different brokers in the industry. We also work with many different platforms like cloud platforms to get this data.

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Um, and then we have basically a methodology that we use to be- standardize this stuff. Obviously, compute is not very standardizable, and so we use a minimum greater above threshold on all of our compute hours.

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And so we clearly state that when you buy these contracts, this is exactly, it's this or above that we are tracking with our index.

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I guess another question is, so Oren has multiple markets, H100s, H200s, B200s, RTX 5090s. Which of these markets is the most interesting to you? Because H100s is pretty mature, but we've had a rip in there lately.

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5090s are mooning. I don't know. Which of these, uh, markets do you think are most- I, I mean, we... Look, we track the H100s today because that's a sort of, um, it's a, it's a widely available trip.

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The markets are matured there. But B200s are also, um, very interesting to us just because the Blackwells are now coming into market and people are looking at buying Blackwells for their enterprises and customers.

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So Blackwells are, I, I guess, another market that we've been tracking pretty closely as well, and I think that will take over the Hopper market as time goes onKush, I have one question.

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As we look at the hockey sticks on all of these charts, besides the obvious that we're ushering in the AI Armageddon by soaking up all of the world's resources, according to some people, um, what...

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Is there anything, is there anything to you that explains the sudden leap in, in these GPU prices? I mean, like, it's pretty dramatic over the last few months. Yeah, it's...

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I think if you just look at the market, and you go to AW- [chuckles] like Modo or AWS or any of your favorite GPU providers, just look at the price. This is increased straight.

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I think it's demand right now is crazy, and a lot of it probably has to do with everyone running their own AI agents and open claw instances- Mm... and all these things.

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If you think about it, people are now using exponentially more compute, because every time you use an agent, it makes a call to another agent. That does another thing. That does another thing.

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And so to more and more tokens, that token cycle continues to grow. I think per people, there's some, like, metric I saw that was, like, 25X more token usage per user now, just because of how- 20- 25X... X. Yes.

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Because- So 25 multiple. Exactly. Wow. Because of how people are using, um, agents on, like, sub-agents, and sub-agents of sub-agents now, and all this.

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I'm sure you guys have used many of these tools too, but don't have to explain it here. Yeah, I was just curious as to, like... 'Cause you see a dramatic move like that, and you think something new came out.

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And so, like, you know, uh, OpenClaw and things like that makes a lot of sense. And, you know, you, you mentioning how agents interact with each other in, in the, in the token economy.

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It's, like, tokens and agents all the way down, I guess. Yes. Um, I'm curious. It, uh, seems like everybody and their dog is compute-constrained. It seems to be, like, the main story for Anthropic right now.

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It's why my, it's why Claude is not behaving as much as I'd like it to. Um, you know, uh, w- I also see the story of local compute, people buying, I would say, secondary GPUs. The 3090 is a popular model.

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I'm curious, um, where does the secondary market for maybe, say, non-premier GPUs go? This is kind of a curveball question because I've got 3090s, I've got some 4090s. These are not primarily training or inference.

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What are you seeing there? I mean, look, we haven't been tracking 3090s and 4090s, to be honest with you.

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Mainly because, like, demand for those is still great, and I think a lot of those will be used for local servers and people running, like, open source models locally at home. Hey, I have an old gaming chip.

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I used to play Call of Duty, League of Legends, name my favorite game, and I now wanna run my own AI agent locally and don't wanna pay for tokens.

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And you can run, um, GPT-OSS, like 28 billion parameter model, pretty easily on these ships. So, uh, I would say that's probably the biggest use case for a lot of people. It, it's, it's a good one too.

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The next big thing to track is regional electricity prices versus token prices to arbitrage spinning up your own, you know, AI instance at home. Of course.

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[laughs] Well, I like to say we were joking, you know, back when we covered Bitcoin mining in the before times, that the, uh, best hash price traders would be meteorologists.

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So maybe we could see that with localized GPU compute, uh, and power rates. Kush, thank you so much for coming on the show.

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Um, I anticipate we're gonna keep pinging you to talk about the markets, 'cause this is a very exciting time and place for- Bet... GPU compute. Sounds good. Thank you guys so much. We appreciate it. Thank you, Kush.

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Thank you. All right. Always fascinating. Love Kush, love Oren. Let's keep rolling be- we have, uh, Alex Leishman, uh, founder of River Financial, on next. But before that, a word from our sponsor, CleanSpark.

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[gentle 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, and we are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com.

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All right, we've got Alexander Leishman, CEO of River Financial, in the wings. Not to glaze him too much- [laughs]...

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but probably my favorite Bitcoin exchange for a number of reasons that we might get into during this- Mm... uh, exchange. We'll go ahead and bring Alex up and ask him a few questions. Alex, welcome- Hey, guys...

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to the show, sir. Thanks for having me on. Yeah, man. Really, really happy, uh, to have you on. Thank you for taking the time.

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So we'll get into a few things with River, uh, towards the tail end of this, but we gotta talk about the Prime Trust news, um, or, or the Prime Bankruptcy Trust. Yeah.

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'Cause it's, it's eating Bitcoin Twitter right now, and you've been on the ball tweeting about it a lot.

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And, and my first question that I have to ask, this omnibus account stuff with Prime, where everything was just bunched into one.

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They had spreadsheets allegedly for the accounts, but everything was packed into, you know, single u- uh, single accounts for crypto and w- and, um, bank accounts. This seems... Is this atypical? Is this normal?

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Like w- that, that to me seems like a huge red flag if I were going to be using one of them. The, the high level here, and, and I think this is what the... Well, so, so, so maybe just to step back for a second.

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Um, you know, Prime, the Prime Trust is state. Um, so Prime Trust the company is, is gone. Um, all the shareholders were wiped out.

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Uh, no one running that company is, you know, involved, as far as I know, in these lawsuits happening right now. This is an estate representing the interests of everyone who had money at Prime Trust, right?

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So I think that's an important thing to recognize about, like, what the nature of these lawsuits. And so, um, so, uh, y- so this estate is basically saying Prime Trust was so-Uh, poorly run.

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Um, the assets, uh, that were supposed to have been clearly demarcated by client were hopelessly commingled. And so any, uh...

