On The Brink with Castle Island - Weekly Roundup 06/05/26 (MSTR wobbles, Polymarket's MSTR market, Andrew Left convicted) (EP.723)

Episode Date: June 5, 2026

Matt and Nic are back for another week of news and deals. In this episode:  FIFA's World Cup ticketing scandal Andrew Yang is now a crypto and telecoms entrepreneur Are Strategy's woes responsible for the Bitcoin pullback? Will Saylor defend STRC or MSTR? What are Saylor's options here? Polymarket has another market resolution SNAFU How UMA could be used to exploit Polymarket BitMine considers a perpetual preferred security Google's quantum circuit is optimized by hobbyists Galaxy launches OTC trading for prediction markets Treasury sanctions Iran's largest digital asset exchanges Andrew Left of Citron research is convicted of securities fraud

Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only is an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees will be liquidated.

The federal government loans American International Group, AI, IG $85 billion. This is a different kind of market, and the Fed is a sleek. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called the Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. So I just went to my first baseball game in three. years. How was it? It's terrible. Red Sox were awful. It's actually an embarrassment to the city of Boston. So I was with a portfolio company at their summer outing and I left after the fifth inning. Red Sox gave up like seven runs in the first inning. It was embarrassing to watch. The baseball, I don't understand why they called America's pastime. I find it to be tremendously boring.

At least that's kind of exciting in a way. Yeah, I mean, there was a lot of runs being scored. Baltimore Orioles are awful, but they were crushing the Red Sox. The one baseball game I've been to in my life, I think I did one zero. Oh, was that the one that one? With you? Yeah, we went with our lawyer. Our lawyer. And then I remember you turned and you asked him, see that big green wall over there?

Does anyone ever hit it over? And he said, yes. That's absolute slander. I'm sorry. That's completely made up in slanderous. I know enough about baseball to know the answer to that question. Sometimes people do hit it over that big green monster. That's just a completely made up story.

And you've said it to a lot of people over the years to humiliate me. It's just not true. I have a very specific recall of that. It's like, hey, does anyone ever hit it over that wall? Absolutely false. Absolutely false. And also a very boring game. So that was it for me in baseball.

I think I'm all set on the Red Sox until they can actually put a good product on the field. It's actually really a problem. Now, you haven't changed your mind on the World Cup. The world. You're not planning on attending. I had like three or four Zoom calls this week that start with people talking about the World Cup as if I actually care about the World Cup. We operate in a global space, Matt, and it's the number on sport.

And you owe it to yourself to learn a bit about it. About soccer? Yeah. Yeah. About how it works. I can give you some talking points if you want. Okay. Yeah.

got i would say the thing about arsenal is they always try and walk it in you say that to someone okay but arsenal's not playing in the world cup i know that much that yeah actually a lot of people mix that up that's very that's a very astute observation if you want to sound smart i would just say france are probably your pick france or spain france okay and then say england on a skill level should you know should compete but they just don't have the psychological ability to win a game in the knockouts, they just say something like that. It's a good talking point. A lot of people asking me if I'm going to this upcoming conference,

a crypto conference in France. Like, no, I'm not a crazy person. Yeah, that's just death wish. There is a scandal with the World Cup. Have you followed it, though? No, what's that? So, BFA, I would say, is maybe the most corrupt organization on the planet,

possibly the number one. And they have been doing this artificial scarcity thing on the tickets. So they didn't unlock all the tickets in an effort to keep prices high. It's like some kind of like a crypto scheme that they're running. Oh, I heard about this. Yeah. They didn't sell the tickets. And now with like a week to go, they're unlocking huge tranches of tickets because they couldn't sell all them out.

