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Blockspace: AI & Bitcoin
Kraken IPO CANCELED & Vanity Fair Hates Us
01:14:24
Kraken shelves its IPO as market conditions shift. Francis Corvino joins to break down the Blockfills bankruptcy and the $145M in claims. Plus, the SEC's new token guidance, Circle’s stock surge, and a sophisticated North Korean hack targeting Bitrefill and Jimmy Song.
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- [00:00]
Colin
Foreign. What is going on, y'?
- [00:06]
Francis Corvino
All?
- [00:06]
Colin
Welcome back to Block Space Live. We have got a packed docket today. Kraken is shelving its IPO attempt. Maybe try again another day. But they say right now the market is just not ripe enough for it. We also have a story about a Vanity Fair hit piece on the crypto Reich that depicts them exactly as you might expect actually. And probably the biggest news today, the SEC is finally going to give us some guidance on what a token offering is and should be and how developers and teams can manage these without getting their pants suit off. And we will close with a story on Bitrefill suffering from the Lazarus Group hack through Telegram that we discussed on the show a month or two ago. And we also have some great guests lined up today. We're going to we have Francis Corvino of Lygos to talk about the Blockville's bankruptcy. We've got Adam Reed of Lennon to talk about the bitcoin lending market and Tom Massero of Cathedra to discuss the sphere 3D merger.
- [01:06]
Charlie
Block space goes live on Monday, Wednesday and Friday at noon Eastern. We feature quick hits on the latest in mining tech AI bitcoin. Make sure to hit subscribe if you're watching on YouTube it's that day bell so you get notifications and follow on X. This is a podcast you can find anywhere. Podcasts are downloaded and if you like what you hear, you'll love our newsletter newsletter@.blockspace media sorry newsletter blockspacemedia.com and lastly, we have a conference this April in New York City. It's a technical conference targeted for the investors. If you're in New York City, go to OP News next OP N E X T Dev Love to see you there. Info and tickets on the website. This show is brought to you by CleanSpark. Let's kick it off Colin and we'll
- [02:00]
Colin
start with a little just market update because I think this leads in well to the Kraken story. Bitcoin down today 3.4% after just touching almost getting back above 75,000 this week. We're still, well we were up a lot more on the week up until this sell off but you know, we're still above 70k. I think a lot of people were surprised to see this considering the entire world is kind of shaking right now. Our world economies are shivering over the war in Iran and whether or not oil prices will grind the global economy to a halt. And then yeah, actually on Tuesday we got almost 76,000 so highest that we've seen since the February crash. But, you know, we'll kind of see where we go from here. I think some people were cautiously bullish here. Market looks somewhat good, but you never know. I mean, we could have a liquidity crunch and this could go back down to 60 in a minute.
- [02:50]
Charlie
Yeah, I don't know why you're looking at bitcoin. I'm looking at oil, Colin. Oil's where all the money's being made right now. Oil just almost kissed $100 yesterday. So the straight up Hormuz, still it's will he, won't he be open or not? I heard something about like some ships getting through Iran, maybe like letting off the gas. I don't really know. Everybody and their dogs got an Iran take these days.
- [03:16]
Colin
Yeah. I was about to say, you know, everyone's a, an expert on the Strait of Hormuz these days, so we'll leave that where it is. Love to see the straight open. Love to see oil prices come down just a little bit. But with regards to the current crypto market, Kraken is shelving its IPO plan, saying that right now market conditions just aren't really good enough for it. This is a scoop from our friends at CoinDesk. The lead here, Kraken's parent company filed an s draft s1 registration statement with the SEC in November regarding the proposed public offering of its common stock. But right now it is apparently putting it on hold, according to two people with knowledge of the matter cited by CoinDesk. Now, Kraken, as that earlier paragraph mentioned, announced this IPO at the end of last year. This was, they were probably getting the paperwork ready when bitcoin was. I mean, these IPO registrations take a long time, multiple months of work and they were probably putting a bow on it around October when bitcoin was ripping. So you can see why when they filed this confidential prospectus, the timing was really good for it because bitcoin was hitting an all time high or it was just coming off of an all time high in November, things were doing great. But now as bitcoin's cut in half from that all time high, and especially after February's brutal drawdown at the first of the month, Kraken is changing course. From COINDESK article, it doesn't look like they're entirely scrapping their plans for an ipo, but they're going to hold off until market conditions improve. A cracking CoinDesk spokesperson told CoinDesk. Quote, or cracking spokesperson, excuse me, told CoinDesk quote. As we announced in November, we confidentially filed with the sec. That is all we can share, end quote. When they were asked about whether or not this was being deferred. And I think that, I think the reticence of that quote and the fact that they weren't willing to divide, divulge more information kind of tells you everything you need to know. It's like, yeah, we filed for a prospectus, but that's all we can share. If this was really not true, they probably would have pushed back against it
- [05:19]
Francis Corvino
a little bit more.
- [05:20]
Charlie
So, yeah, I mean, just let's, yeah, let's, let's recap the past year. Like, last summer was hot IPO season. You had circle absolutely come out the gate swing. You had, I think Bullish had a pretty hot ipo. So, like, everybody was trying to ipo, obviously, like Kraken starts sprinting in that direction. Maybe that was always the plan. Maybe it was somewhat like, okay, it's IPO season for these crypto companies. And then they raised what, 80 mil? 800 million at a 20 billion valuation. Gut check. That seems fair to me. Kraken's an og. They do a ton of volume. They're like a premiere, you know, company. And they just like, what? Two weeks ago we did the story on them getting that Fed license, which was huge. So, yeah, they were kind of winning, winning, winning. And now we see them taking their foot off the gas and delaying this.
- [06:18]
Colin
And that makes sense to me. You know, don't cash in your chips if they're not going to be worth as much. And to your point, Charlie, they have been on a hot streak. They're the first crypto company to get a Fed master account. Now, it doesn't have the same benefits as a full scale Fed Master account. They're calling it a skinny master account. What this means, though, is they can access Fed payment rails for bank to bank settlement, but they will not be able to earn interest on their deposits with the Fed. So, crucial difference there. And going back to what you were saying about last year being a hot one for IPOs, Charlie, according to CoinDesk here, there were at least 11 crypto IPOs in 2025 that raised a combined 14.6 billion. Big leap from the 310 million raised in 2024. So you got to wonder if some people at Kraken aren't a little bit kicking themselves thinking, well, we kind of missed the juicy opportunity last year for this. But, you know, with Bitcoin down to 60 or 70k or so, this to me makes a lot of Sense. And if you don't really need, there's
- [07:26]
Charlie
no rush to go public.
- [07:26]
Colin
I mean, obviously people would love that liquidity event. There's no reason to do it. And also for what you said, Charlie Kraken, one of the OG exchanges, really cool to see them still out there and innovating and doing things at this stage in the game because they were one of the first, I would say non sketchy exchanges or the, one of the more buttoned up ones.
- [07:47]
Charlie
Yeah, they're like the trustee exchange. I mean I've done business there a long time.
- [07:51]
Colin
It's.
