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Blockspace: AI & Bitcoin
Prime Bankruptcy Trust Sues Strike Parent Co for $150M, NAKA’s Reverse Stock Split, SEC Tokenized Stock Framework
01:21:55
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- [00:00]
Glenn Cameron
Foreign.
- [00:05]
Colin
What's going on, y'?
- [00:06]
Charlie
All?
- [00:06]
Colin
Welcome back to Block Space Live. Coming at y' all fresh on this Wednesday, Charlie. It is the Sad Violin edition of Block Space Live. We have got some pretty unfortunate stories. Very important though, we're going to start off with the Prime Trust suing Zap Solutions Strikes parent company for nearly $150 million in assets tied to flows that were made from prime to Strike right before the company went bankrupt. After that, we have Kush Bavaria back on to talk about ORN's partnership with the International Continental Exchange for Compute Futures, a kind of follow up from his segment last week. Then we also have Alexander Leishman of Riveron 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, we also have Glenn Cameron of Onramp to talk about their Series A and also to talk on the Prime Trust thing because you know, once you got, 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 after that. For our second story of the day, we will be covering the Nakamoto's reverse stock split. That's right, they are going to dodge a bullet from a NASDAQ delisting by splitting their stock 40 to 1. 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.
- [01:42]
Charlie
That's right, the bear market Groundhog woke up and saw his shadow. Six more weeks of suits. We'll come back and cover the story. Block Space goes live Monday, Wednesday, Friday at noon Eastern featuring quick hits on the latest in mining, AI, bitcoin, emerging tech. Make sure to hit subscribe. If you're on YouTube, get the notification bell to get the push notification on your phone. If you are listening on Coindesk right now, make sure to subscribe to the Block Space, RSS and podcast feeds. You can find that by searching blockspace and in your podcast downloader of choice. 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. More on CleanSpark later on in the show. I mean, if we're talking about Clean Spark, AI, HPC stocks are up today. Colin, I'm just looking at my charts here. Iron, Clean Spark, Mara Cipher all up over from any from 5 to 9% as well as ARM, AMD and some other, you know, chip stocks.
- [02:53]
Colin
Yeah, big rebound after a pretty 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.
- [03:06]
Charlie
The answer, yes, you've been sidelined super hard. All of everybody's bags are going up except for yours. So get on board, man.
- [03:14]
Colin
A thread guy had a tweet yesterday where he said the funny thing about bitcoin is in ten years it's either going to be worth zero or a million. And in either case you'll feel like an idiot. And I tweeted that like, yeah, actually Max Payne in 10 years is not zero. Max Payne is. We're between 75 and 100K and you know, everyone's just linking arms, singing, you know, Bitcoin to 10 million in the tune of Swing Low, Sweet Chariot. Okay, go ahead and dive into the news. News that's eating crypto, or rather I should say bitcoin. Twitter this morning and throughout the week. So this headline comes to us from yours truly at Block Space and it's Prime Trust Bankruptcy estate sue strike over alleged 13.8 million and 1,758 BTC in transfers. So we covered this on the Swan Bitcoin side of things on the stream Monday. If y' all recall, Prime Trust is also suing Swan for nearly 1 billion, I believe 970 million in assets, including Bitcoin, stablecoins, cash and XRP. And this is a part of a larger story where the Prime Bankruptcy Trust, the Prime Litigation Trust, is suing scores of companies. 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. So Prime Trust went bust in 2023 and is trying to claw back funds as it settles the estate. Reading directly here from BlockSpace PCT Litigation Trust filed a complaint on March 2nd in Delaware bankruptcy Court against Zap Solutions par parent company of Strike, seeking to recover no less than $13.88 million and 1,758 BTC. That BTC at the time of recording is worth about $135.95 million. Now there is a lot to unpack here in November of 2022. According to the suit, Mallard's pushed for some structural changes in how it was working with Prime Trust, according to the suit. On November 18, 2022 calls show Maller's attending with Zap's general counsel, their VP of operations and VP of product, with a meeting with Prime Trust pushed Prime to adopt a new model, according to the lawsuit, where Zap would control its own KYC and Prime would step back critically. Mallor's reportedly repeatedly quote, use the argument that Prime Trust does not have bank accounts for each end user. 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 because Prime Trust Estate here, which Prime Trust is the company, it went bankrupt. 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. They've made the point that funds were like, hopelessly commingled in such a way where. Where they can't even make sense of individual accounts. And that's a key part of their point here in the lawsuit. And that commingling is really important because, like, they had spreadsheets, according to the lawsuit, for 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. Really importantly here too, according to Prime's argument here, they cite the Master Services Agreement that. That ZAP signed with Prime. Quote, the agreement does not create a partnership, franchise, joint venture agency, fiduciary, or employment relationship between the parties. 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 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. 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 belong to zap. The lawsuit is alleging that. That this Master Services agreement basically says there was no such agreement. And so there's a creditor, debtor relationship here. The reason why that's important is the trust is using what's called a preferential clause, 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 that that preference clause and bankruptcy 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. And in a bankruptcy, there's a tier in terms of which creditors get paid out first. 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. And within the case of Swan, one of the insinuations in the lawsuit is that Corey could have been allegedly tipped off. Corey Klipstein, the CEO of Swann, could have allegedly been tipped off by a Prime Trust executive because they had 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, going back to the timeline here for strike in March 2023, regulatory troubles start to mount. ZAP and prime are actively working together to navigate regulatory crackdowns in multiple states, including Texas and Connecticut. Senior executives of both companies, including Mallor's and Prime CEO, met to discuss a playbook for operating under imminent regulatory shutdown. The litigation trust for prime argues, quote, this gave Zap, quote, highly sensitive information regarding the regulatory challenges going back to the November meeting. They're saying this gives him insider information. Jack Mallers as for what's going on now, this is also crucial. On May 25, 2023, allegedly there was a contract renegotiation the day before prime executives were scheduled to meet with Nevada's Financial Institutions division regulators. Mallard demanded significant amendments to zap's API agreement, specifically converting to a month to month contract and reducing ZAPS capacity blocks from prime from four to one, essentially allowing them to move more funds out and at a more rapid pace. Prime agreed to Mallor's demands on the same day. According to the lawsuit. 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. While going back to the msa. The 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. 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 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 credit debtor relationship here. Therefore the clawback according to the preference period of 90 days should be valid. But we'll see how it shakes out in court.
