GSR reduced investment
Overstock and their subsidiary, tZERO, broke the news today, that their long pending deal with GSR Capital has been downsized.
Some readers may recognize the name, GSR Capital, as they are also the ones that turned to tZERO for the tokenization of cobalt. Beyond this, the duo made waves over the past few months, as GSR was expected to make a $404 million investment in tZERO.
Unfortunately, this deal never materialized. While the announcement was made in mid-2018, the deal was supposed to occur in the fall. This was then delayed, as a third party was to come on-board. Fast-forward to today, and the deal has now been downsized, with an expected completion date of April 2019.
This downsizing will see the $404 million slashed down to $100 million. To ensure the eventual completion of the deal, each of the involved parties have signed a memorandum of understanding, outlining the deal.
GSR Capital will not solely provide the $100 million investment. The third party involved has now been identified as Makara Capital.
Makara Capital is an investment firm with pre-existing close ties to GSR Capital.
Why Go Through The Trouble?
Beyond the obvious appeal of the funds involved, there is more to this deal than simple financial allures. Each of these investment companies has sturdy footing within Asian markets. As tZERO continues its global expansion plans, strategic partnerships such as the one described here today will be key.
“The previously-announced GSR equity investment in Overstock and tZERO has not been completed. However, we remain in discussions with GSR Capital and Makara Capital, a key partner of GSR Capital, regarding a potential transaction. Both have recently signed an MOU with tZERO outlining a transaction in which Makara and GSR would co-lead an investment of up to $100 million in tZERO common stock and close the transaction in April subject to due diligence, negotiation of binding contracts and regulatory approval. The investors would also assist with tZERO’s expansion in Asia and other regions of the world and link them with other key partners from their portfolios.
Following the recent successful launch of tZERO’s new security token trading technology, we are excited by the emerging partnerships and business opportunities in front of us. More information on Overstock’s retail and blockchain properties will be shared within our upcoming 2018 FY Earnings reporting. I urge you to join us for that discussion of our business at a time and date to be announced soon.”
For those that may be surprised by the statement above: don’t be. When the first delay occurred in this investment, Patrick Byrne issued warnings to ‘not count your chickens before they hatch’.
At the time, he stated,
“Despite our concerns (which no doubt you share), we have decided to grant GSR the time requested to onboard this additional partner (who we think will in fact be a highly valuable participant in the ecosystem). Additionally, in a display of commitment to our partnership, GSR has signed a retainer agreement with tZERO to ensure the cobalt offering is not delayed by this extension on the GSR investment. While we are appreciative of GSR’s commitment and excited about the opportunity in cobalt offering, we do acknowledge to you our shareholders that one should not assume the arrival of GSR’s investment until it arrives.”
GSR Capital founder, Sonny Wu, created the company in 2004. Operations are currently based out of Hong Kong, China.
To date, GSR has shown great interest in the blockchain industry at large. Despite this hiccup, it is expected that they will remain active in blockchain investments.
As an independent company, Makara Capital was formed in 2008. Since then, this investment firm has gone on to see great success, with various global hubs.
Company headquarters are situated in Singapore, where Makara Capital is regulated by the Monetary Authority of Singapore.
A young company, tZERO is the brainchild of Patrick Byrne – founder of overstock.com. tZERO has caught the attention of many in the burgeoning digital securities sector. They have done so, to date, through impressive execution of their roadmap. The most recent large milestone was the launch of their digital securities trading platform.
In Other News
To learn more about the companies and deals discussed here today, check out a few of the articles below.
DX.Exchange Ceases Operations while Looking for Merger/Sale
DX.Exchange Shuts Down
In a surprise move, DX.Exchange has announced that they are immediately ceasing operations. While customers will remain able to withdraw funds, they indicate that all trading and deposits will be halted.
For a company that endured quite an arduous journey to established what they have, this is a disheartening development to see a unique exchange shutter before the digital securities sector even takes off.
Permanent or Temporary?
While the ceasing of operations is immediate, it does not necessarily mean that the exchange is gone forever. DX.Exchange has indicated that they are actively looking to, either sell the company, or facilitate a merger.