- [07:51]
Charlie
And they were the first, I think they were the first exchange to do proof of reserves. I don't think they did proof. I think, I'm not sure if they've done proof of liabilities. But yeah, they were. They kind of led the mainstream Tier 1 exchanges in their like proof of reserves, which is showing that they do in fact have the bitcoin and crypto assets that they say they do. So yeah, I mean it's hard not to kind of like, I think the founder, Jesse, he's always, he's kind of like one of those like more cypherpunk coded big, big name founders. There's a few of them still out there who are OGs who still like retain some, some street cred in the space. You know, I'll also mention that this, I just have to like, I have to point out that the circle chart, like if we're talking about like public companies, if you hadn't been watching circle, has been soaring since their bottom in February. 50 bucks per share in February and now over 200%, $132 per share probably related to the Clarity act stocks going well, maybe. But like you know, we do have in the market currently like these IPOs continuing, continuing to perform pretty well. So that, you know, it's down from. What's funny is like it's technically up where an IPO'd last summer. Summer at about $100 per share, so up 30% since then. Not bad when the rest of the market's down like bad. Not. Not too bad.
- [09:39]
Colin
Yeah, I mean definitely benefiting I think from bitcoin's bounce here. But I do wonder, per what you said, Charlie, how much of this has to do with talks for Clarity going well for stablecoin issuers. We covered the scoop or rumor, depending on who you want to ask from TFTC on Monday's show that Coinbase is lobbying against a bitcoin de minimis tax exemption in favor of A stablecoin de minimis tax exemption in the Clarity Act. A lot of he said, she said. Some people said it was fake. Zach Shapiro from the Bitcoin Policy Institute said they were also hearing this. Who knows what's true? But I do wonder. You can kind of leave bitcoin even to the side of this. If you want to divine something out of circles, move here and it's stock is. Are there actual legitimate benefits in the Clarity act that are being carved out right now for stablecoins? Are the stablecoin issuers going to get what they want in that bill? The biggest one obviously is being able to pay customers interest on their deposits in the stablecoins, which banking industry does not want.
- [10:45]
Charlie
Yeah. While we wait to see about our next guest, Lygos, I can riff on this a bit more like, you know, Kraken has a bunch of different plates. It's spinning. One of the things they've been doing is if you're familiar with Coinbase's base, which is a based roll up on Ethereum, a little bit controversial, but it's been quite successful from a user standpoint. Kraken's got their own that they've been in development of called Inc. I'm not sure too many details have been revealed but you know they are. It's funny like these two companies are following really similar playbooks because like these playbooks work and. So we can I guess like do a holding pattern while we wait to see where Kraken goes. I would, you know, I would love to get someone from Kraken on here to chat about this. Yeah, you are with Kraken. Hit up, hit up your people. Send a message in the, in the company slack to come on to the Blockspace Live podcast.
- [11:54]
Colin
Well Joe, I think that does it for this one. I say let's go ahead and oh, speak of the devil and he shall appear. Well, our first guest of the day just popped into the green room so we are going to go ahead and bring up Francis Corvino of Glygos Finance.
- [12:12]
Charlie
Francis, you are on the show. Welcome to Blockspace Live.
- [12:18]
Colin
How you doing Francis?
- [12:19]
Francis Corvino
I'm great. How are you guys?
- [12:21]
Colin
Pretty good man. Thanks for joining. Got a few questions regarding you know, just general market, especially in the lending landscape. As you know, y' all at Lygos know very full well. But I just want to get a quick update from you because y' all have been tracking this pretty closely. What have you learned about the block fills bankruptcy since the initial filing hit on Sunday. So for those of you who have listened or haven't listened to our prior podcast, Block Fills Crypto Financial services company filed for bankruptcy on Sunday for chapter 11 protection. And there are some new filings that came out since we've covered that on Monday. Francis, what is the latest on this bankruptcy?
- [12:59]
Francis Corvino
Yeah, I mean, just headlines. You got about 145 million in total unsecured claims. They have a collateral package still in terms of value at the company worth about 30 million. And they did about 61 billion trading volume reported in 2025 with over 2000 institutional clients. So this is kind of one of the more quiet behemoths. It's not someone that everyone in the industry necessarily knows compared to like an FTX or maybe a Celsius, just because they're a little bit more institutional facing than most of these sort of like former retail platforms. But the big thing I think that's come out is the reality that this is not a new store which is opened up for block bills.
- [13:41]
Charlie
Right.
- [13:42]
Francis Corvino
I, I think, you know, we had Bitcoin dip under 80k, I think, on February 2nd, and a lot of people probably pointed to that as being the impetus for, you know, Blockville's entering chapter 11. But I think if we look behind the scenes, we can see kind of a picture of a company which has been struggling since even 2022. Right. They had a series of mining loans go bad, you know, namely Axa Digital. They lent 123bitcoin and 500 ETH to Babel Finance, which is stuck in Singapore bankruptcy. And additionally, you know, there's been pretty much constant rumors about issues with their derivatives book. So it's just kind of a continued burn for these folks. I don't think that this is. I think what's really come out is that this wasn't a new thing. This was a hole that's been burning at the bottom of their book. And then Dominion recently moved one of their creditors to freeze about $4 million in Bitcoin on their platform. And that was approved by the courts. Essentially, they put a temporary restraining order on that Bitcoin and that likely was the trigger that had the, you know, the bigger class of creditors say, okay, we're going to restructure this and push this thing in chapter 11. Now. We're not just going to let 4 million flow out of this entity.
- [15:05]
Colin
Yeah, it's interesting to see if the 4 million was the thing that set this off, how little you need to get the dominoes, you know, falling. In this case, a few other kind of housekeeping items. Before I move on to my next question and some of the filings that came out recently, you know, some of them were procedural. You know, the holding company or parent company realize relays. I don't really know how to pronounce it. They decided to consolidate all four entities that are involved in this bankruptcy into one to make sure that they can just process all of the claims as one entity as they go forward. Forward through the court cases or go through, through the restructuring. The other interesting one was this motion that they were granted to use cash collateral from a loan from Celsius. Which two things there. First of all, going back to the hole has been there for a while. The court documents said that they had been basically in default on that loan since August of 2025. If I understand it correctly, they hadn't. That was the last time they made a payment. But the biggest thing for me there is like Celsius, we're talking about Celsius. Again, how, how is, how are they even a player in this?
- [16:11]
Francis Corvino
Well, I mean, you're still as a retail client talking about Celsius, right? I think not so long ago, quite a few Celsius clients who had received USD or BTC from the platform had been essentially had that assets attempted to. To be clawed back. So I believe, if I remember correctly, the specific issue at hand with Celsius was sort of a botched settlement from Celsius which led to there being residual value for four block fills. And now that capital I think is probably supposed to be flowing back to Celsius in the not so distant future and it just. Or the estate of Celsius.
- [16:49]
Charlie
Right.
- [16:49]
Francis Corvino
I mean that obviously hasn't happened, but again, I think it's not so much an individual 4.2 million as being what broke the camel's back. It's more like someone is no longer willing to play along with this. Right. I think a lot of the folks who were involved in the block fill scenario knew what was happening for a while. And at some point people recognized, hey, there's sort of two classes of creditors here. There's the larger class of creditors and there's a smaller class of creditors. And when that smaller class of creditor is no longer getting along with that larger class of creditors, that's when you start to trigger sort of maybe some chapter 11 bankruptcy which can give some of those larger creditors advantage over some of those smaller guys.
- [17:36]
Colin
So my last question on this, I actually have a number of questions. We probably could do a whole podcast on this. But you know, are you Surprised that we haven't seen more contagion from this? Or do you think that that's something that will take a while to play out?