Yeah. So the secondary market's getting crushed, right? I know some people up here that bought tickets thinking they would flip them and now they can't. Yeah. So, I mean, because it's like Curacao Ivory Coast is like $2,000. or price. It's like why? I mean, insane. So they tried to basically scam everyone with the tickets and it didn't work. All right. So that was talking soccer. Should we hop into the deals of the week? Yeah. First up, we have coin one. That's the South Korean crypto exchange. There is 106 million from

Oakex ventures and Korea investment and securities. Then it's Signal Plus, which is a crypto options exchange. There is $50 million from hashkey, block booster, and app works. Block booster, not to be confused with the video rental store. I've never heard of Blockbooster. Block booster. Then you have Wasabi Car that's a stablecoin powered card company. There is 10 million from Avenir Group and Vernal Capital. Key Rock, which is a digital asset trading company,

they're reportedly going to acquire block fills, the corporate entity. For $3.25 million, this is the crypto lender that declared bankruptcy three months ago. Helium Mobile. This is my headline of the week. Helium Mobile, this is a cell service provider built on top of the decentralized helium network, was acquired by Andrew Yang's Noble Mobile. Andrew Yang, the Andrew Yang. The presidential candidate, Andrew Yang.

That's right. So he is now a telecoms entrepreneur. I just found this out five minutes ago. So helium mobile, that's not the main part of helium, or is it? I mean, I think that's a substantial part of the business. right so why are they selling that i don't know but uh they have sold to noble mobile mobile and uh this is a real company and apparently i looked into it if you don't use your phone you got a you got a rebate really paid for not using your phone which is kind of like well kind of want to use your phone i don't

really get that andrew yang crypto entrepreneur all right next one up is in bed um this is a european payments company, they're required by OpenFX. OpenFX, we're an investor there, just fast-growing FX wholesale liquidity marketplace. So congrats to both teams there. Amber Data, a crypto market data company, was acquired by Kiko, another crypto market data company, really two of the longest tenured crypto data companies in the space. That's right. Then we have Variant, a crypto venture fund. They raised $222 million for their new So congrats to Jesse and team over at Variant. And Falcon X, the crypto prime broker, has confidentially filed an S-1 for a public offering

last week. All right. So let's get into the news of the week. I mean, big story is just the price of Bitcoin is just crashing right now. And a lot of people are saying it has to do with strategies. So what do you think? I think so. I think that's it.

Some people are saying it's a liquidity pullback thing. you know, people are trying to pre-fund their positions in the SpaceX IPO or Anthropic and Open AI. I also believe that to a certain extent. Yeah, I'd buy that. Kind of like how, you know, when a tsunami comes in the water pulls out first. But strategy has a lot to do with it, I think. I mean, they were basically the main buyer over the last few months of Bitcoin, especially with a stretch product. And they seem to have gotten them. themselves in trouble. I mean, stretch is trading at 95 cents on the dollar. I know it's not meant to be stapled to $1 or $100, whatever, but it's come off its par significantly. My strategy spent down

a lot of their cash reserve to retire, was it, convertible notes? Yeah. So maybe to set the table a little bit on that. So I think it was last week, they retired somewhere in the ballpark of $1.5 billion worth of the convertible notes that were due in three years. So they bought them back at a discount, but in doing so, they took, they took themselves from two years of cash runway to, I think, like four months. And then on Monday. To service the dividends. This is. Yeah, to service, when I talk about cash runaway, it's to service the dividends on stretch. And then on Monday, they sold 32 Bitcoin, which is not a lot, but 2.5 million. And that really jolted the market, I would say. That's their first sale since 2022. And of course, the story keeps changing. You know, it's,

well, we're not going to issue stock above a certain multiple of nav. Then they stopped doing that. They were meant to never sell Bitcoin. And now they sold a little bit. The idea was to inoculate the market. I don't fully understand the reasoning there. I think it was maybe to test how the market would react and it reacted very badly and Bitcoin is down to oh my goodness it's down to 63 as of today

peaked at about 82 5 early in May and the bottom as of yesterday was 61K so just a massive collapse in Bitcoin so do you think that micro strategy is selling as part of this? Or is this just people getting out of the way thinking that micro

strategy will be selling? Yeah, I think the whole game was just anticipating what strategy was doing and the market was front running their purchases. That was humming along nicely for a while. Then not only did they stop buying entirely, but they kind of started to position themselves as potentially net seller. On top of that, you have massive outflowers from the ETFs. Massive. And I think that might be a combination of, well, people have lost faith in micro strategy's ability to prolong their buying activity because, of course, the common equity is not trading far above par. And stretch is troubled and the dividend coverage is not there. But I think that might actually be more of the story around these big IPOs coming up. Yeah, I'm looking at the last few days.