While this would be a best-case scenario at this point, there remains a real possibility that DX.Exchange will not open their doors again. With this possibility remaining, the DX.Exchange team has indicated that they are ready to take the appropriate steps necessary, should permanent closure be the final outcome.
A Unique Approach
The exchange caught the attention of many when they first launched, due to their unique approach towards digital securities. Rather than supporting simple security tokens, the team at DX.Exchange decided to tokenize publically traded securities. While this approach drew criticisms from many, it was a unique one that opened doors to new forms of investment.
Hurdles and Scares
This development shouldn’t come as a huge surprise, as the exchange has consistently dealt with various hurdles and scares, in their short time. Examples of this include a delayed launch, compromised security, liquidity issues, and more.
Over the course of their short time being in operations, we have detailed a few of these issues.
The team at the exchange made the announcement of their closure through their blog on Nov. 3, 2019. In this statement the team had the following to say on the matter.
“We must inform the community that the board of directors of DX.Exchange has decided to temporarily close the exchange as we pursue a merger or outright sell of the company…The costs of providing the required level of security, support and technology is not economically feasible on our own…The board believes this is the best opportunity for DX.Exchange to achieve success for its shareholders and compete in this challenging market. In the event a merger or sell is not completed in a timely matter then the exchange may not resume operations and take appropriate action.”
Founded in 2018, DX.Exchange is an Estonian based cryptocurrency exchange. The exchange operates under the oversight of the Estonian Financial Intelligence unit, while utilizing technology developed and provided by NASDAQ.
CEO, Daniel Skowronski, currently oversees company operations.
UBS Managing Director Oi Yee Choo Becomes iSTOX CCO
This week, the Singapore-based digital securities exchange iSTOX announced the appointment of Oi Yee Choo as the firm’s new Chief Commercial Officer (CCO). The maneuver follows the larger trend of tokenization platforms hiring from traditional financial institutions over the last year. Additionally, iSTOX gains significant stature with the decision as Choo garnishes much respect in the Singapore market.
Oi Yee Choo
Notably, Oi Yee Choo has over 20 years of experience in the region. Her accolades most recently include a stent as the Managing Director of UBS. Here, the talented Choo was responsible for the firm’s Singapore investment strategy.
It’s precisely this experience that makes Choo the perfect fit for the iSTOX platform. Importantly, the firm recently became a part of the Monetary Authority of Singapore‘s (MAS) Fintech Regulatory Sandbox. The MAS sandbox allows Fintech Companies to test innovative financial products and concepts in a safe and more efficient manner.
Oi Yee Choo
Discussing the decision to join iSTOX, Choo explained the inevitability of a shift in the financial markets. She took a moment to speak on the pro-blockchain stance of Singapore, and why iSTOX’s positioning in the space makes them uniquely prepared for the upcoming digital revolution.
Oi Yee Choo – A Deep Understanding of the Market
Additionally, iSTOX Co-Founder, Darius Liu shed some light on the firm’s next moves after the appointment. He explained that the company needed someone with the reputation and experience of Choo. iSTOX needed an individual with a deep understanding of the nuances of the Singapore securities market.
Also, the company wanted someone with relationships across Singapore’s financial networks. Choo provided all of these features. Liu went on to say that Choo possessed all of these traits, plus she has a deep institutional understanding of the challenges faced by issuers and investors.
The iSTOX digital exchange utilizes cutting edge technology, such as blockchain, to streamline the issuance, trading, and management of digital securities. The company is at the forefront of the tokenization sector in the region.
Series A Funding
As previously reported, iSTOX completed Series A funding earlier in the month. Importantly, company officials decided it was a smart strategy to not disclose the amounts of funds invested publicly. However, the company did acknowledge that the Kiatnakin Phatra Financial Group (KKP) was the only investor needed to meet the company’s crowdfunding goals.
iSTOX – First Regulated Exchange for Digital Securities in Asia
iSTOX seeks to be the first regulated digital securities exchange in Asia. As such, the firm would hold tremendous power in future market developments in the region. As part of this strategy, iSTOX developers want to create an all-inclusive blockchain ecosystem.
iSTOX – Moving Forward
iSTOX continues to make headlines for its pro-regulatory stance in the market. The firm is set to be a major player in the Singapore securities sector moving forward. There is no doubt that Choo’s two decades of experience and network will play a critical role in the company’s future.