- [11:01]
Charlie
You are far deeper down the rabbit hole here than I am because, like, for the listener context, this, this. The documents on Strike were unsealed last night. 500 pages, it appears. So there's a lot to go through here. You know, if you've been around the block, you've been watching, Prime Trust has an interesting and entertaining history involving maybe some more gray area markets before they began custodying crypto assets. It makes you wonder why were so many companies using Prime Trust as counterparty? I can speak to this a little bit. Like there were very few options. Like, it was very, very difficult to get any type of custodian or counterparty. One reason why custodians still remain a pretty concentrated narrow field to this day. You say, Colin, the linchpin here might be the Master Service Agreement. It's also like, as I understand, like a lot of their, A lot of the argument here is when Prime Trust is like looking at say Swan or Strike or these other parties, they are claiming that these other parties, that these counterparties had, quote, highly sensitive information regarding regulatory challenges. So I think that's kind of the other side of this, which is how much can they prove that there is sensitive information? How much could they prove is stuff that is, that let them pull their assets early and what kind of argument do they have? So, I mean, we'll see. I didn't realize yesterday when we were looking, I thought that this, I think a lot of people thought that the Strike exposure was maybe like 10 million, but for it to be 1700, some odd Bitcoin, that brings it to nine figures. That's way bigger than what I anticipated originally. So. Right.
- [13:05]
Colin
And I want to clarify something. I kind of. I misrepresented something just then. Zaps is considered a creditor. All of these depositors are considered creditors. And that's actually the problem 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. So I, I wanted to clear that up because that, I kind of got my, my terms and my understanding there flipped. But if Strike or Zap wasn't considered a creditor, then there would be no problem here. They would own the assets outright. It would be a trust beneficiary scenario, but because they are considered a creditor according to the Master Services agreement. That's why the 90 day preference period can result in a clawback. So really sticky situation here kind of puts not your key is not your coins really into perspective.
- [14:05]
Kush Bavaria
Right.
- [14:05]
Colin
And also, you know, as Alex Leishman pointed out in a tweet, 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 of the actual services agreement and see what you're actually legally protected against.
- [14:27]
Charlie
And so the rest of the, most of the stuff we're talking about today is all kind of clouded in this type of, you know, these people going bankrupt. It's the proceedings, it's takes on those bankruptcies. But our next story and next guest is a fun one. It's a big deal. We're bringing on Kush Bavaria again. You remember him from last week. I'm going to tee him up here. Kush Kush. Welcome back to the show.
- [14:54]
Kush Bavaria
Hey guys, how are you? It's only been, it's been like five days. I think I did.
- [14:58]
Colin
Yeah, I think so.
- [15:00]
Charlie
Yeah. It's because you guys keep, you guys keep putting stuff out this time. Just yesterday you announced ORN and ice, the intercontinental exchange to launch GPU compute futures contracts. Congrats. What is this deal? Explain what's happening here.
- [15:20]
Kush Bavaria
So we're partnering with ICE to launch GPU futures and options in all of ICE's exchanges. We're going to start with the US and go through many of their exchanges. All this subject to regulatory approval. But I think we have a really good shot at getting this out in the next few months, hopefully. So it's going to be exciting to let anyone in the world basically trade compute futures and what we've been building.
- [15:46]
Charlie
So if in my kind of cursory looking around, it looks like we had early proto versions of these futures markets, but they're on Kalshi or Robinhood or prediction markets is does ice, does this ICE more like major regulated market? Does it bring like more credibility? What is different about this than the stuff we had over the past?
- [16:12]
Kush Bavaria
Nothing against call sheet Polymarket. I think Tarek and Luana and Shane are incredible people and they've done an incredible job. 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 it's the largest exchange in the world. So I think the volume is thousand x 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.
- [16:41]
Colin
Yeah, and maybe it goes without saying, maybe it doesn't. But institutions with hundreds of millions of dollars to place bets are not going to do that through Kalshi.
- [16:51]
Kush Bavaria
Right.
- [16:51]
Colin
I mean that's very clearly a retail product, of course.
- [16:55]
Kush Bavaria
I mean, at least not today. And I think having a partnership with ICE just gets us into the more of the institutional players that want to hedge a lot of their commercial risk. Right. Today you see trillions of dollars and 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.
- [17:18]
Colin
So Kush, that leads me to a question that I have for this because I used to work at Luxor Technologies and they launched the first hash rate forwards. They also had a futures product with Bit Nomial getting bought out. I'm not really sure what's going to happen with that, but one of the things that I always got asked when I was at Luxor because I was on the marketing and media side is okay, obviously miners are going to want to sell forward their hash rate so they can lock in revenue. But who's on the other side buying this? So for a product like this, the seller to me is obviously very clear data center companies. They want to make sure that they have access to. It's almost like a form of financing because you can have your, your revenue locked in for a specific period and you know that you're going to make payrolls, you know you're going to meet your debt obligations. But who is the natural buyer of a product like this?
- [18:07]
Kush Bavaria
It's funny you say this because yesterday someone was like, who's the natural seller? I think everyone's going to buy in this market. It's literally the exact opposite thing that you told me just now. But I think a lot of buyers want to hedge their cost 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 much they're integrating with all these AI tools and everyone's training their own model, post training stuff, stuff on top of open source models. 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 costs that they're taking on as a business based off of prices of compute that change very rapidly based on supply and demand.
- [18:51]
Charlie
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. You mentioned ice trades electricity, which is interesting because it's like a non storable commodity and GPU hours are kind of like that. And it appears that the market is modeled after electricity. Can you describe this and dive in this a bit more for me?
- [19:17]
Kush Bavaria
Yeah. I mean if you look at electricity futures, they trade based off of different nodes throughout the US especially. I could talk about that. There's different sort of style features that exist. I think a popular one is Asian style futures where you basically could trade one, you average the past days of index and then you settle based off of that price as a features contract. That's one way these trade. And also there's day ahead markets. You basically trade electricity a day before and it's time sensitive. Given that how as you just said, like electricity is not really so it is storable in the sense that you could have batteries today, but when it started it wasn't really. It's still kind of not really storable just given how the scale of things are. But there's definitely uniqueness is how compute and electricity trade. I think they're very same. We call it a very similar good where it's time sensitive and it's a flow good, not a stock good.
- [20:11]
Charlie
And we've seen that. I look at data center companies here in the central and southwestern U.S. the day ahead markets for electricity are pretty core to the success of their business models. Do you see similar types of strategies day ahead markets for GPU hours as being unlocked by this and what are the implications of that?