So yesterday, minus $396 million in the ETFs. before minus 519, day before 483. I mean, massive outflows in the ETFs. I mean, if you're a large potential buyer of Bitcoin, why not just wait to see what strategy is gonna do? And I'm a little surprised that Sailor hasn't come out and explained himself a little bit more in terms of why did you retire down the converts

when you had three years to figure it out? Just killed your optionality. It's a little bit confusing. I mean, I think the ultimate problem here is just if you zoom all the way out, if you are going to offer someone a 10 or 11 or even 12% yield, and nothing that you hold is yielding anything close to that. So it's a Bitcoin yields nothing. There's no other real yielding instruments that they hold. That just can't be reconciled. No. I think it's very simple. So no matter how much financial engineering or trickery you do,

the equation doesn't balance at the end of the day. And even if, look, like, Bitcoin goes up, call it 5% a year, you're really just betting on their ability to issue new, either equity or debt to pay you that yield. So it never made a ton of sense to me in the first place. Yeah. I mean, I understand that appreciation can sort of bail them out. But the problem, I think, is every dollar of STRC issues,

as you'd set senior to MSTR. And in my opinion, every dollar of STRC subtracts more than a dollar from MSTR because it's a perpetual liability. And so why would you be an MSTR holder? Because if it trades above par, then it gets, then you get diluted. They issue more. And then at the same time, there's an increasing stack of STRC sitting on top of you. So I wonder about the psychology of MSTR holders And I just think, well, people aren't going to bid it up far beyond one XMNAV any longer

But that was the core engine that funds this whole thing And I just don't think that engine is firing anymore So what do you think Saylor does now? I mean, he's really depleted his cash I think it's like four months of cash right now to to service the preferred You can either kill the dividend on the preferred crushing the price of that what else do you do? Yeah, a couple options. So you can sacrifice STRC and just turtle up and just act like any other closed end fund would do

and just accept maybe you're going to trade it a discount for a while. He certainly could do that. Or he could sacrifice the common and keep STRC going. So he could raise the dividend, raise cash by issuing MSTR, destructively and keep STRC going and hope that that resets things and hope that Bitcoin rebounds. I suspect that he's going to try and protect STRC. Or he could sell Bitcoin, but then it gets pretty reflexive, right? I mean, that punctures the whole story.

One of the side effects of that sale was the polymarket controversy. Do you want to talk about that? Yeah. So from one crisis to the next, polymarket, man, what a mess. I mean, we've complained about UMA on this show before, I think. We have. UMA. So Polly Market Market Market Micro Strategy sells Bitcoin by May 31st.

That resolved to know. Even though they did. They did. So that resolved wrongly. The trouble was the information regarding the sale was filed with the SEC on June 1st after the market had closed. Yeah, it was filed on a Monday. So the information required to settle the market to a yes

was not in the public domain when it closed. And so it basically settled to know and they kept it like that. And they added a note actually. So they turned it into from initially it was kind of a occurrence market and they turned it into an announcement market. A lot of people felt that was deceptive because it had traded as high as 60 cents on the dollar. before it eventually settled to know.

It also ran through the Yuma market resolution process, which is very fraught. I mean, Yuma is a crazy way to decide if something happened or not. It's really insane that they do it this way. I looked into it. The total market cap of Yuma is $35 million as of today. So, and not every Yuma votes on every market. So it's plausible that if,

if you had single digit million dollars worth of Yuma, you can start to swing markets one way or the other. And now you look at the volumes of some of these contested markets. They're in the hundreds of millions, right? So now you get a big asymmetry where with a relatively small amount of money, you can swing a market potentially that yields you way more than the cost to get. I don't know if anyone's doing this. Sounds like an Avi Eisenberg strategy. It's like an Oracle attack.