- [17:53]
Francis Corvino
You know, I'm not, to be honest with you. I think if you look at, you know, the. These are names which you've seen before, right? Like SBI, I think, showed up in the last 24 hours as a, as another creditor. Like SBI has, has dealt with worse in the past, right? Like, this is, this is a, a small avalanche and they've dealt with avalanches at the, at the top of Everest. So I, I don't necessarily think we're going to see a whole lot of. And same goes with Nexo, right? Nexo is a little bit more of a complicated situation here, but like Nexo, likely a situation in which, you know, there's been some things happening behind the scenes in the past. Is this going to be what tips the camel? Or, you know, is this going to be the straw that breaks the camel's back? For a company as large as Nexo, given all of the kind of seemingly insurmountable pressure that they face back in 2022 with Otteru and the Bulgarian boys, like, there was quite a lot of pressure both on their withdrawals on them via socials and, and is this going to be enough? Probably not. And my guess, this is probably going to be an isolated event.
- [19:04]
Charlie
So Blockfills, it feels like one of the first bodies floating to the surface, but it's not like that big in the scope of like, bankruptcies. Do you think that there's, you know, do you think there's more of these blockfield types companies perhaps, that, that we. That could emerge?
- [19:25]
Francis Corvino
Yeah, I mean, I, I don't think, I don't think that this alone will be a big enough trigger though. I think that there are a number of firms who are still patching a hole from 2022, which is looking more and more insurmountably large. Right. Another, you know, a common thought process in the industry is like, if bitcoin price goes up, everyone is saved. But the reality is if your liabilities in btc, which for some of these guys behind the scenes it's probably is because back in 2022, you know, when bitcoin was in freefall, it might have made sense to change reliability into BTC. But if that BTC liability now is, you know, 75k and there's been significant appreciation in bitcoin, that's significant appreciation in the, in the value of your liability as well. So realistically, yes, I think that there are some very significant sort of like background issues for a lot of these companies. What pushed a lot of folks into bankruptcy in 2022, beyond just losses on the balance sheet, was issues with duration of the capital. Right. You had Celsius who had a number of trades on like the Staked east trade, which needed essentially that east to be locked into that lido smart contract until the merge event. They needed to exit that early. Right. And that created sort of a lot of pressure on the staked eth pair and that led to a de pegging and they needed to all of a sudden serve a bunch of clients, their capital back on the Internet with everyone talking about it, so they couldn't really survive the trade. Same thing with gbtc, right. Eventually, if you're willing to pay the interest for long enough, that did become an ETF and you could get your, your Bitcoin out at, you know, Pari Passu. But people weren't able to survive that level of duration. So if we see panic in the streets, that's probably going to be the thing that is more likely to push some of these companies over the edge because now they have capital that they're required to get to their lenders in, you know, maybe three days or something like that. And that capital is locked up in Singapore bankruptcy court like Babel, or it's locked up in some leveraged long trade that folks are trying to sort of like get themselves out of back in I think 2020. In March of 2020, a company which is actually on the, you know, Babel, who is sort of like, that's a, that's where Blockfields is a creditor here. Babel was actually caught recorded saying, we're just going to try and trade our way out of this. We got a hole in the balance sheet. They still got a loan after that fact from Blockfills and many, many others. They were still able to raise around in 2021, I believe from Susquehanna, which I don't know if you noticed, is also an investor here in block fills. So it's where exactly does the buck stop? A lot of folks are likely trying to trade out of this position. There's a lot of historical precedent for people trying to trade out of the position and there' lot of historical precedent also for other lenders and other VC funds coming in and plugging the hole temporarily in the hopes that some of these folks will be able to trade out of that position.
- [22:29]
Colin
So to close here, Francis, because you said something really interesting that I Wanted to double tap on and give you a chance to expand on. I think a lot of people would look at this bankruptcy and say, well, clearly the February sell off was the thing that finally did them under. And that's probably true. But you mentioned that a lot of these companies are still trying to patch holes from 2022. Can you expand on what you mean by that and why there would still be damage from that fallout?
- [22:55]
Francis Corvino
Yeah, I mean, for sure, like we already talked about the Celsius gap, right? But we also can see like one of the assets on the Blockville's balance sheet here is about an 8 and a half million dollar claim which is stuck in Singaporean court. Right. So if I have a lender who has capital with me and I need to go deliver him his capital back because he's called it from me, but I have eight and a half million dollars stuck in, you know, Singaporean bankruptcy claim, I can't get to that capital. Right. So that is still sort of dragging these folks down. Same thing with Exa Digital here. That was a bitcoin miner where block fills had been lending out capital sort of on behalf of nexo. Another one of the familiar characters showing up again. AA essentially went into bankruptcy, paid all of their, paid all of their invoices off and said, you know, screw it, we're done with this. And that again is like sort of a 2022 era issue, which is still a challenge for their balance sheet today. Right. Those holes don't necessarily close. It's not super easy to make $10 million and just have that, you know, liability wiped off the books.
- [24:08]
Colin
I mean, it just, it sounds like just an incestuous mess of lending. And I think it's kind of incredible that, you know, a blow up from 2022, the Hangover as these companies restructure and try to settle those debts can still be felt today, four years later.
- [24:21]
Francis Corvino
And it's not just blow ups too. It's like the other things that were going on in the industry at the time were you can think about like sort of the full spectrum of things that went wrong in 2022. There's uncollateralized lending and we got a little bit of uncollateralized lending here. There's derivatives books gone awry. We got a little bit of derivatives books going around here. There's over allocating to Bitcoin mining. 36 million deployed in January of 2022. Also not, you know, not the best. Right. Like mining has been tough. So they've essentially touched every single one of the hot pans in the kitchen. And at this point, like you know, the hand is burning off and you can only keep it behind your back until someone smells something for so long.
- [25:03]
Colin
Until someone sniffs that burning flesh, I guess. Right?
- [25:05]
Francis Corvino
Yeah.
- [25:07]
Colin
Francis, thank you so much for joining, man. We'll have to get you back on sometime soon. We'll be keeping track of this closely and we'll be writing a kind of second day. Take some of the stuff we talked about today for Friday's newsletter. So if you are interested, keep an eye out for that. Francis, nice to see you as always, sir. Have a great day.
- [25:26]
Charlie
And now a word for our sponsor, CleanSpark.
- [25:29]
Colin
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- [25:35]
Francis Corvino
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- [25:40]
Colin
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- [25:47]
Francis Corvino
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- [25:51]
Colin
Learn more about the intersection of energy and bitcoin@cleanspark.com
- [25:59]
Charlie
okay, let's talk sec.
- [26:01]
Adam Reed
Yeah.
- [26:02]
Colin
For our next story, light at the end of the tunnel for all of you token lovers and degens out there because the SEC chairman Paul Atkins is saying that actually regulatory clarity is finally coming. In a speech at the DC Blockchain Summit yesterday, Chairman Atkins was addressing the crowd saying, quote, it is a pleasure to join you today to discuss a subject that sits at the center of American innovation, capital formation and the enduring principles of our securities law. For over a decade, market participants have operated without clear guidance on a fundamental question. When does a crypto asset implicate the federal securities laws? Today I am pleased to announce the SEC's persistent failure to provide clarity on this question is over. As we speak, the Commission is implementing a token taxonomy and investment contract interpretation. Now before I get into what this means, just one housekeeping item. This is not official SEC policy yet,
- [27:01]
Charlie
but they are work.