- [20:34]
Kush Bavaria
So I think there's going to be a lot of day ahead markets on the GPUs as time goes on. Right. I mean we're 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. 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. There's a utility provider that does all of this for you and you just get the electricity cost so there's going to be different market structures that play along to get this how it is.
- [21:03]
Colin
My question is at what point does this compress? Like when the CapEx cycle that we're in concludes. I mean, it's kind of, I'm asking you, kind of look into a crystal ball because like, you know, the CapEx cycle could conclude and we could have 10 more gigawatts of AI data centers, but then demand could go up and outpace the actual supply of GPUs. So how do you all think about that when you're.
- [21:25]
Kush Bavaria
I think the truth is nobody knows what the answer is and there's a lot of people that want to basically understand what the answer is. And that's why the futures market for this exists. Right? 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 we don't really, we, we build the market. Right? We don't take on any opinions on this, but the whole point of the market is to explicitly express that opinion. 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. 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.
- [22:06]
Charlie
So, so I'm curious about 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, 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, what did you need to do in order to jump through the hoops to get this deal and what are the regulatory challenges here?
- [22:37]
Kush Bavaria
I think it's just proving that the index is accurate and tracks traded price of compute. And I think part of that's. We've done that clearly through many of our other cert partnerships before this as well. That's the main thing. And I think also 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. And I think we've done an incredible job so far making sure that's true.
- [23:01]
Charlie
And that's because you take, I believe, actual traded like, yes, it's cleared prices.
- [23:07]
Kush Bavaria
Yes, exactly. It's the same way oil is tracked, where we track like traded prices of what the computer is actually being bought and sold for, rather than it being indicative pricing.
- [23:17]
Charlie
And maybe for the person who doesn't buy GPU compute, where does this stuff trade? How do you get this data? Where.
- [23:24]
Kush Bavaria
Yeah, there's multiple different people that we work with. So we work with many different brokers in the industry. We also work with many different platforms, like cloud platforms to get this data. And then we have basically a methodology that we use to standardize this stuff. Obviously compute is not very standardizable. And so we use a minimum greater above threshold on all of our compute hours. 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.
- [23:53]
Charlie
I guess another question is. So Orn has multiple markets. H1 hundreds, H2 hundreds, B2 hundreds, RTX 5090s. Which of these markets is the most interesting to you? Because H1 hundreds is pretty mature, but we've had a rip in there lately. 5090s are mooning. I don't know which of these markets.
- [24:14]
Kush Bavaria
Look, we tracked the H1 hundreds today because that's a sort of. It's a widely available trip. The market sort of matured there. But B2 hundreds are also very interesting to us just because the black walls are now coming into market and people are looking at buying black walls for their enterprises and customers. So blackwalls are 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 on.
- [24:38]
Colin
Kush, I have one question. 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. Is there anything to you that explains the sudden leap in these GPU prices? I mean, it's pretty dramatic over the last month.
- [24:58]
Kush Bavaria
I mean, if you just look at the market and you go to AW or like modal or aw, AWS or any of your favorite GPU providers, just look at the prices, just increase straight. I think its demand right now is crazy. And a lot of it probably has to do with everyone running their own AI agents and open call instances and all these things. If you think about it, people are now using exponentially more compute because every time you use an agent and makes a call to another agent, that does another thing. That does another thing. And so it's more and more tokens. That token cycle continues to grow I think per people there's some metric I saw that was like 25x or more token usage per user. Now just because of how 25x so 25 multiple exactly because of how people are using agents on like sub agents and sub agents of sub agents now and all this. I'm sure you guys have used many of these tools too but don't have to explain it here.
- [25:47]
Colin
Yeah, I was just curious as to like because you see a dramatic move like that and you think something new came out and so like you know, open claw and things like that makes a lot of sense and you know you mentioning how agents interact with each other and the token economy it's like tokens and agents all the way down I guess.
- [26:05]
Kush Bavaria
Yes.
- [26:08]
Charlie
I'm curious. It seems like everybody and their dog is compute constrained. That seems to be like the main story for Anthropic right now. Why Claude is not behaving as much as I'd like it to. You know I also see the story of local compute people buying I would say secondary GPUs the 3090s, a popular model. I'm curious where does the secondary market for maybe say non premier GPUs go? This is kind of a curveball question because I've got 30 90s, I've got some 4,090s. These are not primarily training or inference. What are you seeing there?
- [26:48]
Kush Bavaria
I mean look, we haven't been tracking 3,090s and 4,090s to be honest with you. Mainly because like demand for those is still great. 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 I used to play Call of Duty, League of Legends named my favorite game and I now want to run my own AI agent locally and don't want to pay for tokens. And you can run GPT OSS like 28 billion parameter model pretty easily on these chips. So I would say that's probably the biggest use case for a lot of people. It's a good one too.
- [27:21]
Colin
The next big thing to track is regional electricity prices versus token prices to arbitrage spinning up your own AI instance at home.
- [27:32]
Charlie
Well I like to say we were joking back when we covered bitcoin mining in the before times that the best hash price traders would be meteorologists. So maybe we could see that with localized gpu, computer and power rates. Kush, thank you so much for coming on the show. I anticipate we're going to keep pinging you to talk about the markets because this is a very exciting time and place for Apu Compute.
- [28:00]
Kush Bavaria
Sounds good. Thank you guys so much. We appreciate it.
- [28:02]
Charlie
Thank you. All right, always fascinating. Love Kush. Love Oren. Let's keep rolling. We have Alex Leishman, founder of River Financial on next. But before that, a word from our sponsor, CleanSpark.
- [28:19]
Colin
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. This is our proof of work. We are setting the standard for what's next. Learn more about the intersection of energy and bitcoin@cleanspark.com all right, we've got Alexander Leishman, CEO of River Financial in the wings. Not to glaze him too much, but probably my favorite bitcoin exchange for a number of reasons that we might get into during this exchange. We'll go ahead and bring Alex up and ask him a few questions. Alex, welcome to the show, sir.
- [29:10]
Alexander Leishman
Thanks for having me on.