basically. I think you can't rule it out that someone might be doing this. This is not the first market that had a contested resolution. I think the real problem here is actually not Yuma. It's the polymarket didn't specify the market very well. And then I went and looked at all the rules for all their competitors. Kalshi, CME, the interactive broker events market. Generally, they pre-specify a specific source, right, an authoritative source. And then they actually often add in latency so that you can collect the requisite data. So the market doesn't settle. It might expire, but the settlement is delayed. That's how you should have done it, of course. So I think polymarket needs to completely overhaul the settlement methodology here. I think

it's naive. And I don't think they have like lawyers riding the markets. Don't you think the UMA protocol being the back end of this is a historical relic of the Gensler administration where they just wanted to say, hey, we're decentralized and we don't actually operate this as a market, so don't come after us. And the real way to do this would be to just have someone at polymarket arbitrating these markets. 100%. They should just have a team of lawyers that all day looks to codify markets appropriately and then subtle markets. That should be an internal function. That's how Kalshi does it. They don't outsource it to anyone.

And I think, yeah, it was pretty well intention at the beginning, Polymarket, the on-chain element, the fact that there was this third-party Oracle, also on-chain, token-based, that was elegant for what they were trying to do initially, which was to operate largely outside the bounds of U.S. regulation. But now they've come unsure.

Right. You know, they're the Polymarket U.S. and it is officially regulated by the CFTC. The market where this happened is the offshore market. But I think the UMA thing outsourced resolution is a total anachronism. I think they need to bring the whole thing in-house. So in other news, somewhat related to strategy here, Tom Lee's bitmine, which is the Ethereum dat,

they had $53 million in purchases of ETH this week. They're coming out with their own version of SGRC. It's a 9.5% yielding perpetual preferred. So he's just kind of run in the same playbook as Sailor. Hopefully he doesn't get himself in trouble in the same way Sailor did. Kind of a weird week to do that. Yeah, tough time to announce this one. Maybe slightly easier to operationalize with ETH as the underlying asset.

Well, they've yield embedded maybe. You could sort of argue that maybe ETH itself has yield or maybe you can go and find ways to get yield using ETH, but it does suffer from the same fundamental problem. I mean, ETH itself is never going to pay 10%. I think Sailor is going to be on the podcast circuit here the next couple weeks? I don't know. I mean, he's going to have to do something to restore market confidence.

People are really wondering if the jig is up here. I mean, so you get a Bitcoin sell-off. You have this huge question on strategy. So they're one of the, one of if not the largest current market participants in terms of their total Bitcoin holdings. Then I think you're right that you have this kind of rotation trade going on right now where just liquidity is getting sucked out of other places into SpaceX, Anthropic, OpenAI, IPOs. The other thing you have is quantum. Do you want to talk a little bit about what happened this week on the quantum side? Yeah, there was an interesting public challenge, which was aimed at rendering Google's results.

more efficient to basically compress Google's result into as few cubits and T gates as possible. And people were able to use AI models to make Google's own result much more efficient. That doesn't mean that, you know, you can use a quantum computer to break Bitcoin. But it does mean that the target, the difficulty of breaking ECDSA, provided you had a scaled quantum computer, the target continues to get lower. So meanwhile, the quantum stocks are doing well, Continuum, one of the top names in the industry, IPO today. So the stocks are trading as if, you know, a commercially relevant quantum computer is not that far away. It's kind of crazy. So we're talking about two university students with AI agents that almost, almost reverse engineered this

Google paper, right? Not fully, but it's pretty insane to me that you have people that are not from the domain necessarily, but we're able to leverage AI in order to actually get pretty close to what these Google researchers did. Yeah, I mean, at this point, the state of the art, the website is ECDSA.fail. The state of the art is lower and more efficient than the Google result officially. Why? So when I, you know, when I started to get concerned about quantum, one of my hypotheses was AI is going to accelerate quantum development. It's already solving major unsolved math problems. Building a quantum computer is a math problem. And this is clear evidence that that's happening. And this is where Bitcoin being a decentralized project kind of hurts it, right? Because

if this was a corporate setting, you would say, okay, look, we need to get out there with some PR. Here's our game plan on updating to post-quantum cryptography. But we're just not never going to have that in bitcoin land but in ethereum land you are seeing that yeah and i think you'll start to see even more major firms and even governments revising their deadline closer to 2029 2030 yeah just give it an update um all right let's talk about the clarity act so this week the senate uh basically rejiggered the calendar a little bit and We've cleared the committee stage by a 15 to 9 partisan vote a couple weeks ago. This is going to get on the calendar here.