- [27:02]
Colin
As far this is how I read this. They are working on this taxonomy and a kind of token safe harbor carve out in existing regulation. Now as for the timeline for when this will be enacted, it's anyone's guess. You know, I would be shocked if we didn't see it maybe sometime later this year. But this for anyone who's been paying attention to crypto regulation, this is a huge 180 from the prior guidance we got under Gary Gensler where it was this kind of guidance by enforcement regime where the SEC would kind of putter around and they wouldn't really say what was and wasn't above board. And then companies would Launch a token thinking they had done things the right way and then boom, they'd be slapped with an investigation, with a subpoena, and then they would have to engage in some sort of litigation with the sec. So the SEC would go and enforce its regulations by basically taking companies to task without giving them proper regulation and guidance beforehand. But now there are three pillars to what Adkins is saying the new framework will look like. And those three pillars are a startup exemption, which is a roughly four year registration exemption, which allows developers to raise up to 5 million over those four years as long as they make certain public disclosures and notices and give some notices to the sec. This is not exclusive. So existing options like regulation D which allows companies to sell their securities to accredited investors without going through the traditional rigamarole for issuing securities. There's also a fundraising exemption. So the startup exemption would be just a startup that's issuing a token and the amount that they can issue is only 5 million, very small. The fundraising exemption is for more mature companies where over a one year period they can issue up to $75 million with certain reporting obligations. And finally, and this is the most, I think the biggest part of this is that there is now like legal clarity on when exactly a crypto or when exactly a cryptocurrency as a security has like an end date. And by that what I mean is they're devising a definition for when a team can reasonably say we have distanced ourselves from this project and this coin should no longer be considered a security. So what this means is like legal clarity that a crypto asset exits SEC jurisdiction once the project team's essential managerial efforts have been completed. And this is very similar to the argument for Ethereum post facto. You know, a lot of people said Ethereum was launched. You know, the SEC in the past has said Ethereum was launched as a security, but now it is no longer a security because it is sufficiently decentralized. This says something similar where there's going to be a token safe harbor carve out within regulation that says, okay, you're a team, you launch a token, you're managing the project. But here is a clear exit strategy for you. Once you can show that management has departed from the project and no longer has managerial control over the project, it then graduates from being a security to maybe being closer to like a commodity or a digital collectible. And that's one last thing. Here they, there are four categories that they deem not securities. Digital commodities, that'd be Bitcoin, digital collectibles. NFTs digital tools. I don't really know what that means. And payment stable coins under the Genius Act. So all that being said with the speech, nothing is concrete yet but Atkins is saying we are working on a framework that will give you more clarity than you have ever had before for launching tokens.
- [31:01]
Charlie
And this surprisingly actually seems to mirror from my view basically how our industry has tried to advocate for ourselves for years. Especially the ETH cases is a great example. It launched, it was very much controlled, it was very much a security by how you would view the Howey test. But now it is not. There are various governing or authoritative groups don't have complete control of the protocol anymore. Revenues on chain do not directly fill their coffers. So yeah, love to see it. I'll also note the SEC defined as the startup exemption being 5 million, the fundraising exemption being 75 million annually in broader crypto assets. There's always kind of a moving target for what a fair value of a cryptocurrency is. And what are the major thresholds for your meme coins? It used to be like the billion dollar market cap. Your meme coin would graduate into the big boys and there would be lower thresholds at maybe 50,000 or 100,000 market cap. Does it get out of the trenches? So it's funny because SEC almost like defines the new thresholds. These are the new de facto market cap thresholds at least as far as issuance of the token by the company building these assets can be.
- [32:34]
Colin
Yeah. And one more thing to note on the carve outs for exemptions for the fundraising and for startups. Interestingly and I really curious to see where the SEC lands on this. Atkins didn't touch on accredited versus non accredited investors in that. So accredited investors are qualified investors who have the ability to buy into security sales that most people don't. I'm not totally sure what the threshold is. I think it's like you have to have like 1 million in assets and or maybe 200, $250,000 in annual income to be considered an accredited investor. There's a certain threshold that you have to meet. But Adkins did not mention anything specifically in this speech as to whether or not accredited investors only will be able to buy into these exempted token sales basically. And I think that's really important for where this regulation lands because if they do open it to unaccredited investors, that is a pretty liberal stance to take in terms of opening up token sales to retail investors. You know, that's always been the argument against letting companies Just issue whatever tokens they want. Is that some schmuck who doesn't know anything about blockchain, let alone finance, and then they're gonna buy, you know, Harry Potter Sonic Shiba Inu token and think that they're going to get rich from it. And they end up immiserating themselves because the token crashes. So I'd be curious to see where they land on that because there's a part of me that says, yeah, you should open it up to everyone. But then there's a part of me that says, actually a lot of people are really bad at managing their money and they'll probably lose it, you know.
- [34:16]
Charlie
Yeah. We have a comment in the live stream chat on YouTube. The fact that accredited investors is the thing I find baffling. You and me both, man. You and me both. Well, let's move on to, I think the, the.
- [34:34]
Colin
The spiciest story today. This is the spiritual Successor to a 2017, 2018 circa 2018 New York Times article called Everyone is getting hilariously rich and you are not. I think the only difference though is that was a very bullish headline and this one is more bearish, at least in terms of how it is presenting the industry. This is a Vanity Fair expose feature piece, whatever you want to call it, called Crypto's True believers demand to be taken seriously. So you can already see this is framed as the crypto reach are much like petulant children that need to be herded appropriately into a space where they can be controlled, but they demand to be taken seriously. They're like children, you know, we don't want to quite give them any sort of consideration, but they're asking for it. And this article really profiles a lot of very well known people in the space, as you can see from this header image. We've got Mike Novogratz, the CEO of Galaxy Digital. We've got Meltem Demars of Crucible Capital, formerly of Coinshares, and Cathie Wood of Ark, as well, the founder of OpenSea. Not, not that interesting to me. I'm sorry, it's just not. And Carson, we, who I actually don't know very much about, we'll get into it in a second. I just want to highlight some of the bangers from this and just to kind of drive this point home at this point. I think most people in crypto are used to the media dragging them. This though, is a special type of dragging because it's dressed up as being positive. This is press. We're going to take this glamorous photo Shoot inside this really nice hotel, inside this luxurious bar. But we're also going to kind of give you backhanded coverage and undermine you stylistically every way we can in the actual prose and with the photography at the event.
- [36:41]
Charlie
Yeah, I'll say. So. This, yeah, the piece profiles a number of like, long standing, well known people within our industry and broader crypto. And the piece is not written so obviously to be a hit piece. However, if you're in the know, it feels like a mean girls play where like they, they, you know, lined you up thinking that you're going to get to be in a lauding, you know, piece on how cool your industry is. We brought a photographer, went with to a cool venue in New York City and had you take a lot of great style photos. But then it reads all underhanded and if you are not in our industry, it looks terrible. What's funny is I'll note that a lot of the comments that they'll make, especially like Meltem will make in this piece, many of which are bangers, I think are like, very insightful. And I'm like, yeah, that's probably pretty true. But to the outside, which is the majority of the readers of this piece, the majority of the audience of Vanity Fair, it reads like the height of vanity and delusion and cult. So what are some of your favorite.