Poloniex Branches out from Circle as ‘Polo Digital Assets’
Unfortunately, and unsurprising as Poloniex is U.S. based, the exchange’s customer base within the States will see future access to their services revoked. While this is unfortunate, it is a necessary stance being taken by such companies, due to the regulatory climate within the U.S., to date.
While not nation-wide, rival exchange, Bittrex, recently restricted access to their services for customers living in the state of New York. With the exiting of both of these exchanges from U.S. markets, there now remains a woefully thin selection of North American based exchanges for crypto enthusiasts to trade on.
While U.S. based customers may be losing access to services, this move actually represents an expansion of services for Poloniex, themselves, as they will now focus on global dominance.
Circle has indicated that an outside investment group has already earmarked $100M for infusion into services provided by Poloniex.
The team at Poloniex released a statement of their own, separate from Circle, elaborating on their future intentions. In an effort to bring an air of positivity and reassurance around the announcement, the team stated,
“Going forward, we have a multiyear plan to spend more than $100M to develop and expand Poloniex, and we are very excited to continue working with the amazing global community of Poloniex customers. The cryptocurrency revolution has just begun, and we’re in it for the long haul.”
There have been reports that the outside investment group, which is based out of Asia, is being led by TRON founder Justin Sun. This, however, has not been confirmed at this time, and is just conjecture.
While the driving factors (U.S. regulatory compliance) resulting in the development discussed here today are known issues, the move remained a surprise, due to the timing.
Poloniex was acquired by Circle in a high-profile move, a mere 18 months ago. This acquisition came in to the tune of $440M. While Circle did, indeed, help Poloniex expand services and rebuild a tarnished reputation, most expected a longer time frame of ownership for such an acquisition.
Despite the change of plans, Circle has not wavered in their belief of digital securities. Many believe that the initial intent of the purchase was to see Poloniex act as a secondary market, supporting digital securities distributed through the SeedInvest platform.
Change of Plans
While their approach to the sector may have changed, Circle is still eyeing digital securities as the future, and has indicated that their efforts, moving forward, will be more focused on SeedInvest.
Circle indicates that the following points of interest will also see a ramp up in development as the company looks to develop real-world use cases.
As one of the most successful crowdfunding platforms in the U.S., SeedInvest has the potential to provide Circle with an effective inroads to establishing themselves within digital securities sector.
The platform, which was acquired by Circle in early 2019, has helped a plethora of companies generate crucial funding, to date. Circle indicates that it is their goal to eliminate the divide between traditional finance and blockchain. By marrying the two, they hope to democratize investing, by opening new opportunities to investors of any ilk.
Upon making their announcement, a joint statement was released by Circle Cofounders, Jeremy Allaire and Sean Neville. This statement addressed the rationality behind this move, and how it will help Poloniex mature.
“In an effort to create a competitive internationally-focused cryptocurrency exchange, the Poloniex team and leadership are spinning out from Circle into a new independent international company, Polo Digital Assets, Ltd. Backed by an Asian investment group, the spin-out will bring significant resources and freedom to deliver the product features and marketing strategies needed to be competitive.”
The pair elaborated on their plans moving forward, and the role that SeedInvest will play in them.
“Earlier this year we completed the acquisition of SeedInvest, the largest equity crowdfunding platform in the United States, and have helped hundreds of companies raise hundreds of millions of dollars with internet-based securities offerings. Our plan with this business is to transform how companies raise capital, and open up investment opportunities to people everywhere. We have been working hard to introduce new services built on SeedInvest that allow for fundraising using tokens and digital assets, marrying traditional financial contracts and assets with crypto.”
Operating out of Delaware, Poloniex is a popular cryptocurrency exchange, which was founded in 2014.
CEO, Tristan D’Agosta, currently oversees company operations.
Circle is a Boston based company, which was founded in 2013. Above all, the team behind Circle is working towards developing a transparent and globally accessible financial system.
CEO, Jeremy Allaire, currently oversees company operations.