I don't think we have a date yet. But the knives are out. I mean, so Jamie Diamond gave a interview last Friday. He had some very strong words against Brian Armstrong, said he was full of an expletive, which pretty aggressive to have publicly traded company going after another publicly traded CEO there. This drew some rebuttals from Senator Cynthia Lummis. So she went on, I think it was CNBC, said that Jimmy Diamond either hasn't read the bill or he deliberately wants to mislead people. Bank lobby. They're fighting hard here. Yeah. And the craziest thing is this happened with money

market funds and none of the critics' greatest fears came true there. No. And stable coins are not really that different. I mean, frankly, I think they're even less threatening than a money market fund because the yield cannot be passed through under current interpretation. So I really, really do not understand the fear here. Well, you get it from Jamie Diamond's perspective, because any yield is bad for them. I mean, they have to live in a world where banks have a monopoly on yield. And I just don't, I don't think they should. Also in regulation, Coinbase and Cal she began offering perpetual crypto futures to U.S. investors this week. That's the first time Perps are going to trade through domestic regulated venues following CFTC approval.

So that's good. I just don't think that they'll be as popular from a retail perspective as people think because you can't get the leverage onshore. All the action in the Perps market is offshore. The SEC has registered Paxos's settlement arm as a clearing agency, making Paxos's security settlement company the first blockchain native firm to win the designation and putting in the same category as the DTCC. Pretty good. I mean, these guys have been at it for a long time. You got to give Chad and everyone over at Paxos a lot of credit there. Galaxy has launched ODC trading for prediction markets. So this is kind of part of the institutionalization of prediction markets we thought would happen. So now hedge funds and family offices can take positions on Calcium polymarket contracts at sizes unavailable through the retail interfaces. So they opened with the $10 million trade for ARCA,

crypto-native hedge fund, tied to the passage of clarity. Don't you think it'll be interesting? I could almost see a structured products desk at a bank or maybe a crypto-native like Galaxy putting together packages for hedge funds saying, all right, this is the DemSweep basket. And there's five underlying prediction market contracts. Maybe you have some equities in there. But it's almost like a thematic way to play a macro theme.

Yeah, I think the challenge is going to be to, I think this product should exist. I think the challenge is actually to do the vetting and make sure the market's not going to resolve it in a weird way. So maybe that's why you would want there to be kind of institutions sitting between you and the prediction market. Well, I guess that's the question is do these kind of, are these based off of polymarket in Calci? Could we end up in a world where this is almost like a bilateral market where you're defining contract specs? probably not as efficient that way. But yeah, if you had some resolution entity that ultimately could clear and settle the trades on the back end, that could be interesting.

I noticed that Robin Hood went live with a rough era this week on some World Cup trading. So Robin Hood kind of moving away probably from Calci is kind of what I read into that. So there's an interesting piece of news this week, which is something we thought would happen. Surprise it hadn't happened yet. Treasury designated Nobodex, that's Iran's largest digital asset exchange, and three other Iranian digital asset exchanges. So they've been sanctioned, and it's weird that they weren't before. So we knew that there was a robust crypto exchange environment in Iran, specifically Nobidx. They hadn't been designated by Treasury previously. I have some theories as to why,

but now as part of Operation Economic Fury, it's called the Treasury has cracked down on them. So your theory is that the U.S. government wanted retail Iranians to be able to get out of their local currency and into dollars or into Bitcoin and Eath? Yeah, I thought Treasury was leaving this valve open to put pressure on the real. I guess the decision that was made ultimately was, well, this is benefiting the IRGC too much. because they too have access to these rails. I'll give you another theory is that the intelligence agencies were on the inside here

and had full visibility into a lot of bad guys and where they were from an IP location. So the, and it could have also been a honeypot type situation. Bessent this week suggested that they had seized

a billion dollars in crypto assets from Iran. We saw the $323 million seizure of Tether that means that there's another 600 million somewhere that they've also seized. So it could have been that they were just waiting to collect information, connect the on-chain dots to individuals, and then done a big seizure and also a designation of the exchanges. There's your strategic reserve right there.