- [37:56]
Colin
The height of vanity and delusion and cult mentality I think is perfect here and here. Just some of the quotes speak for themselves. The other thing I would say is the way this is framed. They stuck these entrepreneurs in a room together and just let them talk. And the journalists probably were just sitting there listening and would take things completely out of context and quote them. Yeah, I mean, like that's, that's kind of par for the course for a lot of these things. But like, for instance, this one seems like there's probably a lot more context to it. This is from Meltem demars. Technology without belief, technology without spirituality is nothing. What we are building, what we were building was a religious movement. Also curious in terms of the tense, as though like the, the movement's over. It's, it's done, guys. But to what Charlie was saying, that's perfect in terms of if you like, if you're a crypto person and you've been immersed in this for long enough, you're a bitcoin maximalist. A lot of the stuff does feel religiously charged with the conviction that some people have. And there are some real zealots in this space. If you're a normal person reading that if you weren't going to invest in crypto before, you're probably not going to regardless of this, but you're really not going to be interested in it now. And then this is also. Sorry, go ahead.
- [39:08]
Charlie
Oh, another good Meltem quote. Quote the. So the Crucible Capital Meltem founder judges potential investments on a sliding scale of Riz and Tis, charisma and autism. Here she says, here's the secret to lasting a really long time. You never become the main character. Everybody knows who I am, but nobody really knows why that is such an underhanded way to frame that comment. Again, with a picture of her looking disdainfully down at the camera. It seems like she's. It looks like she's absolutely out to fleece you. And they really. Everybody in our industry knows that she's being, she's using sardonic language and tone. She's being sarcastic. Because underneath, charisma and tiz, if you will, are like actual metrics such as, like, how well do you think you can market? And how, like, what does your tech stack look like? That's what she actually means.
- [40:11]
Colin
Yeah, it's, it's, it's a good point. And it's this kind of sarcasm that reads very caustically if you don't have the context of the rest of the industry. I mean. But even though framing, you know, her investments on a scale of Riz to Tiz is very. Is very much a chronically online person thing to do. Oh, my gosh. Okay, this is fantastic. I'm not on Blue sky, but Blue sky thinks it's a puff piece. This is really interesting, and this is probably for another podcast topic entirely, but at a certain point, your information silos on the Internet become so isolated that you can only see things through your cognitive bias. So my cognitive bias with this is like, they are making these people look freaking ridiculous. They are making the. They are dressing these people up as vain money mongers and that there's no other takeaway from that. But it's funny to think that the people who are kind of maybe already biased towards crypto, like in the blue sky sphere, they see this as lauding them, you know, for whatever reason. But this photo of.
- [41:20]
Charlie
Yeah, so I want to.
- [41:21]
Colin
Let's get this, this tweet up. This is a really interesting diagnosis from a photographer of what's going on here.
- [41:28]
Charlie
So, yeah, you found this tweet. This is from Dennis and Burtam. Quote, I was a fashion photographer for over a decade before crypto. I worked for magazines like Elle, Cosmopolitan, Brands like Louis Vuitton and Gucci quote, the vanity article was a setup to mock crypto and those it depicted. Definitely reads that way because look at this picture of Cathie Wood. She's sitting there, she looks, she looks scrunched up.
- [41:55]
Colin
Yeah. And that's one thing that he points out in that tweet is the angle for the shot is elevated, it's upward. It's meant to look down on her and make her look smaller.
- [42:05]
Charlie
Right.
- [42:06]
Colin
And he also go back to the tweet thread, Charlie, because he's got some other really good. He's got some other really good like of Carson we here, who. I had no idea who this guy was, but apparently he's pretty well known the bitcoin playboy. And you know, he doesn't really have. Denison doesn't have any comments here. But when you look at this, go back to Carson we. When you look at this photo,
- [42:32]
Tom Massero
he
- [42:32]
Colin
kind of just looks crazy and the way that he is. The composition of this photo does kind of depict him and just an unflattering light, man, I mean, you know what I mean? Like it seems he looks like he's
- [42:45]
Charlie
on year five of a bender.
- [42:47]
Colin
Yeah, yeah, exactly. And then if you scroll down.
- [42:51]
Charlie
But then we have here.
- [42:53]
Colin
Yeah, there's he, there's the one about Cathie Wood. And then look at this camera looks
- [42:58]
Charlie
down at her, frames her to minimize her statue. In the background is a disheveled curtain. Her legs are cross to the ankle and deliberate inclusion of a bellhop trolley. So it, it, yeah. Very disconcerting photo. And then you have Devin and Kuo, I believe Coinbase OpenSea founder deliberately set to look like pillars about to topple. The lines are all crooked, the perspectives off. That's correct. For me, the one that you and I really loved was. I say loved. I think you have to scroll up is Novogratz. Yeah.
- [43:33]
Colin
This one.
- [43:35]
Tom Massero
Yeah.
- [43:37]
Colin
This looks like you're approaching a mob boss who's about to ask you for your entire family's wealth and payment of a debt or he's going to break your kneecaps or worse. I mean they, they really did Novogratz dirty in this one.
- [43:51]
Adam Reed
Yeah.
- [43:52]
Charlie
He looks like the, the villain from Eastern Promises and, But yeah, like, look at that lighting. It's, it's not, it's, it's direct, you know, splotched lighting on his face, a very intense look and glare. His, his attire is all red suit. You know, he's a former fighter so he's always going to look intense but no reading it. Yeah, I think he was like a former wrestler or fighter. Yeah, definitely. This man, this man has, has been in the arena in multiple ways. So yeah, we could probably keep going, but we do want to keep, we do want to get on to our next segment.
- [44:36]
Colin
Yeah, we just A few more notes on this before we hop to before we hop to Adam from Leden, I just want to read a few more quotes here. Quote they're all pussies. End quote says Meltem demoirs, an early crypto investor who now runs her own firm, Crucible Capital of her panicked peers. And then just going back to the flourishes in this that shows that the author does have maybe not disdain, but wants to paint them in a certain light. She is layered in diamond crosses and wearing a black sweatsuit with her firm slogan believe in something bedazzled across the ass. For the first time in years, she is buying bitcoin. Again. I do have to say as a writer, it's a very good polemic for what it's trying to do. It's like, like a soft core polemic. You know, they're not really going out and taking the deep plunging jabs with the knife end of the pin, but they are, they're probing a little bit. You know, they're looking for the weak spots. Another one. Unlike Jesus's followers who doubted his resurrection, crypto's true disciples aren't losing faith really. Demar says what we're building was a religious moment. Talked about that earlier and then I just want to do this one too because I think this is so good. This is one of the lead in lead ins to one of the latter sections. The morning of the photo shoot, Wood doesn't recognize Demoirs who she whom she hasn't seen in decade a decade. You somehow look younger. Wood said, pulling her into a hug. It's because I'm rich now. DeMars responded with a smirk. Carlson we introduces himself to Wood with the sweet docility of a young boy meeting his hero. They immediately dive into conversation. Blah blah blah blah blah. They they lightly skirt the reality that crypto is down nearly 50 from three months ago. Novogratz. This one is incredible. Swaggers in wearing a full length silver puffer jacket, greeting everyone warmly before announcing that he really wishes he weren't on a day two of a gnarly hangover. He then proceeds to describe a Saturday night that climax with a 4am trip to the to the burning man inspired New York nightclub gospel which he hopes his 30 year old daughter and her new husband who Live nearby, did not witness. I mean it's just like you, just you, you're trying to make these look like the most degenerate people ever because they're in a degenerate, degenerate industry. Like that's.