- [29:11]
Colin
Yeah, man, really, really happy to have you on. Thank you for taking the time. So we'll get into a few things with river towards the tail end of this, but we got to talk about the Prime Trust news or the Prime Bankruptcy Trust because it's, it's eating bitcoin Twitter right now and you've been on the ball tweeting about it a lot. And, and my first question that I have to ask is this omnibus account stuff with prime where everything was just bunched into one. They had spreadsheets allegedly for the accounts, but everything was packed into, you know, single, single accounts for crypto and, and bank accounts. This seems, is this atypical? Is this normal like that? That to me seems like a huge red flag if I were going to
- [29:56]
Alexander Leishman
be using one of them, the high level here. And I think this is what the. Well, so maybe just to step back for a second, you know, the Prime Trust is state. So Prime Trust, the company is gone. All the shareholders were wiped out. 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. So I think that's an important thing to recognize about like what the nature of these lawsuits. And so, so, so this estate is basically saying Prime Trust was so poorly run, the assets that were supposed to have been clearly demarcated by client were hopelessly commingled. And so any their argue The Prime Trust estate is arguing, therefore any like, agreement for, to treat these as like a, like a normal trust would like. This is the property of the account holder and it belongs to them and therefore not part of, you know, the Prime Trust estate. That claim that legal protection is gone because the assets just weren't treated that way. And so, you know, it's sort of like the clients at Prime Trust may or may not have had the right legal agreements and structure in place, but unfortunately the Prime Trust operations were just pooling everything together and running seemingly fractional reserve. 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. It's not part of your. It's not part of Prime Trust. But then Prime Trust just takes some of it and moves it away. Okay, and then, well, what do you. What is, what is. And then they go bankrupt. What, what should the estate do? Like, you know, both of them have 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? And that's kind of what's happening here. And the people who got out right before Prime Trust went bust, you know, the current estate is arguing, 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. And it's going to be interesting to see like, what happens with, you know, with the judge's ruling.
- [32:44]
Colin
Yeah, and, and the, the Prime Bankruptcy Trust is arguing that these companies are basically creditors. And, and a linchpin in this is this Master Services agreement with Zap vis a vis Strike. I'm not going to speak to the other companies. I haven't gone through the court documents, so I don't know if There are similar MSAs, but this is coming from that court document. Quote, the agreement does not create a partnership franchise, joint venture agency, fiduciary or employment relationship between the parties. Nothing in the agreement, expressed or implied, is intended to give rise to any third party beneficiary. 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 interests of their clients. But that seems to be the basis of their, of their claim. And Then there were in the court. We covered this in the first segment. Zaps 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, basically make claim over these assets. So I'm just curious, from your perspective as someone who's run, you know, a bitcoin exchange, wouldn't that have flagged, you know, wouldn't that have been a red flag when you're. When you're entering into a contract with this company?
- [34:07]
Alexander Leishman
You know, look, 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. I think that. Look, I think, like, on the surface, without getting into, like, the legal minutiae of their specific contracts, like, it was reasonable to assume a trust company was acting as a trust company and that these assets presumably would have been bankruptcy remote under the Nevada trust law. Now, I know that sort of like a crux. The crux of some of these clawback arguments is that maybe the relationship was weak, but then they strengthened it. But they strengthened it too late or something like this. I think there's, like, just a lot of minutiae there that, like, a judge is probably just gonna have to work through.
- [34:58]
Colin
Right.
- [34:58]
Kush Bavaria
And.
- [34:59]
Alexander Leishman
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? I think really, for me, the takeaway is like, it doesn't really matter. It doesn't, like, it doesn't matter how rock solid your contract is. 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.
- [35:21]
Colin
Yeah, it doesn't matter. To your point about Nevada law, that's actually one of, I think Zaps primary arguments in the lawsuit is like, there are laws on the books in Nevada guarding against this, so where are legal protections? And you're kind of just saying, like, well, we get into these litigations, it gets messy and the money's gone. So does it really matter what the law said?
- [35:43]
Kush Bavaria
Right.
- [35:44]
Alexander Leishman
Yeah. I mean, the state, I think that the estate is like, directionally arguing, well, even if these protections did apply once the sort of hopeless, hopeless commingling happened, it's a nonsensical thing to apply because it's just not like the laws of physics prohibit from applying. Right. Like, the money isn't there, and everyone's is Pooled together. So knowing whose property is what is just not possible. And it's. And so like, let's see how that plays out.
- [36:14]
Glenn Cameron
Yeah.
- [36:14]
Charlie
And it gets further complicated because now we're dealing with multiple assets. We're not dealing with like just bitcoin. And river, you guys have chosen to focus being narrowly in bitcoin, don't bother with other assets for abundance of reasons, which you've talked about. When we talk about all these different crypto assets and you're commingling them in an omnibus account, does that enhance an already problematic setup or. I'm curious how your, your take on this.
- [36:44]
Alexander Leishman
Well, I mean, absolutely, because look at what happened actually with what, what precipitated the, the bankruptcy with Prime Trust. Was they, their. If their ETH wallet was bricked, like they lost access to their ETH wallet and. Or they, they had sort of stopped using it and then started allowing deposits to it again and lost track of the keys, presumably. Right. And so I was tweeting about Prime Trust for a while because I saw a lot of bitcoin influencers like sort of saying, you know, shilling like some bitcoin only companies, like, well, 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, not really well run custodian. And so like what's really happening here? Why are you shilling this? And you know, well, you know, Prime Trust might be multi asset, but you know, you know, this company is not. And I was like, well, you know, there's a lot of legal risks here. So yeah, really Prime Trust being one poorly run, but then two really. It was the ETH stuff that then bit everybody who used them. And so I think it's interesting to see sort of the ripple effects of adding risks to a financial institution impact every depositor there.
- [38:04]
Charlie
Yeah, the, the ripple effects, you might
- [38:07]
Colin
say, you know, the literal ripple effects 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.
- [38:17]
Alexander Leishman
Right? Yes, exactly, exactly.
- [38:19]
Charlie
But so this gets into a thing which you have been since before it was cool, talking about, which is proof of reserves and liabilities and the proofs of all these things. Bitcoin affords the ability to much more transparently prove reserves. You talk about this, I'm gonna, you know, give you a soapbox to talk about the importance of proof of reserves and how your company river does that.
- [38:49]
Colin
And also, sorry, Alex, to tack A question onto that after you talk about how river does it. I just like, why do you think this isn't more adopted outside besides the cynical bitcoiner take, which is like, because the reserves aren't there. But so first, walk us through River's decision for this and why you think this is an industry standard already.