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Their arg- the Prime Trust estate is arguing therefore any, like, agreement for, um, to treat these as like a, a, a, like a normal trust would, like, th- this is the property of, uh, the account holder, um, and, um, it belongs to them, and therefore not part of, you know, the Prime Trust estate.

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That claim, that legal protection is, is gone because the assets just weren't treated that way.

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[laughs] Um, and so, um, you know, it, it's sort of like the, the, the, the, the clients at Prime Trust may or may not have had the right legal agreements and structure in place and, um, but, but unfortunately, the Prime Trust operations were just

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pooling everything together and running presu- seemingly fractional reserve.

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Um, so if you think about it, you know, just a simple example, let's say you have a trust company like Prime Trust, and they have two clients, and both of those clients have, like, rock solid legal agreements saying, "The property I give you is ours.

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It's not part of your, it's not part of Prime Trust." Um, but then Prime Trust just takes some of it and moves it away. Okay. And then, uh, well, what do you... What does, what does... A- and then they go bankrupt.

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What, what should the estate do?

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Like, you know, both of them have a- agreements saying the property was theirs and can't be claimed back from the estate, but the property's gone, and now everyone's going, "Well, what about me?"

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And that's kind of what's happening here.

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And, um, the people who got out right before Prime Trust went bust, um, you know, the, the, the current estate is arguing, uh, you know, had, like, inside information, and therefore, like, they need to send the assets back so we can have an equitable distribution to everyone involved here.

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And it's gonna be interesting to see, like, what happens with, you know, with the judge's ruling. Yeah. And, and the, the Prime Bankruptcy Trust is arguing that these companies are basically creditors.

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And, and a linchpin in this is this master services agreement with Zap, uh, vis-a-vis Strike. I'm not gonna speak to the other companies.

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I haven't gone through the court documents, so I don't know if there are similar MSAs, but this is coming from that, that court document.

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Quote, "The agreement does not create a partnership, franchise, joint venture, agency, fiduciary, or employment relationship between the parties.

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Nothing in the agreement expressed or implied is intended to give rise to any third-party beneficiary."

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So if I'm reading this correctly, and a lawyer could correct me wrong, it's like they're basically saying here that this is almost not akin to a trust, because a trust has to act in the fiduciary, uh, interests of their clients.

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But that seems to be the basis of their, of their claim. And then there were...

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And the court, uh, we covered this in the first segment, um, Zap's legal counsel met with Prime Trust and said, you know, "You need to create for the benefit of accounts for us and so that we can, you know, bas- basically make claim over these assets."

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Mm-hmm. So I'm just curious from your perspective as someone who's run, you know, a Bitcoin exchange, um, w-

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w- wouldn't that have flagged, you know, w- wouldn't that have been a red flag when, when you're, when you're entering into a contract with this company?

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Um, you know, look, I, I, I, I won't speak to, like, the specifics of Zap or Strike's legal contract with Prime Trust, and I haven't honestly done the, like, detailed analysis on, like, the timeline there.

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Um, I think that...

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Look, I think, like, on the surface, without getting into, like, the legal minutia of, of their specific contracts, like, it was reasonable to assume a trust company, uh, was acting as a trust company and wa- you know, that, that these assets presumably would've been bankruptcy remote under the Nevada trust law.

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Um, now, um, I know that sort of like a crux, the crux of like, some of these clawback arguments is that, you know, maybe the, the relationship was weak, but then they strengthened it, but they strengthened it too late, uh, or something like this.

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Um, I think there's like just a lot of minutia there that, like, a judge is probably just gonna have to work through. Uh- Right...

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and, and, like, there's gonna be arguments back and forth, and I really can't speak to like, you know, was their contractor responsible or something.

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I think really for me, the takeaway is, like, it doesn't really matter. Um, it doesn't, like, it doesn't matter how rock solid your contract is.

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It's like, you know, going back to that thought experiment, if every client had the perfect contract with Prime Trust but the assets are still gone, there's still- Yeah... people who- It doesn't matter.

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And to your point- There's just not enough money to go around To your point about Nevada law, that's actually one of, I think, Zap's primary arguments in the lawsuit is, like, there are laws on the books in Nevada guarding against this, so where are our legal protections?

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And you're kind of just saying is like, well, we get into these litigations, it gets messy, and the money's gone, so does it really matter what the law said, right? Yeah.

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I mean, the state, I think that the estate is, like, directionally arguing, well, sh- even if these protections did apply, once the sort of hopeless, hopeless commingling happened, um, it's a nonsensical

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thing to apply 'cause it's just not... Like, the laws of physics prohibit from applying, right? [laughs] Um, like the, the money isn't there and everyone's is pooled together.

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So knowing whose property is what is just not possible. Uh, and it's... And so, like, let's see how that plays out. Yeah. And it gets further complicated because now we're, we're dealing with multiple assets.

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We're not dealing with, like, just Bitcoin. And River, you guys have chosen to focus, um, being narrowly in Bitcoin, don't bother with other assets for abundance of reasons, which you're, you've talked about.

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Like, when we talk about all these different crypto assets and you're commingling them in an omnibus account, like, does that enhance an already-... problematic setup? Or I, I'm curious on your, your take on this.

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Well, I mean, absolutely, because look at what happened actually with what, what precipitated the, the bankruptcy with Prime Trust was they, their eth- their ETH wallet, um, was bricked.

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Like, they lost access to their ETH wallet, and... or they ha- they had sort of stopped using it and then started allowing deposits to it again and lost track of the keys p- presumably, right?

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And, um, and so I, you know, I was tweeting about Prime Trust for a, a while, um, because I saw a lot of Bitcoin influencers, like, sort of saying, you know, shilling like some, you know, Bitcoin-only companies.

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Like, well, you're, you're really just shilling Prime Trust here. You're telling people to send their money to Prime Trust, and Prime Trust is running this multi-coin, you know, not really well run custodian.

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And so, like, what, what's really happening here? Why are you shilling this? And, uh, you know, they said, "Well, you know, Prime Trust might be multi-asset, but, you know, you know, this company is not."