- [46:57]
Charlie
Look, we're not, we're not denying that everybody knows Novogratz likes to go out to the club. But he also is a very visionary, you know, asset manager and is absolutely killing it in the AI data center.
- [47:14]
Colin
Yeah, he's the CEO of a multi billion dollar company.
- [47:16]
Adam Reed
I get it.
- [47:17]
Colin
You may not like how he made his money, but anyway, we'll leave this where it is for now. Go check out the article. I think for anyone in crypto, it's a good reminder that a lot of the media, a lot of the mainstream media, they're not your friends, we're your friends.
- [47:34]
Charlie
Yeah. Don't talk to journalists except for us. Only talk to us. We're the only journalists you talk to, so. And let's move on to the next segment.
- [47:44]
Adam Reed
Yeah.
- [47:44]
Colin
On that note, we will bring up Adam Reed, CEO of Leiden, to talk about the current state of the lending market. Adam, welcome to the show.
- [47:51]
Charlie
Welcome.
- [47:52]
Adam Reed
How's it going guys? How are you? Great to be here.
- [47:54]
Colin
Pretty good. Thank you for joining. Really appreciate it. A lot of news to chew through. You know, we had Francis Gorvino on of Ligos to talk about the block fills blow up. We will not bring that up with you, but we do have to ask, given Lennon's business, financial services, lending and borrowing, all that kind of stuff, how has the current market and the current dynamics we've seen since the February sell off affected business at all on y' all side of the world or just in the industry in total?
- [48:25]
Adam Reed
Yeah, I mean within the lending segment. I mean the nice thing about loans is people use them in any market condition. Right. When the bitcoin price is lower, it's an even more reason not to sell your bitcoin to take a loan instead. When the price is higher, our clients are wealthier in fiat terms so can borrow more and can do more with their bitcoin assets to diversify. So we're still seeing fairly strong originations, admittedly not the origination level or growth level that we saw in the second half of last year when bitcoin was really growing rapidly. But I think comparing with prior downturns, much more stable. So I think there hasn't really been any major catalyst of this downTurn. There's no FTX, there's no major. Obviously the block flows was one bankruptcy, but relatively small as far as overall market structure and today quite isolated. So no major events or catalysts causing anything.
- [49:25]
Colin
Yeah, I mean that was kind of one of our questions to Francis is whether or not he was surprised to see more contagion from this block Phil's blow up. Because I mean that was really the story of 2022, I think, right? Terra Luna went bust. A bunch of people were overexposed to that. Then you kind of had this cascading effect that eventually affected everyone from Celsius to ftx. Now granted that's like kind of a simplification of what happened, but there was a lot of, you know, there was, there was a lot of cross contamination I think in, in terms of who owned, who owed what to whom. And we ended up getting this kind of domino effect. And we asked Francis like, are you surprised to not see more of that happening? And he said no, not really. And I'm just kind of a second or a follow up question on that same line to you. Do you think a lot of the industry participants have kind of learned from 2022, like are we seeing safer lending practices for most of the practitioners in this space? Are there more guardrails, would you say, or not at all?
- [50:31]
Adam Reed
Certainly clients are more educated and smarter. I think they're asking more of the right questions as far as how are companies like Led in handling their Bitcoin? Where is it during the process of a loan and forcing things like Leden does. Proof of reserves. One example of showing clients the transparency of how their Bitcoin is handled behind the scenes. So I think because many clients have been through that prior cycle, some unfortunately experience losses, they don't want to see that happen again. So that forces companies like Leden to bring a better product to market. So I think that upgrade in the level of service and transparency and security around Bitcoin is welcome. I think there also is less of certain trades in market that were unsustainable. We don't have the GBTC trade happening this cycle where there was less leverage. Cycling and cycling and cycling and doing things that were really reliant on certain trades going this way. I think most people are taking bitcoin backed loans now to make real world investments. Right. So you're not doing it to cycle within the Bitcoin or broader crypto specific trades that have this kind of massive spiral effect down when everything goes the wrong direction together. So I think there's that disconnect. Also the type of lending is very different. Right. When you're taking a Bitcoin backed loan, you're over collateralizing it, you're putting up bitcoin. When you're running yield accounts, that's where there's the opportunity to loop it, where you're offering a certain yield that's being lent to another entity or protocol. Uncollateralized. Uncollateralized. Uncollateralized, Uncollateralized. That causes again some massive leverage in market. We look at this all the time. I think again when we think about just the consumer segment of bitcoin backed loans, it's actually really, really small compared to the overall size of bitcoin we estimated at 3 to 4 billion of individuals. When I say consumers, we always talk of retail versus high net worth. So I just like to say consumers. So I think the consumer market for bitcoin backed loans is $3 to 4 billion on a $1.3 trillion asset. Right. So that type of lending is again just done in a very simple way over collateralized bitcoin. So I don't see it suspected the same issues of market structure that existed before when a lot of individuals were running yield accounts.
- [52:59]
Charlie
So Adam, we had a previous guest on this call. The call leddens Bitcoin backed ABs. The most significant thing to happen in bitcoin in years, I believe it was 188 million. Tell us a bit about that. And who is buying these?
- [53:20]
Adam Reed
Of course. Well thanks, I'm flattered to hear that comment. Our teams are working really hard on it for over a year. Who's buying it is investors that were previously on the sidelines of bitcoin coming into it. And that's exactly why we worked hard to develop the structure. When we got it rated by S and P Global that opened up a universe of a whole new different types of participants that aren't in this market today. Because we put it in the same framework that credit card loans, auto loans, even residential mortgages are done. And now that it's rated and put the structure that they're used to, different types of institutions can buy it. Those institutions are. We had a large reinsurance company participate in the senior tranche of the debt. We also had a lot of hedge funds and traditional credit funds participate. Obviously credit funds, that's a broad name, but that would be pension funds behind that, maybe life insurance companies as well, investing in these types of credit vehicles. We had over 50 different roadshow meetings to market the asset backed securitization. So there were back to back meetings both in person and virtual. And then we had 15 different institutions actually participate in buy it. Jefferies was the lead underwriter of the deal and they actually told us that they've never seen as much interest as they saw in this ABS bitcoin structures in their entire career. So we were thrilled with that and hopefully it's something that a lot of other participants can grow and perhaps replicate as well. So it's good for the overall industry.
- [54:58]
Charlie
You made a column.
- [54:59]
Colin
Yeah, sorry. So double tapping on this. The institutions that are interested in this, what exactly is interesting to them about it? How does this differentiate from other kind of crypto bitcoin securities or equities that they could invest in? Why this product specifically?