- [39:06]
Alexander Leishman
Sure, yeah. So, well, I will say first, I've changed my mind about proof of reserves over the years. And the Prime Trust situation actually was one of the main reasons I did, 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. That they're not disclosing. But in practice, you know what proof of reserves actually forces is just transparent. More transparency than otherwise would have existed, which often is just really strong signal that no funny business is happening. And so, yeah, at river, we prove every month that we have all the bitcoin that we say we have. We show the bitcoin we have and we show a list of liabilities basically that any client can verify their liabilities against. It's anonymous, so it's not revealing client information. And if Prime Trust had had proof of reserves, none of this would have happened. Right. Like you see that chart from the lawsuit about how basically Prime Trust was running under, under reserve for like actually like way longer than a lot of people thought. And this just could have never happened if they, they had instituted this. And so, 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 they don't have a transparent operation. Right. And the people running it have competence and prove that to you. They don't just tell you, they show you. And one of the real AHAs from the Prime Trust thing is it doesn't even matter if you self custody, because if you bought the bitcoin at Prime Trust 90 days before the bankruptcy and you withdrew it, they're coming after you. There are a lot of individuals who are clients of certain exchanges that are getting sued by Prime Trust. And so the defense of these exchanges was, well, we encourage people to self custody. So even if you think Prime Trust might not be secured, we encourage you to self custody. Well, if you bought a million dollars of bitcoin of Prime Trust and you self custody did 90 days before the bankruptcy, you have a lawsuit that you now have to deal with and so it doesn't matter if you were self custodying. What matters is that the person who's selling you the bitcoin have their I's dotted and t's crossed. And so then the question, well, why don't more people do proof of reserves? And I don't think the answer is usually because they don't have the bitcoin. I think the answer is one of either one. They don't want to reveal how much or little bitcoin they actually do have. Right. Like maybe some companies maybe will be embarrassed that it's too small or make them feel, I don't know. Right. That's a theory. It's just like for the same reason, maybe certain companies don't reveal certain financial metrics. They don't want that, you know, public. The other one is maybe just sort of they don't care. Laziness. It's just work.
- [42:22]
Colin
I mean, how difficult is it though? Like what was the process for y'?
- [42:26]
Kush Bavaria
All?
- [42:26]
Alexander Leishman
Like, so 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.
- [42:34]
Colin
Yeah. I mean if you've got a casino.
- [42:36]
Alexander Leishman
Yeah. And also just like, you know, if you have 20 different product lines. Right. So, but 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. And so I don't know exactly why, but I think it's one of the reasons that I mentioned and we even open sourced it like so, and you know, ours is compatible with like the Bitmix. 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 without much engineering work. I, I think another part is maybe if you're not running your own custody system, the custody system you're using has to support what you're doing. And so I think actually if you look at how many bitcoin exchanges run their own custody. Manage their own keys. That's my MacBook thumb. Manage their own keys, have their own licenses. It's really just manage their own keys. It's a very short list. Coinbase, Kraken, Gemini, Cash app, River in the us I don't know if it's Fidelity. I think Fidelity.
- [44:00]
Charlie
Yeah.
- [44:02]
Alexander Leishman
I don't know if there's anyone else.
- [44:05]
Charlie
Yeah. So I guess final question is there's so few custodians how much of an issue is this? Does this have like a. Does it have this have any undesirable effects on just this market structure of Bitcoin? I don't know. Most of the ETFs use Coinbase custody. You got to ask, how differentiated are they at some level?
- [44:36]
Alexander Leishman
Well, you know, one thing I will commend Coinbase for as much as I criticize Coinbase for running a casino. Coinbase, at least from what I've seen, has done custody.
- [44:49]
Kush Bavaria
Well,
- [44:52]
Alexander Leishman
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. So there is something kind of like proof of reserves there. And I think also what we see is like running a high quality custodian is not easy. Oh, by the way, I forgot, Niadig is also runs their own custody. So that's another one. Running your own custodian. It's a lot of work.
- [45:15]
Kush Bavaria
Right?
- [45:15]
Alexander Leishman
You're basically getting paid to hold the hot potato. Nobody wants to hold the hot potato. And a custodian is basically like a professional hot potato holder. And I think that what we're seeing is just like a hangover from an era where there were a lot of weak handed hot potato holders or like that, you know, like they didn't have enough calluses in their hand or something.
- [45:41]
Charlie
Yeah, they weren't wearing gloves.
- [45:43]
Alexander Leishman
I'll stop with that analogy. But yeah, and so now I think, you know, Charlie, to your, to your point, we're just not going to see that many. Like, I just don't think there's going to be that many custodians because 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. The people who bothered doing it do it and it's hard to like come up with the economic case for somebody new to do it because there's already people with a reputation doing it. So I think, I think we're just going to see like a small number of high quality custodians for the foreseeable future.
- [46:21]
Charlie
Alex, thank you so much for coming on Block Space Live. Really appreciate your time and your comments on the news of the day. Wishing you guys the best. And yeah, keep on tweeting about proof of reserves. It's a fun topic.
- [46:40]
Alexander Leishman
Yeah, well, thanks, guys.
- [46:42]
Charlie
Love Alex Leishman. He's like the Captain America of bitcoin Twitter, I think.
- [46:51]
Colin
Next up, Charlie.
- [46:52]
Charlie
Yeah, next up, we got our third guest. We are Rolling hot with the guests.
- [46:55]
Colin
Rolling hot. Today we've got Glenn Cameron of On Ramp to talk a little more about prime dress, but also to talk about their series A round. Yeah, go ahead and get Glenn up here.
- [47:06]
Charlie
Bring him on up. Okay, Glenn, welcome to the show.
- [47:12]
Glenn Cameron
Hey guys, thanks for having me.
- [47:14]
Colin
Yeah, thanks for joining, man. So we'll just hop right into the fun news. Before we get to the unfun news, tell us about this most recent fundraise from Onramp and Yalls ambitions for how you plan to use the capital to expand your services.
- [47:28]
Glenn Cameron
Yeah, sure, yeah. So the series A is obviously a really important milestone for Unwramp and it speaks to the success of multi institution custody, which we can talk about actually in relation to the prime trust issue. You know, and the main reason we did the raise is, you know, we want to move this form of custody towards becoming the new standard for bitcoin custody. You know, I know you mentioned, 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. And we'll tell you how we have sold for that. In terms of the raise, we raised $12.5 million at $135 million valuation. A venture capital fund called Early Riders, which is a bitcoin denominated fund, led the round with about 20% of the capital. And then the remainder of the capital was with other investors. And we're going to be using the funds primarily for engineering, expanding the key network. We've got now four keys. We've got one in Canada, one in the UK and two in the US and we're going to be expanding into the Middle east and into Southeast Asia. So we'll have keys all around the world. And then also for marketing because historically we haven't spent a dollar dollar on marketing. It's all being organic growth and so building out some of that and also scaling on Ramp Finance. If you want to talk about that, we can talk about that.