Just keep on collecting. They keep on saying they're going to do something on strategic reserve here. They do keep rumoring that. I don't know what form it would take. That's Santetta. pretty fiery congressional testimony this week, huh? Yeah, he said that he, on the record, he said that he had threatened to kick Pulte's ass.

Oh, I didn't even see that. He had some choice remarks towards Senator Wyden this week as well. Coinbase has launched base MCP. This is a tool that lots AI agents on the base network conduct on-chain transactions like trading and lending. Interesting. Do you see Schwab came out? They said they're targeting a mid-2020

launch of crypto spot trading custody and transfers for RIAs. So Schwab is one of the largest RIA custodians out there. And this would be a very meaningful development, I think, for the institutional market to have RIAs on Schwab able to hold cryptocurrencies for their customers. A lot of these advisors don't make any money off of their customers right now that hold crypto. You know, they hold it away on Coinbase and other places. But to be able to bring that in-house,

think we'd probably open up SMAs, a bunch of stuff for Schwab. So it's a very smart move. Kind of surprised they haven't done it already. Yeah, late but welcome development. Did you see this Andrew left? He was actually convicted of securities fraud, one of the world's most prominent short sellers. Yeah.

So, I mean, it looks like some of these things weren't great, right? He was making some public statements that were definitely misleading, but like not all of them. He's facing 20 years for something that I think it was kind of a, that's kind of tough. I mean, definitely looks like he did some things wrong, but the jury came down against him. So this was, his firm was it Cetron Research? Citron Research, yeah. Yeah, so it seems that he was convicted on multiple counts of kind of using his Twitter feed,

frankly, to manipulate stocks. So he would say things like, oh, I'm going along this stock. It's a long-term hold, and then he would exit shortly thereafter. I mean, I guess you shouldn't do that, really. Yeah, that's not. So you shouldn't really lie. And then the same on the short side. It is a little concerning, though.

I mean, you have to balance a law with pragmatism, and if what he's doing is illegal, then basically everything I see on crypto-tweater and fin to it is legal also. For sure. And also, I think short-sellers serve a quite useful, purpose. Now, you still have to be truthful in your statements and things like that, but I think it's quite good for markets that short sellers exist. Yeah, I think it is quite good. Obviously, you need to be truthful and you can't be misleading and saying you're holding something when you're

dumping it. But I was really surprised at the length of that sentence. MasterCard visa and Stripe are reportedly among the backers of a sooner-launch stablecoin platform. This is CoinDusk's report. landed the same day MasterCard said they would add stablecoin options to their settlement network. That's interesting. It's going to be very curious to see what happens with that. There's a big play to be had there for sure. But MasterCard Visa and Stripe-Ball kind of getting on board with the same platform could drive some standardization.

Yeah, I mean, I think those are the three most important Web2 payments firms in the Stablecoin space right now. Yeah, I'm very interested. to see what that scheme looks like. Yeah, I think this is, a lot of people would look at stable coins and say this could drive a lot of disruption, but these guys are the ones that have the network effect already. And so if they get behind something, look out. Yep. All right.

I think that is it for the week. What do you foresee for the next week here in micro strategy and Bitcoin land? my best guess is that actually sailor tries to restore confidence in STRC and he's got a lot of levers he can pull you know and people always think and I've been guilty of this too that Sailor is going to you know finally face the music or whatever but he's always found a way to wriggle out of each jam he's found himself in and so I think he still has some things that you can do to restore confidence in STRC and I think since STRC really is the whole franchise right now

he is going to try and protect the peg there all right we will see everybody have a safe and healthy weekend and we will see on this