- [55:18]
Adam Reed
Yeah, I think the fact again that we kind of put it in the same box that they're already doing other types of financing. So I always joke that the best way to get something approved is only change one variable at a time. So if you want to get someone that's not doing something now to do something new, don't introduce them to five new things. So what do we do? We put bitcoin in Fidelity as the custodian. So they're familiar with Fidelity as a name that was helpful because when obviously they hear that branded reputation like okay, understand, don't need to think too much about that, that's a risk. We understand they have other products rated by S and P Global, so again rating agency that they can rely on, understand, check, and then even the trust servicer, the backup servicer, all of these things were other pieces of the puzzle that they were already familiar with. It was just bitcoin as the asset that was new. And again they had the backup of S and P global explaining it, understanding it, analyzing it, that they could rely on. So I think it was really that piece that again fitting in a very similar structure that they're already used to that allowed us to come in. And we actually did this more for the fact that we needed to open up this type of instrument to more investors than to get a better rate. Obviously we're doing our best to drive down the rates of bitcoin backed loans. We want to see the rates as low as possible to increase adoption, bring more clients into this type of product. But we were concerned that there just isn't enough dollar capital coming into the bitcoin lending space. I shared before, there's 3 to 4 billion. Obviously Tether's an investor in LEDN. They're a big participant in the lending space. There's other crypto friendly banks like Signum, others in market, but there just isn't hundreds of billions of dollars of dollar capital that says I wanted to do bitcoin backed loans today. So we had to figure out a way to get that type of investor into the market because we see this as exactly that size. We see this developing like residential mortgages where there's literally hundreds of billions of dollars happening every year and broadening out not just in the US but also of course globally as well.
- [57:37]
Colin
So it's is a helpful way to look at this more like you said, sourcing more liquidity and potentially making it easier to actually match lenders and borrowers in this case. Because I was looking at ledn's website and one of the things I think is interesting with the platform is you can both lend through LEDN or you can borrow and the lending interest rates are pretty healthy. And I assume part of that is because the borrowing rates are pretty high and that's where that income is coming from. So is one way to read this. It opens up a new avenue of liquidity that makes it a lot easier to actually manage who is borrowing and who's lending on the platform.
- [58:19]
Adam Reed
Yeah, we view our job as simplifying and providing comfort and I guess what's the right word, peace of mind when people take a bitcoin back loan. So the best thing about LEDN's product is the rate is fixed and you have that available for a year. You can auto renew the loan every year if you'd like to take it longer. But when you take a lead in loan, you know exactly what you're getting. You know your liquidation thresholds, you know the interest rate you're paying for that year. And our job behind the scenes is to make sure that capital is available and to make sure that we can drive the best rate possible. So this, this goes into that latter piece is the great thing about an ABS structure is it was actually a three year financing. So it gave us certainty and therefore gives us client certainty that we can provide a fixed rate for a certain amount of time. Clients are using lent in loans to make real estate investments. They're using it to pay down other higher cost debt. They want to know what they're paying throughout the life of the loan. We do compete against other types of financing in DEFI but but 99% of loans through decentralized finance are variable. So you might be paying four and a half percent today, but if bitcoin rips and there's more demand in that pool, you might be paying 35% tomorrow. So that's the piece is everything we do is to give clients that peace of mind, the proof of reserves to tell us clients what you're doing with their bitcoin and the fact it's a fixed rate product. So all of this plays into that in making sure we can deliver on that mission.
- [59:54]
Colin
I think it's incredible to see how much innovation is still happening within this space. And it reminds me that honestly, bitcoin credit industry is so young and still so early. Right. You look back to like 2017 and even 2021 and some of the fly by night lending practices that ended up going horribly. Obviously for a lot of companies, those are starting to be pushed to the wayside. And now we actually have like, you know, S and P rated bonds out there for this landscape. It's pretty exciting to see.
- [60:23]
Adam Reed
But yeah, it's amazing. I mean I joked actually when we created it, we started letting in Canada and going back eight years ago, we could barely get a bank account open for our company.
- [60:34]
Francis Corvino
Right.
- [60:34]
Adam Reed
And now we've got S and P Global. They actually just did a webinar this morning on the product. So it was pretty great to see them talking about how it's developing. And as they said, you know, I hope it gets replicated. I hope the whole industry can benefit it. So, so we're all on this mission together.
- [60:49]
Colin
Well, congrats on pioneering it and we will be keeping it.
- [60:52]
Adam Reed
Thank you guys.
- [60:54]
Colin
Adam, thank you so much for joining. Have a great week, man.
- [60:56]
Adam Reed
Thanks for having me on. You too.
- [60:57]
Colin
Thanks guys.
- [60:58]
Adam Reed
See you.
- [60:59]
Colin
All right, and then we have Tom Massero coming up next. But before that, quick note from our sponsor, Lygos hedge funds are getting liquidated and other funds as well. Other companies as we covered earlier. Is your Bitcoin safe? It's not just Bitcoin's price drying up. Big whales. Hedge funds and lending desks are going under after the notorious 10, 10 and 2, 5 liquidations. Counterparty risk is rampant. So it's more important than ever to understand who actually controls your Bitcoin. Don't be the next FTX or Celsius victim. If you are working with another loan provider, do yourself a favor before it's too late and check out Lygos Finance, our preferred non custodial Bitcoin lender. That's right. You heard that right. Non custodial using Bitcoin native smart contracts to protect your stack. With Lygos you always know where your Bitcoin is. Hold your keys. No wrapping, no bridging, no rehypothecation. Get competitive rates as low as 10 APR go to Lygos Finance to learn more.
- [62:00]
Charlie
Yeah, no wrapping, no bridging, no rehypothecation. That's true. Also no Tom foolery. But we're going to have Tom Massiero here. Ligo sent me this cool iPhone to demo their products. So I'm a fan and enthusiastic user of their products. But enough about that. Let's get our boy Tom Masiero up on stage. Tom, welcome to the blocks of his live show.
- [62:29]
Tom Massero
Hey gents, how's it going?
- [62:31]
Colin
Pretty good, man. Welcome back. A short segment this time we had a longer show with you in Nashville, one of our better shows to start the year. And now we've got some big news from y'.
- [62:42]
Charlie
All.
- [62:42]
Colin
So Tom is head of strategy at Cathedra, Director of strategy at Cathedral Bitcoin, and y' all just announced a merger with Sphere 3D, I believe this was a week or two ago and this news came out. Tom, give us a quick rundown of how all of this developed.
- [62:59]
Tom Massero
Yeah, I mean, just like anything in this industry, it's, it's based on relationships and usually long lasting ones or, or business ones. And so, you know, we were fortunate to develop a relationship with Sphere earlier this past fall where they became a hosting customer for us and you know, you know, basically developed that relationship through that period and, you know, became apparent that there were a lot of, I don't want to overuse this word, but synergies between, you know, sort of our infrastructure heavy business and their business as being, you know, having a lot of machines, having the capital markets kind of exposure on their end and obviously having a listing where, you know, made a lot of sense for us to think about combining forces.
- [63:48]
Charlie
Sorry, we had to go for a calling.
- [63:51]
Colin
Yeah. Here, let me, I want to get this, get this up. Charlie, let's just leave it like this. You mentioned synergies, Tom. What kind of synergies exactly? Like what is Cathedral bringing to the table for Sphere and vice versa?
- [64:02]
Tom Massero
Sure thing. Yeah, we're, we're, we're bringing essentially a vertically integrated power infrastructure. So, you know, we, we build, develop sites mostly here in tva. We, we very much focus on cheap, reliable power at scale. And you know, we build these sites, we develop them, we host for some of, you know, I would say some of the top tier, you know, institutional customers that are in the United States. We've had them for a really long period of time. We've hosted for ASIC manufacturers going back years. And so they bring a lot of new machines as well as capital markets and we're excited to take that to the next step. I think they, you know, most recently had some, somewhere near 2500 new generation S21, you know, variants that they've deployed most of them with us and you know, we believe that, you know, with those machines as well as, you know, the ability to continue to grow out our infrastructure, it makes, it makes for a great match.