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And, um, I was like, "Well, you know, there's a lot of legal risks here." So, um, so yeah.

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W- really Prime Trust being, one, poorly run, but then two, really it's, it was the ETH stuff that then s- bit everybody who used them.

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And so I think it's, it's, uh, it's interesting to see sort of the ripple effects of adding risks to a financial institution, um, impact every depositor there. It seems like- Yeah. The, the ripple effects, you might say.

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Yeah. You know, the, for want of an ETH- The, the, the literal ripple effects. The literal, for want of an ETH, the trust was lost. It's like the old saying, "For want of a nail, the horse was lost and the kingdom fell."

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Right. Yes, exa- exactly. But, uh, so this gets into a thing which you have been since before it was cool, um, talking about, which is proof of reserves and liabilities, and the proofs of all these things.

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Bitcoin affords, um, the ability to much e- more e- much more transparently prove reserves. You talk about this.

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I'm gonna, you know, give you a soapbox to talk about the importance of proof of reserves and, uh, how your company, River, does that. Yeah.

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And also, sorry Alex, to tack a question onto that after you talk about how River does it. Uh, just like- Sure... why do you think this isn't more adopted outside of the cynical- Yeah.

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And why aren't people not doing this? Besides the cynical Bitcoiner take, which is like, "'Cause the reserves aren't there." But so first, you know, like, walk us through- Yeah...

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like River's decision for this, and why you think this is an industry standard already. Sure. Yeah. So, um, well, I, I will say first, I, I've changed my mind about proof of reserves over the years.

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Um, and, and the Prime Trust situation actually was one of the main reasons I did.

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Um, uh, because I used to sort of take the very sort of, you know, almost sort of like overly autistic argument that, well, they might prove the Bitcoin's there, but you can't know that they don't have some secret liability with somebody else, right?

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That they're not disclosing.

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Um, but in practice, um, you know, uh, um, what proof of reserves actually forces is just transparancy- more transparency than otherwise would have existed, which often is just really strong signal that no funny business is happening.

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And so, um, so yeah, at River we, we, you know, prove every month that we have all the Bitcoin that we say we have.

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We show the Bitcoin we have, and we show the, um, a list of liabilities basically that any client can verify their liabilities against. It's anonymous, so, you know, it's not revealing client information.

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And if Prime Trust had had proof of reserves, none of this would've happened. Um, right?

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Like, you see that chart from the lawsuit about how basically Prime Trust was running under a, a under reserve for like, oh, actually like way longer than a lot of people thought, and this just could've never happened if they, they had instituted this.

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And so, um, uh, so you know, I think like really the, if you have your money somewhere, you should demand, you should, you should never have your money anywhere where y- they're, they don't have a transparent

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operation, right? And the people running it have competence and, and, and prove that to you. They don't just tell you, they, they show you.

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And one of the real ahas from the Prime Trust thing is it doesn't even matter if you self-custody, because if you, it's, w- if you bought the Bitcoin at Prime Trust 90 days before the bankruptcy and you withdrew it, they're coming after you.

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There are a lot of individuals who are clients of certain exchanges that are getting sued by Prime Trust.

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Um, and so, you know, the defense of these exchanges was, "Well, we encourage people to self-custody, so even if you think Tr- Prime Trust might not be secure, we encourage you to self-custody."

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Well, if you bought a million dollars of Bitcoin at Prime Trust and you self-custodied it 90 days before the bankruptcy, you have a lawsuit that you now have to deal with.

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And so it doesn't matter if you are [laughs] self-custoding. What matters is that the p- person who's selling you the Bitcoin have their I's dotted and T's crossed.

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And, um, and so s- then the question, well, why, why don't more people do proof of reserves? And I, I, I don't think the answer is usually 'cause they don't have the Bitcoin. I think the answer is one of either, um,

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one, they don't wanna reveal how much or little Bitcoin they actually do have, right? Like, maybe some companies maybe will be embarrassed that it's too small, um, or that it'll make them feel, I don't know, right?

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That that's a theory, is just like for the same reason maybe certain companies don't wanna reveal certain financial metrics, um, they don't want that, you know, public.

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Um, the, the other one is, uh, maybe just sort of they don't care, laziness. Um, it's just work. Um- I mean, how difficult is it though? Like, how, how, like what was the process for y'all like?

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So it, it really depends on your operations, right? Like for example, if you're Coinbase, it's a lot more work than if you're us. [laughs] Um- Yeah. I mean, if you've got a casino.

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[laughs] Yeah, and also just like, you know, if you have 20 different product lines, right?

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Um, so, uh-But, um, I think if you're like a Bitcoin-only exchange with like a relatively simple product suite, it's kind of just like there's no good reason not to, frankly. Um, and I, so

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I, I, I don't know exactly why, but I think it's one of the reasons that I mentioned. Um, and we even open sourced it, like, so y- and, you know, ours was compatible with like the BitMEX.

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BitMEX was like, I think the first to do like an open source version of this, and ours is compatible with that. And so, like the tools are all there to basically do this, um, without much engineering work.

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Um, I, I think another part is maybe if you're not running your own custody system, uh, the custody system you're using has to support what you're doing.

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And so I think actually if you look at how many Bitcoin exchanges are run their own custody, manage their own keys. Um, oh, [laughs] that's my MacBook thumb.

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Um, manage their own keys, uh, you know, have their own licenses, really, it's really just manage their own keys, right? It's a very short list. Um, Coinbase, Kraken, Gemini, Cash App, River, um, in the US.

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Uh, I don't know if it's- Like Fidelity, I think. Fidelity. Yeah. Uh, I, I, I, I, I don't know if there's anyone else. Yeah. So I guess final question is, there's so few custodians, um,

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how much of an issue is this? Does this have like a, does it have this have any undesirable effects on just the s- market structure of Bitcoin? I don't know, like,

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you know, all, most of these guys, most of the ETFs c- uh, use Coinbase custody, um- Yeah... you know, uh, it, you gotta ask how differentiated are they at some level?