- [49:40]
Charlie
Talk a little bit about On Ramp Finance. We talked about it with Michael a few weeks ago. But yeah, kind of talk about that in light of the raise.
- [49:47]
Glenn Cameron
Yeah, sure. So, you know, a lot of people want to buy the dip. They want to dca, they want to, you know, they don't necessarily necessary want to 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. But on the other hand, you might not want to buy Bitcoin at the price available at the time. So what? On Ramp Finance, one of the things that allows clients to do is to transfer money onto the platform, convert them into stable coins and earn stablecoin rewards. We've got kind of a limited number of spaces, I don't know exactly how many are left, where we will pay a 5% yield. Well, it's not a yield, it's a reward. On those stable coins, people can put in limit orders, they'll be able to DCA into Bitcoin, etc. And earn a yield there. The other part of it is for clients to be able to actually buy physical gold on the platform. The gold will be serialized gold bars held in the Royal Canadian Mint, and people will be able to withdraw the physical gold and they'll be able to purchase it directly through the platform. And that's through our partnership with Argo, which are part of the kind of Sprott family
- [51:31]
Alexander Leishman
stable.
- [51:33]
Charlie
Yeah.
- [51:34]
Colin
That's interesting, Glenn. You're giving a sales pitch to my boomer father who has a small allocation but has a much larger gold and silver allocation.
- [51:43]
Glenn Cameron
Yeah, so, yeah, I mean, look, I mean, I'm 52.
- [51:47]
Kush Bavaria
Right.
- [51:48]
Glenn Cameron
And when you, when you start getting a little bit older and you've got to start thinking about actually spending the money you spend your whole life saving, you don't want to necessarily be 100% allocated to an asset with a 50% volume. Right. So. And also, there's a very low correlation between gold and it's also hard money. You know, that they're part of the same family. We will never, you know, stable coins are just digital dollars and they're actually safer than dollars in the bank because they're 100 reserved. Right. Gold is 5,000 is being used as hard money for 5,000 years and Bitcoin, but we're not going to be, you know, diversifying into Ethereum, Cardano, Solana or any of the that stuff ever. Yeah.
- [52:48]
Colin
So, Glenn, to tie it. To tie what y' all do back to the prime news on Ramp works with it's multi institutional custody. Y' all deal with a number of custodians. What kind of due diligence or vetting process do you go about when you're choosing custodians? What do you want to see to ensure, like, this is a place where we're comfortable with parking for funds.
- [53:11]
Glenn Cameron
Yeah. Well, let me stop by just for the viewers explaining what multi institution custody is.
- [53:17]
Alexander Leishman
Right.
- [53:18]
Glenn Cameron
So you've got either self custody, where you can have a single sig or multi sig wallet and you hold all the keys, right? Then you've got like a collaborative custody situation, you know, Unchained or CASA or one of these where you hold two of the keys, they hold a backup key, right? In both of those scenarios for the masses, right? If we believe Bitcoin is going to become, you know, gradually going to monetize into the base money and widely adopted around the world, we think it's unlikely that people are going to be sitting with trazos and you know, things in cupboards and whatever and you think about inheritance or fires and you know, and also 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, because either you leave it somewhere like Prime Trust or with Swan or you know, one of these entities and then you've got, you know, the obvious risks that we're talking about in the Prime Trust case, right, or you've got to suddenly become, you know, cypherpunk. So what, the multi institution custody model is this. We've got three entirely separate institutional custodians, right? And they each hold a key, right? And each of those keys is sharded, right? 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, so they cannot collude because they don't even know who to collude with. You know, there's a few hundred people at Bitco. If the people, one of the other key holders want to collude, you know, they're going to have to guess who they need to collude with, right? Now you can imagine 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. So what it means is if one of the key hold keys fail, we just swap them out, right? And when you actually do the maths, the probability math behind it, it works out that the Cassidy is a thousand times safer, right? I've written a couple of articles showing that mathematics. 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,
- [56:36]
Charlie
big
- [56:36]
Glenn Cameron
easy buttons even for old people like me. And it's, you know, and, but at the same time you've got that ease of use, you don't have these risks that we do in the case of Prime Trust and we think, you know, multi seg has been around for 13 years, right? This is the obvious solution. We're not talking about using multi sig, because at Prime Trust they were using multi sig, right? It doesn't help if one entity holds all the keys.
- [57:10]
Charlie
So one again, on the prime trust thing, you know, they were a qualified custodian, but as we saw, some of the more sophisticated counterparties got wind that this qualified custodian was at risk of going under, which they did. And those sophisticated counterparties were able to exit ahead of say like retail investors at least. Kind of looking briefly at the timeline, you know, I do kind of wonder like about the layers between the individual and their actual Bitcoin. Whenever there is a single custodian or a single counterparty on the other end. How many layers, if you're familiar, it typically exists between when somebody has somebody else custodian their Bitcoin, how many different legal layers, different hoops are there to jump through whenever the average person hands over their Bitcoin to even a qualified custodian?
- [58:17]
Glenn Cameron
So I'll answer your question like this, right? So the way I ended up in the position I'm in now at onramp was I was the head of digital assets and a senior investment consultant at an investment consulting firm here in London. Our clients were pension funds, family offices, funeral trusts, various types of institutional investors.
- [58:44]
Colin
Right.
- [58:46]
Glenn Cameron
And the, the director of investment consulting wanted me to lead the digital assets part of the business. But it was kind of a misnomer because it was all about Bitcoin. Right. And when we were looking for custodian. So first of all, I wanted the multi institution. Well, a multi sig setup with different entities holding the keys. And that's how I found on ramp. But the other thing is we did 18 months worth of due diligence. We hired a specialist due diligence firm in London and we did full operational financial due diligence. There was a, you know, multiple meetings and reports between, you know, very experienced due diligence professionals at, at this firm here in London called Perform. And you know, the average person is not going to be able to do that, right? What are they trusting? They trusting the name or whatever? They trust Swan or they trust, oh, I'm going to put my Bitcoin in an Iraq. And what you find across the markets, right, whether it's ETFs or whatever, I mean, for example, BlackRock is not custody in the bitcoin Right. They're using a sub custodian. Every IRA is, you know, so 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. Ftx, Binance, us, Celsius, Swan, Strike, Fold, Galaxy were all using Prime Trust. Right. And I wonder if they did 18 months worth of due diligence before putting the bitcoin there. Right, right. And you know what? I, I, I mean, when I was in the position I was as, as head of digital assets, 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, 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?