- [65:10]
Colin
Yeah.
- [65:10]
Charlie
And I'll point out that you guys say that you are pursuing quote 100 megawatts of expansion opportunities. That's huge. Most of which I understand probably AI, HPC, far cry from where we all were 5 years ago. Can you kind of rehash this, this major industry trend and your role in it?
- [65:30]
Colin
It.
- [65:32]
Tom Massero
Yeah, I mean really, it's just, it's just a, it's. I think I'm trying to remember who, who made the statement, you know, somehow we got categorized as energy pirates back in the day and you know, to, to a certain extent we still are. And I think the, the big difference between you know, five, six, seven years ago and today is now there's two potential buyers for that, that stranded energy and it's eight, you know, it's hbc, AI and then it's Bitcoin and, and you know, primarily where I've had focused most of my time since leaving Great American mining was on these smaller, I would say dispersed off grid opportunities, I'm sorry, on grid opportunities that are like sub 20 megawatts. And you know, for the most part we could just sort of do our thing there with bitcoin mining. But just up until maybe the last six months, you know, the HPC AI opportunities are starting to come down market. Nvidia has launched some initiatives where they're focused on developing a distributed cloud, I would say infrastructure for GPUs and they want to make sure that they represented it within sub 50 megawatt tranches. And so that opens up a lot of opportunities for folks like our size to be able to accommodate that.
- [66:52]
Colin
Tom, on that note, as we see all these miners moving towards AI and hpc, we've come back to this question a lot and I actually asked you in our full show, but we'll rehash it again here. What does that mean for bitcoin mining writ large? I mean, what's your reading on the current state of bitcoin mining specifically with hash price hovering near all time lows, hash rate kind of stagnating. And what do you think is the, the future of this industry in the United States specifically?
- [67:24]
Tom Massero
Well, I know I have More gray hair than, than I've had in the past. And I, it's just a bear market, you just gotta deal with it. I think you know, like what you and I talked about Colin, the last time was this, this weird kind of, you know, I guess like two things happening at the same time which is lots of really decent machines are hitting the market, flooding the market. But yet at the same time this depressed price and depressed profitability that's out there. And so it's made it sort of unique because in prior cycles when price and profitability are at the areas that they typically are mining sort of like dries out. And then you know, the ASIC manufacturers will sort of start developing relationships with hosting customer hosting providers like ourself and self host machines until the market kind of picks up. That's really not taking place this time around. And so I think like overall there's a little bit of an identity crisis for a lot of I want to call miners but people who are into bitcoin mining along with you know, doing AI and hpc and I really just think they're two different customers and they are still very valuable for a specific type of load. For example, we just built a 15 megawatt site in TVA. It's an off peak only site. So for 83% uptime we get very, very favorable rates. And because there's this influx of very cheap machines out there, you know, it makes mining profitable, it allows us to continue to build that, that business. There are all these like different shoulder times that are very, you know, they're built for bitcoin mining. And so I think you know, whereas hpc, AI it's, it's much more, you know, you need, you need more stable uptime, you have to have a lot more redundancy, there's more permitting that's required and so that's great, that's better for bigger chunks that maybe will need that type of investment. But for a lot of these like shoulder opportunities to take place, Bitcoin mining I think is still going to be, you know, still a viable thing. I just think we're moving from the scale of or the age of mega miners into a more distributed side of things. And you know, like what, what do things look like two years from now when you've got, you know, you and I talked about a little bit of the, about this Colin was you're going to have a lot of these mega miners who are now mega HPC AI providers but at their core they were bitcoiners. You know in two or three years or five years, and they're still going to look at things the same way they did when they first got in. And so I also. I honestly think there'll be a. A renaissance when it comes to a lot of bitcoin mining in a couple of years. This is very cyclical right now.
- [70:20]
Charlie
Yeah. Each bitcoin mining meta looks totally different from the previous one. So the one thing we can be certain of is that it'll look very different in four years than it does today. So.
- [70:33]
Colin
And I hope you're well. Yeah, I hope you're right about that, Tom, because I would love to cover more bitcoin mining in the future, but we will leave it there. Thomas Arrow, thank you so much for joining. Hope you have a good day, man. Always good to talk to you.
- [70:45]
Tom Massero
Appreciate it, gents. Thanks so much.
- [70:47]
Colin
See you, Mattio.
- [70:50]
Charlie
Okay. All right, last segment. Bit of a cry corner this time.
- [70:55]
Colin
Yeah, a. A pretty big cry corner, and it's one that actually relates to some reporting that we've done. We'll keep this brief because we're running up pretty long here, but Bit refill has suffered from the Telegram hack that is being perpetrated by the Lazarus Group in North Korea. So we did a podcast on this about a month or two ago with Taylor Monahan of Metamask. The TLDR is Lazarus Group Hackers, a hacking syndicate in North Korea that is tied to a lot of crypto hacks, is going around and tricking people to download malware by impersonating people on their contact list through Telegram. They're doing this so well that when you pop onto one of these Zoom chats with someone who's being impersonated, it will actually have a video of the person that you think that you're talking to. So you can have a buddy that sends you a Telegram chat from a chat that you've had with this person for years, as long as your chat history goes back. Because it's their actual Telegram account, it's not a fake account. They will get you on Zoom and they will actually have a recording of that person that will trick you into downloading malware to your computer. Bit refill fell victim to this. It's the first big crypto company that that's at least reported falling that we
- [72:12]
Charlie
know that we know the person that's reported. So it was disclosed of a mark. It was a March 1 incident. They disclosed it yesterday, confirmed that it looks like the Lazarus or Blue Noroff Group. And it originated, quote, through a comprised employee laptop from which a legacy credential was exfiltrated.
- [72:32]
Colin
So basically an employee got hacked and then Lazarus Group was able to then go through Bit Refill databases and company websites, etc, wallets. As a result, they have not disclosed how much money has been stolen. They did disclose that about 18,500 purchase records were accessed. Those records contain limited customer information such as email addresses, crypto payment addresses and metadata, including IP addresses.
- [73:00]
Charlie
Yeah, so hopefully I could still use Bit Refill, one of my favorite companies in the space ever. If you're not aware. Oh, Bit Refill, sponsor the show, please hit us up. No, Bit Refill is awesome. You just send bitcoin and you get gift cards.
- [73:16]
Colin
So it's a great service. You can buy gift cards, preloaded Visa cards, you know, you can get SIM cards from them, you know, temp SIM cards and things like that.
- [73:24]
Charlie
And you can also get free bitcoin if you're from North Korea.
- [73:28]
Colin
Yeah, great service.
- [73:31]
Charlie
I'm sorry.
- [73:32]
Colin
So that was good. It's a great service. I hate to see this happen. One last note, just on the complexity of this hack, Jimmy Song also allegedly was hacked. I think he about it recently. This, this is seasoned bitcoin developer and evangelist Jimmy Song. And that just goes to show this is a very. This is the most sophisticated phishing and hacking attempt that I've ever seen in crypto. And they are actually taking control of people's rights, real Telegram accounts through this. So if you see a message asking for a zoom link from someone that you know and have contacted a lot, double check with that person through another communication method to make sure that it's actually them and not a North Korean hacker. With that, we will close. Thank you all for tuning in.