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Well, you know, I, one thing I will commend Coinbase for, as much as I criticize Coinbase for running a casino, um, Coinbase, at least from what I've seen, has done custody well. Um,

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uh, and now they might not have proof of reserves, but at least if... The Coinbase custody, like for the large clients, they do have segregated addresses and things like this.

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So there is something kinda like a proof of reserves there. Um, and I think also what we see is like running a high quality custodian is not easy.

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Um, oh, by the way, I forgot, NYDIG is also, uh, runs their own custody, so that, that's another one. Um, running your own custodian, it, it's a lot of work, right?

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You're basically getting paid to, to hold the hot potato. Um, nobody wants to hold the hot potato, and a custodian is basically like a professional hot potato holder.

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And I think that what we're seeing is just like a hangover from an era where there were a lot of

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weak-handed hot potato holders, um, or like ba- you know, like they didn't have enough calluses on their hand or something- Yeah, they weren't wearing gloves... to kind of drop some of the potato.

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Um, I'll stop with that analogy. But, um- [laughs] Uh, yeah. And so, and so now I think, you know, Charlie, to your, to your point, um, we're just not gonna see that many.

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Like, I just don't think there's gonna be that many custodians, 'cause it doesn't make sense for a lot of small players to do this now. It's kind of like almost the ship has sailed.

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Um, the people who bother doing it do it, and it's hard to, like, come up with the economic case for somebody new to do it, um, 'cause there's already people with a reputation doing it. So I think,

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um, I think we're just gonna see like a small number of high quality custodians for the foreseeable future. Alex, thank you so much for coming on Block Space Live.

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Really appreciate your time and your comments on the news of the day. Um, wishing you guys the best and, uh, yeah, keep on, uh, tweeting about proof of, of reserves. It's a fun topic. Yeah. Well, thanks guys.

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Love Alex Leishman. He's like the Captain America of, uh, of, uh, Bitcoin Twitter, I think. [laughs] Next up, Charlie. Yeah. Next up we got our third guest. We are rolling hot with the guests this morning.

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We're rolling hot today. We've got Glenn Cameron of Onramp to talk a little more about Prime Trust, but also to talk about their Series A round. Yeah, so- Let's go ahead and get Glenn up here Let's bring him on up. Okay.

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Okay. Glenn, welcome to the show. Wow. Hey guys. Thanks for having me. Yeah, thanks for joining, man. So we'll just hop right into the, uh, fun news before we get to the un-fun news.

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Tell us about this most recent fundraise from Onramp and y'all's ambitions for how you plan to use the capital to expand your services. Yeah, sure. Yeah.

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So the Series A is obviously a really important milestone for Onramp, um, and it speaks to the success of multi-institution custody, which we can talk about actually in relation to the Prime Trust issue.

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Um, you know, and the main reason we did the raise is, you know, we wanna move this form of custody towards becoming the new standard for Bitcoin custody.

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You know, I, I know you mentioned, ch- uh, I was listening to your conversation with Alex, and you asked whether there was a problem with the market structure here, right? And that is our view. Okay.

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Um, and w- we'll tell you how we have solved for, for that. Um, in terms of the raise, we raised $12.5 million at $135 million valuation.

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Um, a venture capital fund called Early Riders, which is a Bitcoin-denominated fund, uh, uh, led the round with about 20% of the capital, and then the remainder of the capital was with other investors.

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Um-And we're gonna be using the funds primarily, um, for engineering, expanding the key network. We've got now, uh, four keys.

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We've got one in Canada, one in the UK, um, and two in the US, and we're gonna be expanding into the Middle East and to Southeast Asia, so we'll have keys all around the world. Um,

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uh, and then also for marketing, because historically we haven't spent a doll- dollar on marketing. It's all been organic growth. And so building out some of that, and also scaling on-ramp finance.

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If you wanna talk about that, we can talk about that. Um, but- Yeah, talk a little bit about on-ramp finance. We talked about it with Michael a few weeks ago, but yeah- Mm...

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kind of talk about that in light of the raise. Yeah, sure. So, you know, a lot of people wanna buy the dip, they wanna DCA, they wanna...

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You know, they don't necessarily wanna transfer dollars onto a platform and immediately buy Bitcoin, right? But if you leave cash on a platform, first of all, it's just sitting there being eaten away with, by inflation.

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Um, but on the other hand, you might not wanna buy Bitcoin at the price available at the time.

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Um, so what on-ramp finance, one of the things it allows, uh, clients to do is to transfer money onto the platform, convert them into stable coins and earn stable coin rewards.

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Um, we've got kind of a, uh, limited number of spaces, I don't know exactly how many are left, where we will pay a 5%, uh, yield.

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Uh, well, it's not a yield, it's a reward on, uh, those stable coins. People can put in limit orders. They'll be able to DCA into Bitcoin, et cetera, um, and earn a yield there.

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The other part of it is for clients to be able to actually buy physical gold on the platform. Um, the gold will be, uh, serialized, uh, gold bars out of the Royal Canadian Mint.

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Um, and people will be able to withdraw the physical gold, um, and they'll be able to purchase it directly through, uh, the platform.

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Um, and that's through our partnership with Argo, which are, uh, part of the kind of Sprott family, uh, uh, stable. Um, yeah. That's interesting, Glenn.

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You're giving a sales pitch to my boomer father who has a small- [laughs]... Bitcoin allocation, but has a much larger gold and silver allocation. Yeah. So- Yeah, I mean, look, I mean, I, I'm 52, right?

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And when you, when you start getting a little bit older and you gotta start thinking about actually spending the money you spent your whole life saving,

294
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you don't want to necessarily be 100% allocated to an asset with a 50% vol, right? Um, so... And also there's a very low correlation between gold, and it's also hard money.

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Um, you know, they, they're part of the same family. We will never, you know... Uh, uh, stable coins are just digital dollars, and they're actually safer than dollars in the bank because they're 100% reserved, right?

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Um, gold is 5,000... It's been used as hard money for 5,000 years, and Bitcoin. But we're not gonna be, you know, diversifying into Ethereum, Cardano, Solana, or any of that stuff ever.

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Um, yeah. So Glenn, to tie it, to tie what y'all do back to the Prime news. Mm. On-ramp works with... It's multi-institutional custody. It, it... Y'all deal with a number of custodians.