- [61:33]
Kush Bavaria
Yeah.
- [61:35]
Charlie
Glenn, thank you so much for joining us on the show, chatting about the topics of the day and the various ways bitcoin is uniquely positioned. I'm a fan. I think 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.
- [62:01]
Glenn Cameron
Thank you for having me.
- [62:03]
Colin
Thanks, Glenn.
- [62:04]
Charlie
All right, we still have some fun stories about people possibly losing money or trying to stop losing money to keep rolling. But before that, gotta do a shout out word for our sponsor, Luxor.
- [62:27]
Colin
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- [63:09]
Charlie
All right, let's go to everyone's favorite company, Nakamoto.
- [63:14]
Colin
Who's everyone's favorite?
- [63:16]
Charlie
Split Triple Sal Cow 1 for 40.
- [63:21]
Colin
Missed the Olympics there by a few.
- [63:22]
Charlie
I know.
- [63:23]
Colin
But yeah, yeah, this. It just goes to show there are no shortage of financial levers for companies to pull when they are distressed. So I'm going to get this up here right Now. Nakamoto sets 1 for 40 reverse stock split as NASDAQ deadline nears so this was announced a while ago, I believe March or April. But Nakamoto has the vote for the reverse stock split passed. It was approved. They had originally said it might be between 1 for 20 or 1 for 50, but now they have settled on 1 for 40. 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 8, 2026 for it to go back above $1 for 10 straight days or face a delisting. So the details of this reverse stock split, this will reduce the company shares down to. Let me see. I believe it is 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. So if they want to rip an ATM in the future, assuming the stocks do 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. Again, that assumes that there's a strong market to sell into. Another thing to point out here, NACA's stock price is about $0.16, by the way, at the time of recording, as of early April, when all this is going down, shares were trading around 21 to 22 cents. But importantly, my question when this was, okay, So I have 40 shares of NACA. After this split, I will have one. 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 going to pay you out cash. Don't know how much cash they'll have to pay out. 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 going to have to end up paying out. Believe in Edgar, they had a few 10, $10 million worth of cash on the balance sheet. They obviously have their Bitcoin. But that being said, there will be no fractional shares for this. Those shareholders will receive cash. Now, to tack on to this, NACA also released its Q1 earnings, I believe, last week.
- [66:15]
Charlie
And the revenue came in is kind of a doozy.
- [66:20]
Colin
It's. Yeah. And I want to be clear though, this. This 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, to me it doesn't seem like they can claim revenue for the entire quarter for BTC Media. Maybe they can.
- [66:42]
Charlie
Well, and also I consider that the BDC Media, you know, the big flagship event was an April, which is not in Q1 PER. I don't know. Are they declaring the revenue from that conference?
- [66:55]
Colin
Yeah, and a lot of that revenue would certainly have hit the books probably throughout last year and earlier this year for sponsorships.
- [67:03]
Alexander Leishman
Right.
- [67:04]
Colin
Depending on the deal. Right. There might have been payment, 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 derivative revenue from their BTC options. You know, they sell options because they have a ton of. Bitcoin was just over a million dollars and their healthcare revenue line was 479 million. As you'll recall, KindlyMD was the company that NACA ended up merging with to go public. They're winding that down though, and that makes a lot of sense. There's probably a lot of overhead associated with that that they do not want to deal with. Be curious to see what the M and A looks like for that. And I don't know how far along they are in talks, but I would imagine they would just sell that business to, to a pure play healthcare company. The big thing on the quarterly earnings though is the total operating losses for the company were 1:28.85 million. Now this is largely driven by a 102, 0.5 million change in its Bitcoin holdings. As you 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. Compensation stood at 7.35 million and SGNA stood at 8.78, sorry, 9.78 million.
- [68:35]
Charlie
So yeah, it is, it is if I'm understanding these numbers right, it is. Man. It's hard to say this because I, I love these folks but like compensation being more than their Q1 revenue, if I'm understanding
- [68:51]
Colin
well, and that's. They got bodied on Twitter with certain people analyzing this, right. As a result, you know, and huge transition period for them. 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. So assuming it stays above that for the 10 day period after this, the Shares are split then they should be good on the NASDAQ delisting. So I mean as for right now, they've got a stop gap in place. They're going to continue list be they'll continue being listed as a public company so long as nothing goes awry. 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? How do we make them believe in this narrative? So Godspeed to them. Unfortunate Q1 but good news for the stock split. I mean the stock split in and of itself is actually like, you know, you don't want to necessarily see that. But they do have, they are executing on that plan.
- [69:58]
Charlie
Yeah, I mean it, it looks like it'll buy them time I guess like maybe down to the wire. Is that, what's the date? It's June 1st. So this gives them exactly 10 days.
- [70:08]
Colin
June 8th is June 8th.
- [70:09]
Kush Bavaria
Okay.
- [70:10]
Colin
Yeah.
- [70:10]
Charlie
So yeah, so you get a rolling 10 day window where it's got to stay above a dollar. It's shooting up to like 6 to 7 I think you said maybe even $8 depending on the current share price right now. So looks like they'll buy some time.
- [70:27]
Colin
100%. Well we'll, we'll put a cap on that. And we will move on to our last story.
- [70:33]
Charlie
But first before that, a word from our sponsor. Lygos.
- [70:43]
Colin
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- [71:37]
Charlie
All right, we're going to tokenize everything and you're going to be happy, you're
- [71:43]
Colin
going to be tokenized and you're going to love it.
- [71:47]
Charlie
Yeah. And I will say this feels like one of the bigger stories. This has been a bit of a white whale for crypto for a long time. And if it ever seems natural to see institutional adoption of something, it would be tokenizing stocks.
- [72:03]
Colin
So call 100%. And huge ramifications if this actually becomes the standard I imagine it will do. We get 24, 7, 365 trading as a result of this.
- [72:13]
Charlie
It's about time. Why does the stock market close? It's 2026.
- [72:20]
Colin
No more gap ups or gap downs when you open your Fidelity account. Trying to take out a position because I don't know, the United States napped the president of Venezuela.
- [72:29]
Charlie
How are they things like that, how are they going to compete with Hyper Liquid if they don't do this? So.
- [72:34]
Colin
Right. And hype up on the news. I'm actually kind of curious about that. There's an argument to be made that this is bearish for hype.
- [72:42]
Charlie
Right.