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What kind of due diligence or vetting process do you go about when you're choosing custodians? Uh, what do you wanna see, uh- Mm... to ensure, like, this is a place where we're comfortable with parking funds? Yeah.

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Well, let me start by, just for the viewers, explaining what multi-institution custody is, right? So you've got either

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self-custody, where you can have a single sig or multi-sig wal- wallet, and you hold all the keys, right?

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Then you've got, like, a collaborative custody, uh, situation, you know, Unchained or Casa or one of these, where you hold two of the keys, they hold the backup key, right? In both of those scenarios,

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for the masses, right? If, if we believe Bitcoin is going to become, you know, th- gradually gonna monetize into the base money and widely adopted around the world,

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we think it's unlikely that people are gonna be sitting with Trezors and, uh, uh, you know, things in cupboards and whatever. And you think about inheritance or fires and, you know... And also,

304
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if people don't know what they're doing, they can make mistakes, right? We, we see it every time, right? So it's a conundrum, right?

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Because either you leave it somewhere like Prime Trust or with Swan or, you know, one of these, uh, entities, um, and then you've got, you know, the obvious risks that w- we're talking about in the Prime Trust case, right?

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Um, or you've got to suddenly become, uh, you know, cypherpunk. Um, so-What the multi-institution custody model is this.

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Um, we've got three entirely separate institutional custodians, right? And they each hold a key, right? Um, and each of those keys is sharded, right?

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So within each organization, nobody can sign that key, and that's just to reconstruct one key, and the people in each institution don't know who holds the shards in the other institutions.

309
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So they cannot collude because they don't even know who to collude with. You know, there's a few hundred people at BitGo.

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If the people at one of the other key holders want to collude, you know, they're gonna have to guess who they need to collude with, right? Now, you can imagine

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if something happened to one of the custodians, it would not matter, right? The 100% of the Bitcoin would be completely safe, and we've already got four key holders, and we're adding more.

312
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So what it means is if one of the keyhold- keys fail, we just swap them out, right?

313
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Um, and when you actually do the maths, the probability maths behind it, it works out that the, uh, custody is 1,000 times safer, right? Um, I've, I've written a couple of articles showing that, uh, mathematics.

314
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Um, so what this means is the people don't have to be technical at all, right? The dashboard and the interface is as simple as an online banking account. Um, big, easy buttons with...

315
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even for old people like me, and, uh, it's, you know, and but at the same time you've got that ease of use.

316
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You don't have these risks that we do in the case of Prime Trust, and we think, you know, multisig has been around for 13 years, right?

317
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This is the obvious solution, and we're not talking about using multisig because at, at Prime Trust they were using multisig, right? It doesn't help if one entity holds all the keys. So one...

318
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Yeah, look, go, again, on the Prime Trust thing. Mm-hmm. Um, you know, they were a qualified custodian,

319
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but, uh, as we saw, some of the more sophisticated counterparties got wind that this qualified custodian was, uh, at risk of going under, which they did.

320
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Um, and those sophisticated counterparties were able to exit ahead of, say, like retail investors, at least kind of looking briefly at the timeline. Um, you know,

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I- I- I do kind of wonder, like, h- about, like, the layers between the individual and their actual Bitcoin whenever there is a single custodian or a single counterparty on the other end. Like, how many layers are...

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if you're familiar, like typically exists between like when somebody has somebody else custodian their Bitcoin, like how many different legal layers, different hoops are there to jump through whenever, like the average person hands over their Bitcoin to even a qualified custodian?

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So I'll answer your question like this, right? So the way I ended up in the position I'm in now at Onramp+,

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I was the head of digital assets and a senior investment consultant at an investment consulting firm here in London.

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Our clients were pension funds, family offices, um, funeral trusts, various types of institutional investors, right? Um,

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and the, the director of investment consulting wanted me to lead the digital assets, uh, part of the business. But it was kind of a misnomer because it was all about Bitcoin, right?

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Um, and when we were looking for a custodian... So first of all, I wanted the multi-institution, well, a multisig setup with different entities holding the keys, and that's how I found Onramp.

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Um, but the other thing is we did 18 months worth of due diligence. We hired a specialist, uh, due diligence firm, uh, in London. Um, and we did full operational financial due diligence.

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There was a, a, you know, multiple meetings and reports between, you know, very experienced due diligence professionals at, at this, uh, firm here in London called Perform. Um, and,

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you know, the average person is not gonna be able to do that, right? What are they trusting? They're trusting the name or whatever. They trust Swan or they trust, "Oh, I'm gonna put my Bitcoin in an IRA." Um, what...

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And what you find across the markets, right? Whether it's ETFs or whatever, I mean, for example, BlackRock is not custodying the Bitcoin, right? They're using a sub-custodian. Every IRA is, you know. Um,

332
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so i- it's prolific. I mean, if you look at who was using, I mean, Prime Trust was one of the biggest custodians in the digital assets industry.

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FTX, Binance, uh, US, Celsius, Swan, Strike, FOLD, Galaxy, were all using Prime Trust, right? Um, and I wonder

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if they did 18 months worth of due diligence before putting the Bitcoin there, right? Um, and you know what? I, I, it, I mean-When I was in the position I was as, as head of digital assets,

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I, you know, there was no way that... Bitcoin's the only asset in the world that you can hold in a multi-sig structure with different entities holding the keys. You can't do that with equities.

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You can't do that with bonds. You can't do that with gold. You can't do that with property. So why wouldn't you take advantage of that? Yeah.

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Glenn, thank you so much for joining us on the show, chatting about the topics of the day and the various ways Bitcoin is, uh, uniquely positioned. I'm a fan.

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I think, uh, given the abundance of ways people can reduce their counterparty risk, we should see more of that hopefully. So Glenn, thank you so much for coming on Block Space today. Appreciate your time.

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Thank you for having me. Thanks, Glenn. All right. We still have some fun stories about [laughs] people possibly losing money or trying to stop losing money, uh, to keep rolling.

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342
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343
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01:02:53.308 --> 01:03:07.788
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All right, let's go to everyone's favorite company, Nakamoto, who's doing- Everyone's favorite... a reverse split, triple sow cow, one for 40. [laughs] Triple sow. [laughs] I can't.

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Yeah, mi- missed the Olympics there by a few months. I know. But, uh- Yeah... yeah, this, um, it just goes to show there are no shortage of financial levers for companies to pull when they are distressed.

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So I'm gonna get this up here right now. Nakamoto sets one for 40 reverse stock split as NASDAQ deadline nears.

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So this was announced a while ago, I believe, uh, March or April, but Nakamoto, um, has m- the vote for the reverse stock split passed. It was approved.

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They had originally said it might be between one for 20 or one for 50, but now they have settled on one for 40.

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This is because the stock fell below the $1 minimum bid threshold on the NASDAQ for 30 days, and they got a notice in December that they needed to fix that by June 8th, 2026, for it to go back above $1 for 10 straight days or face a delisting.

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So the details of this reverse stock split, [tsks] this will reduce the company shares down to, let me see. I believe it is

352
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somewhere in the ballpark of, like, yeah, 17.3 million shares down from 690.018 shares. However, and this is important, the authorized share count is still 10 billion.

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[laughs] So if they want to rip an ATM in the future, assuming the stock's doing well and they can sell into the open market, they've got plenty of room to dilute and to issue new shares to raise capital.

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Again, that assumes that there's a strong market to sell into. Another thing to point out here, NAKA's stock price is about 16 cents, by the way, at the time of recording.

355
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Um, as of early April, when all this was going down, shares were trading around 21 to 22 cents. But importantly, my question with this was, okay, so I have 40 shares of NAKA. After this split, I will have one.

356
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What happens if I have 20 shares of NAKA? They're not doing fractional shares, so if you are going to have a fractional share after this split, they're gonna pay you out cash.

357
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Don't know how much cash they'll have to pay out. It, it's basically a forced buyout. Kind of, yeah, in a way, for sure. And, you know, I don't know how much they're gonna have to end up paying out.

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Believe in Edgar, they had a few 10, $10 million worth of cash on the balance sheet. They obviously have their Bitcoin. Uh, but that being said, there will be no fractional shares for this.

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Those, uh, shareholders will receive cash. Now, to tack onto this, NAKA also released its Q1, uh, earnings, I believe, last week, and the revenue came in- Yeah, this one is kind of a doozy.

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It's- Yeah, and I wanna be clear though, this, this, uh, Q1 does not really account for the BTC Media acquisition, so NAKA bought BTC Media. That was approved on February 20th. So unless I'm missing something,

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to me, it doesn't seem like they can claim revenue for the entire quarter for BTC Media. Maybe they can.

362
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But they- Well, and also, I consider the BTC Media, um, of, you know, the big flagship event was in April, which is not in Q1, perh- I don't know, are they declaring the revenue from that conference in Q1?

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Yeah, and a lot of that revenue would certainly have hit the books probably throughout last year and earlier this year- Okay... for sponsorships, right?On, on, depending on the deal, right? Right.

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There might have been payment in- in installment terms and stuff. But for Q1 revenue for NACA, they had 409,000 in media revenue from BTC Inc. They had $510,000 in advisory revenue, asset management $209,000.

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Derivative revenue from their BTC options, you know, they sell options because they have a shit-ton of Bitcoin- [laughs]... was just over a million dollars, and their healthcare revenue line was $479 million.

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As you'll recall, KindlyMD was the company that NACA ended up, uh, merging with to go public. They're winding that down, though, and that makes a lot of sense.

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There's a, probably a lot of overhead associated with that, that they do not wanna deal with. Be curious to see what the M&A looks like for that.

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And I don't know how far along they are in talks, but I would imagine they would just sell that business to, uh, uh, to a pure-play healthcare company.

369
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The big thing on the quarterly earnings, though, is the total operating losses for the company were 128.85 million. Now, this is largely driven by a 102.5 million change in its Bitcoin holdings.

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Um, as y'all might recall, companies can now log the fair value of their Bitcoin as part of their operating losses or gains. So Bitcoin goes up, they can log that as a gain. Bitcoin goes down, they log it as a loss.

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Compensation stood at 7.35 million, and SG&A stood at 8.78... Uh, sorry, 9.78 million. So- Yeah, it is, it is, uh, if I'm understanding these numbers right, it is,

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uh, man, it's hard to say this, 'cause I, I love these folks, but, like, compensation being more than their Q1 revenue, if I'm understanding...

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[winces] For- Well, and that, they, they got bodied on Twitter with certain- Yeah... people analyzing this, right? As a result, you know. And, uh, the huge transition period for them.

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But, you know, one last thing to note about the reverse split, this should put their share price squarely within, like, six to eight bucks a share.

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So assuming it stays above that for the 10-day period after, um, this, the shares are split, then they should be good on the NASDAQ delisting. So, I mean, as, as for right now, they've got a stop gap in place.

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Um, they're going to continue list- be- th- they'll, they'll continue, uh, being listed as a public company so long as nothing goes awry.

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Just a huge transition period for them, and I would imagine for the team now, the question is, how do we take BTC Inc. and this Bitcoin treasury company, and how do we sell this to the market?

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How do we make them believe in this narrative? So, um, Godspeed to them. Uh- Yeah... unfortunate Q1, but good news for the stock split.

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I mean, the stock split in and of itself is actually, like, you know, you don't wanna necessarily see that, but they do have, uh, they, they, they, they are executing on that plan.

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Yeah, I mean, it, it, it looks like it'll buy them time, eh, I guess, like, maybe down to the wire. Is the, what's the date? It's June 1st, so this gives them exactly 10 days. S- uh, June 8th is, is the- June 8th. Okay.

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Yeah, yeah. So yeah, so you get a rolling 10-day window where it's gotta stay above a dollar. It's shooting up to, like, six to seven d- I think you said maybe even $8 depending on the current share price right now.

382
01:10:20.932 --> 01:10:37.572
Uh, so looks like they'll buy some time. 100%. Well, we'll, we'll put a cap on that, and we will move on to our last story. But first- But before that, a word from our sponsor, Ligos.