- [72:43]
Colin
But there's an argument to be made that's bullish because liquidity begets liquidity. So, you know, do you know what I'm saying? Like it?
- [72:51]
Charlie
Oh, I do. I mean the, we're never going to get anybody from, from Hyper Liquid on the show. So I don't have to worry about burning those bridges. But Hyper Liquid exists because these are, this is a gray market. You can trade your anthropic shares, you know, at a 30% premium there. The average, average person.
- [73:10]
Colin
So maybe there's an argument to be made that even after these get approved, they will still. Hype will still be popular because it allows overseas investors exposure to US equities that are tokenized.
- [73:20]
Charlie
Exactly.
- [73:20]
Colin
But we're dancing around the headline here. This is from CoinDesk or Bloomberg by way of CoinDesk. They're reporting on Bloomberg's reporting SEC to propose tokenized stock frameworks as Wall street efforts deepen the exterior. The Security and Exchanges Commission quoting from CoinDesk is preparing an innovation exemption for tokenized securities. As early as this week, Bloomberg Law reported SEC chair Paul Atkins earlier in May signaled the agency was considering new rulemaking to accommodate blockchain based trading and settlement. And you know, one thing to point out here, Atkins is just such a reversal from what we had from years of Gary Gensler. And one of the big things here is that he's basically saying 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. 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. This is a huge criticism of Gary Gensler's regime. As the SEC head, they were prosecuting what some lawyers called regulation. Border by enforcement rather than regulating first and then enforcing when people break the rules. And we won't spend too much time on that. But you talk to anyone who worked in crypto at the time who's trying to do something innovative, 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. One last thing to note about this. As this framework gets rolled out, we've already seen a lot of traction in this field. The Depository Trust and Clearing Corporation, which processes a lot of the US securities market for a number of these exchanges, is planning to begin limited production of tokenized assets in July ahead of a launch in October. Wondering what that trial run looks like. And it seems to me like they knew that something was already in the works with the sec, so they thought, we're going to go ahead and try to get ahead of the market on this one. NASDAQ is also developing a framework for companies to issue tokenized shares. The SEC approved this in March. And the Intercontinental Exchange ICE also is rolling out a process like this through a partnership with OKEx. So this is 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.
- [75:54]
Charlie
Yeah, this is big news for blockchains. 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. I mean, do you see these things? 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 I was doing some like research on the Depository Trust and Clearing Corporation, the dtcc, they process something like I'm looking at two quadrillion dollars in transactions annually. That's quadrillion, which is a thousand trillion. So you know, I think the volume of these, of the trading of these assets kind of boggles most people's Minds.
- [76:50]
Colin
Jamie, can we get a fact check on that? I'm just kidding. Yeah, I know, but I mean obviously that's like, it's not too quadrillion created, it's, it's money changing hands. But that's an insane number.
- [76:59]
Charlie
This is money changing hands. This is not like ag value. These networks.
- [77:03]
Colin
To your point though, Charlie, like are they going to trust ethereum or an L2? Look at the Kelp Dao hack and the fallout from that. Hell no, they're not going to do that. They want to have internal measures to roll back transactions if they have to. 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. I mean if you're an institutional guy looking at Defi and you have all these Ethereum maxis saying why don't you build it on Ethereum? The answer is obvious. Defi has been a train wreck in terms of these fly by night protocols having horrible security gaps. And importantly, what the Kelp Dao hack taught us is one smart contract's vulnerability could be another one's liability. 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, you know, basically creating a fake liability for that platform and seizing up some of these lending pools. So I, I, I, I really fail to see a future in which any of this is anything but proprietary, closed source, closed loop controlled by these institutions.
- [78:22]
Charlie
So yeah, it's a really big week for, it's really just been a big year or two for trad markets. But I mean think about it. We, we, we did a story, we've done story, we've talked about the ice, NASDAQ and now DTCC on this show. All of these markets are heating up. I think, I think you mentioned this, but I believe in the announcement it said that these, that the SEC said it could be as early as this
- [78:53]
Colin
week, that they have the framework announced they have the framework, it should. So 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.
- [79:04]
Charlie
Yeah, and then I just kind of wonder about the implications, being able to trade 247 because if we're talking about again Jamie, fact check me on this, 2 quadrillion in total trading volume annually. That's not just five days a week, that's actually just 9 to 4 Eastern or whenever the markets are open, which is really just half of it. It's less than half a day. So you're basically now. We're now talking about 247 trading. So you actually almost like triple the trading hours of the normal, like, weekday, and then you get weekends. So it's not just, you know, 2/7 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. So, like, we could see just aggregate volumes. You know, I don't imagine that after conventional. Conventionally, after hours volumes will be out the gate as big as they were they are during normal hours. But, like, you can see a future as this market matures and becomes globalized. As like now we're just seeing not 2, 2, quadrillion, but 10, quadrillion.
- [80:16]
Glenn Cameron
Yeah.
- [80:17]
Colin
And I'm curious what perpetual trading. Assuming, like, they might not allow 247 for this. That's kind of like everyone's assuming it. But I'm curious what that means for market dislocation location.
- [80:27]
Charlie
But, but, but this, this means it just gets one step closer to that.
- [80:31]
Colin
Yes.
- [80:31]
Charlie
Because how do you turn a blockchain off, you know, at 4pm Eastern?
- [80:36]
Colin
Like you. Right.
- [80:37]
Charlie
Yeah, I don't really see that happening.
- [80:39]
Colin
I mean, if it's a private blockchain, they could theoretically do whatever they want.
- [80:44]
Charlie
But then why. Then why do we. Why are we.
- [80:46]
Colin
What do we do?
- [80:47]
Charlie
What are we doing here? I. I guess the. The other thing is, my other hot take is I'm excited for the. For the finance bros to finally get a slap in the face of what it looks like to be terminally locked in and perpetually monitoring the situation so you can catch, you know, that crypto Insider info at 3am and. And then it totally dominate.
- [81:17]
Colin
Your next 24 hours are not ready for the.
- [81:20]
Charlie
They're not ready. They think you can go home to your family at 5pm and go be. No, you got to sit at your computer staring into the blue light 24 7. Okay. I think that brings. That probably wraps up the show today. Colin.
- [81:35]
Colin
I think we'll put a cap on it.
- [81:36]
Charlie
Yeah. All right. Thank you so much for listening to Black Space Live. We're going live again this Friday at noon Eastern. I'm Charlie.
- [81:47]
Colin
I'm Colin.
- [81:49]
Charlie
And we are Block Space.