383
01:10:37.992 --> 01:10:49.612
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389
01:11:37.132 --> 01:11:50.932
All right, we're gonna tokenize everything, and you're going to be happy. You're going to be tokenized, and you're going to love it. Yeah. And- And I, I will say, this feels like one of the bigger stories.

390
01:11:51.012 --> 01:12:03.392
This has been a bit of a white whale for, uh, for crypto for a long time, and if it ever seems natural to see institutional adoption of something, it would be tokenizing stocks.

391
01:12:03.592 --> 01:12:14.732
So call- 100%, and huge ramifications if this actually becomes the standard. I imagine it will. Like, do we get 24/7/365 trading as a result of this? Uh, that's- It's about time. Like- Yeah...

392
01:12:14.752 --> 01:12:18.792
why don't, why don't these, why does the stock market close? It's 2026.

393
01:12:19.612 --> 01:12:29.292
No more gap ups or gap downs when you open your Fidelity account trying to take out of a position because, I don't know, the, uh, United States napped the president of Venezuela.

394
01:12:29.632 --> 01:12:38.092
How are they gonna com- Things like that... how are they gonna compete with Hyperliquid if they don't do this? So. Right, and Hype, uh, up on the news. Hype up on the news. I'm actually kinda curious about that.

395
01:12:38.232 --> 01:12:49.252
Uh, I, like, there's an argument to be made that this is bearish for Hype, right? Well- But there's, there's an argument to be made that it's bullish 'cause liquidity begets liquidity. So, you know.

396
01:12:49.452 --> 01:12:57.912
Do you know what I'm saying? Like, it- Oh, I do. I mean, the... We're never gonna get anybody from, from Hyperliquid on the show, so I don't have to worry about burning those bridges.

397
01:12:57.932 --> 01:13:09.524
But Hyperliquid exists because, uh, these are, this is a gray market. You can trade your Anthropic shares, uh-You know, at a 30% premium, uh, there- Right... for the average, average person.

398
01:13:09.644 --> 01:13:19.494
So- And maybe there's an argument to be made that even after these get approved, they will still... IPO will still be, uh, popular because it allows, uh, overseas investors exposure to US equities- Exactly...

399
01:13:19.524 --> 01:13:29.284
that are tokenized. Exactly. But we're, we're dancing around the headline here. Right. This is from CoinDesk or Bloomberg by way of CoinDesk. They're, uh, um, reporting on Bloomberg's reporting.

400
01:13:29.424 --> 01:13:33.104
SEC to propose tokenized stock framework as Wall Street e- efforts deepen.

401
01:13:33.704 --> 01:13:43.754
The exterio- ah, the Security and Exchanges Commission, quoting from CoinDesk, is preparing an innovation re- exemption for tokenized securities as early as this week, Bloomberg Law reported.

402
01:13:44.264 --> 01:13:51.144
SEC Chair Paul Atkins earlier in May signaled the agency was considering new rule-making to accommodate blockchain-based trading and settlement.

403
01:13:51.684 --> 01:14:03.004
And, uh, you know, one thing to point out here, uh, Atkins is just such a reversal from what we had from years of Gary Gensler. Um, and one of the big things here

404
01:14:04.004 --> 01:14:14.844
is that he's basically saying, uh, that, you know, under the existing law, like, there's not really a good carve-out for tokenized securities. This is from the CoinDesk article.

405
01:14:14.924 --> 01:14:25.874
Atkins said existing securities rules do not fit blockchain-based systems that combine exchange, clearing, and settlement functions into a single protocol, arguing that the SEC should clarify the rules through regulation rather than enforcement.

406
01:14:26.244 --> 01:14:40.484
This is a huge criticism of Gary Gensler's regime as the SEC head. They were prosecuting what some lawyers called regulation by enforcement rather than regulating first and then enforcing when people break the rules.

407
01:14:41.324 --> 01:14:47.224
And we won't spend too much time on that, but you talk to anyone who worked in crypto at the time who was trying to do something innovative.

408
01:14:48.324 --> 01:14:56.664
You know, like some fly-by-night token wouldn't get prosecuted, and then someone who thought they were doing the right thing because they were trying to do the right thing would end up getting the hammer thrown on them.

409
01:14:57.384 --> 01:15:04.464
Uh, one last thing to note about this. As this framework gets rolled out, we've already seen a lot of traction in this field.

410
01:15:04.874 --> 01:15:19.264
The Depository Trust & Clearing Corporation, which processes y- uh, a, a lot of the US securities market for a number of these exchanges, um, is planning to begin limited production of tokenized assets in July ahead of the bro- uh, ahead of a launch in October.

411
01:15:19.724 --> 01:15:27.853
Wondering what that trial run looks like, and seems to me like they knew that something was already in the works with the SEC, so they thought, "We're gonna go ahead and try to get ahead of the market on this one."

412
01:15:28.404 --> 01:15:37.484
NASDAQ is also developing a framework for companies to issue, uh, tokenized shares. The SEC approved this in March, and the Intercontinental Exchange,

413
01:15:38.624 --> 01:15:43.504
ICE, also, uh, is rolling out a process like this through a partnership with OKX.

414
01:15:44.044 --> 01:15:57.924
So thi- this is a, a, a field that is rapidly advancing and to me it almost seems like we could have tokenized tradings on regulated exchanges by the end of the year. Yeah. This is big news for blockchains.

415
01:15:58.064 --> 01:16:13.104
You thought the corporate blockchain narrative was dead back in 2018? It's roaring back, and I think it's the BlackRocks of the world who've been developing these things forever who are probably positioned to take it.

416
01:16:13.224 --> 01:16:24.564
I mean, do you see these thi- Do you anticipate these things trading on Solana or Ethereum or any of those L2s? I have a hard time seeing that. If you look at, like...

417
01:16:24.604 --> 01:16:38.904
I'm- I was doing some, like, research on the, uh, Depository Trust & Clearing Corporation, the DTCC. They process something like, I'm looking at two quadrillion dollars in transactions annually.

418
01:16:38.944 --> 01:16:51.304
That's quadrillion, which is a thousand trillion. So, uh, you know, I think the volume of these, of the trading of these assets kind of boggles most people's minds. Jamie, can we get a fact-check on that?

419
01:16:51.344 --> 01:16:59.724
I'm just kidding. Yeah, I know, but- Um, I mean, obviously that's, like, it's not two quadrillion created. It's, it's money changing hands. Yeah, this is- But that's an insane number. This is money changing hands.

420
01:16:59.764 --> 01:17:01.904
This is not- Yeah... like- Yeah... adding value to these networks.

421
01:17:01.924 --> 01:17:11.524
So this is- And, and, and to your point though, Charlie, like, are they gonna trust Ethereum or an L2, l- look at the Kelp DAO hack and the fallout from that. Hell no, they're not gonna do that.

422
01:17:11.534 --> 01:17:16.944
[laughs] They, they wanna have internal measures to roll back transactions if they have to.

423
01:17:16.973 --> 01:17:25.964
And if you look at DeFi, especially in the age of AI, where it seems like it's getting easier for really crafty hackers to find chinks in the armor.

424
01:17:26.883 --> 01:17:34.283
I mean, if you're an institutional guy looking at DeFi, and you have all these Ethereum maxis saying, "Why don't you build on Ethereum?" The answer is obvious.

425
01:17:34.364 --> 01:17:47.984
DeFi has been a train wreck in terms of these, you know, fly-by-night protocols having horrible security gaps. And importantly, what the Kelp DAO hack taught us is one

426
01:17:48.944 --> 01:17:53.004
smart contract's vulnerability could be another one's liability.

427
01:17:53.404 --> 01:18:01.624
Because in the Kelp DAO they stole a bunch of staked ETH and then deposited that on Aave, I believe Compound, and some other DeFi platforms, creating fake, uh...

428
01:18:01.664 --> 01:18:10.964
You know, basically creating a, um, a fake liability for that platform and seizing up some of these lending pools. So

429
01:18:12.384 --> 01:18:24.704
I, I, I really fail to see a future in which n- any of this is anything but proprietary, closed source, closed loop, controlled by these institutions, so. Yeah, it's a really big week for...

430
01:18:24.724 --> 01:18:37.024
It's really just been a big year or two for trad markets, but I mean, think about it. We, we, we did, we did a stor- We've done a story, uh, uh, we've talked about the ICE, NASDAQ, and now DTCC on this show.

431
01:18:37.864 --> 01:18:42.484
Uh, all of these markets are heating up.

432
01:18:42.584 --> 01:18:55.294
I think, I think you mentioned this, but I believe in the announcement it said that these, that, uh, the SEC said it could be as early as this week, that- That they have the framework announced, yeah.

433
01:18:55.384 --> 01:19:04.304
That they have the framework. It should. So it, we might be covering this again on Friday in terms of what the actual framework is. Yeah. But it could be as early as this week according to Bloomberg.

434
01:19:04.344 --> 01:19:12.636
Yeah, and then I just kind of wonder about the implications of being able to trade 24/7, because if we're talking about-Again, Jamie, fact-check me on this.

435
01:19:12.646 --> 01:19:18.996
[laughs] Uh, two quadrillion in total trading volume annually, that is, uh, that's not just five days a week.

436
01:19:19.036 --> 01:19:28.576
That's actually just, you know, 9:00 to 4:00 Eastern or whenever the markets are open, which is really just half of a d- it's less than half a day.

437
01:19:28.636 --> 01:19:41.596
So you're basically now, we're now, we're now talking about 24/7 trading, so you actually almost, like, triple the trading hours of the normal, like, weekday, and then you get weekends.

438
01:19:42.176 --> 01:19:54.856
So it, it's not just, you know, two-sevenths of an increase in trading hours. It's actually more like several multiples over... It's actually, it's, like, three to four times the amount of trading hours.

439
01:19:54.896 --> 01:19:56.896
So, like, we could see just aggregate volumes.

440
01:19:57.196 --> 01:20:06.616
And, you know, I don't imagine that the v- uh, after conventional, conventionally after-hours volumes will be, uh, out the gate as big as they were, as they are during normal hours.

441
01:20:06.676 --> 01:20:16.116
But, like, you can see a future as this market matures and becomes globalized as, like, now we're just seeing not two, two quadrillion, but 10 quadrillion.

442
01:20:16.416 --> 01:20:25.186
Yeah, and I'm curious what, uh, perpetual trading, assuming, like, they might not allow 24/7 for this. Yeah. That's kind of like everyone's assuming it, but I'm- That's true...

443
01:20:25.186 --> 01:20:35.516
curious what that means for market dislocation. But, but, but- Right?... this, this means it just gets one step closer to that. Yes, 100%. Because how do you turn a blockchain off, you know, at 4:00 PM Eastern?

444
01:20:35.796 --> 01:20:43.875
Like, you- Right. Yeah, I don't really see that happening, um- I mean, if it's a private blockchain, they could theoretically do- Yeah. [laughs]... whatever they want.

445
01:20:43.936 --> 01:20:47.776
But then why, then why do we- [laughs] Why are we- Why do we need to turn off blockchain? What are we doing, what are we doing here?

446
01:20:49.076 --> 01:21:17.956
Um, I, I guess the, the other thing is, my other hot take is, um, I'm excited for the, uh, for the finance bros to finally get, um, a slap in the face of what it looks like, uh, to be p- terminally locked in and perpetually monitoring the situation so you can catch, you know, that crypto insider info at 3:00 AM, and, uh, and then it totally dominate your next 24 hours.

447
01:21:18.016 --> 01:21:30.136
So- Suit pointers are not ready for the future changes. They're not ready. They, they think you can go home to your family at 5:00 PM and go be... No, you gotta sit at your computer staring into the blue light 24/7.

448
01:21:30.676 --> 01:21:41.956
Okay, I think that bring, that probably wraps up the show today, Colin. [laughs] Yeah, I think we'll put a cap on it. Yeah. All right, thank you so much for listening to Blockspace Live.

449
01:21:42.056 --> 01:21:54.516
We're going, uh, live again this Friday at noon Eastern. I'm Charlie. I'm Colin. And we are Blockspace. [outro music]