Tech Brew Ride Home - Thu. 03/23 – Coinbase Wells Notice

Episode Date: March 23, 2023

Coinbase got a Wells Notice, which is not good. Hindenburg research has a new note out and is making short run on Block, which is not good. Apple might expand its sports streaming and release more things in actual theaters. And the space startup that 3d prints its own rockets. Sponsors: Thuma.co/techmeme for a $25 credit Links: Coinbase warned by SEC of potential securities charges (CNBC) SEC charges Tron founder Justin Sun, celebrities Lindsay Lohan, Jake Paul with crypto violations (CNBC) Jack Dorsey’s Block Falls After Hindenburg Says It’s Short the Stock (Bloomberg) Hindenburg takes aim at Dorsey's payments firm Block; shares plunge (Reuters) Apple Considers Bidding for English Football Streaming Rights (Bloomberg) Apple to Spend $1 Billion a Year on Films to Break Into Cinemas (Bloomberg) Canva Launches ‘Magic’ AI Tools For Its Design Software’s 125 Million Users (Forbes) Chatbot Start-Up Character.AI Valued at $1 Billion in New Funding Round (NYTimes) Relativity Space’s first launch fails to reach orbit, but proves its 3D-printing rocket tech works (TechCrunch) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Thursday, March 23rd, 2023. I'm Brian McCullough today. Coinbase got a well's notice, which is not good. Hindenberg Research has a new note out and is making a short run on block, which is also not good. Apple might expand its sports streaming and release more things in actual theaters, and the space startup that 3D prints its own rockets.

Here's what you miss today in the world of tech. Huge news in CryptoLand. Coinbase says it received an SEC notice. warning the exchange of potential U.S. securities law violations that could lead to enforcement actions. The stock, of course, has plunged on this news, quoting CNBC. The Securities and Exchange Commission issued Crypto Exchange Coinbase a well's notice, warning the company that it identified potential violations of U.S. securities law. Coinbase shares fell nearly 12 percent in extended trading after the news broke on Wednesday, adding to an 8.16% drop during regular trading hours. Based on discussions with the staff, the company believes these potential enforcement actions would relate to aspects of

the company's spot market, staking service, Coinbase Earn, Coinbase Prime, and Coinbase Wallet. Coinbase said in a regulatory filing, the potential civil action may seek injunctive relief, disgorgement, and civil penalties, end quote. A Wells notice is typically one of the final steps before the SEC formally issues charges. It generally lays out the framework of the regulatory argument and offers the potentially accused an opportunity to rebut the SEC's claims. Coinbase described the investigation as cursory and said the Wells notice provided relatively little information about potential violations. Although we don't take this development lightly, we are very confident in the way we run our business. The same business we presented to the SEC

in order for us to become a public company in 2021. Coinbase chief legal officer Paul Grawall said in a blog post, the company said that until the resolution of any legal processes, the exchange's offerings would continue to operate as usual. Grwall said Coinbase is looking for more regulatory clarity. Tell us the rules and we will follow them, he said. Give us an actual path to register and we will register the parts of our business that need registering, end quote. This seems to be the regulator ramp up that folks have been talking about in the

crypto space actually hitting the ground running because also yesterday, it was announced that Lindsay Lohan, Jake Paul, among other celebrities, agreed to pay a combined $400,000 to settle SEC charges over promoting two different crypto projects without disclosing compensation, quoting CNBC. The Securities and Exchange Commission has unveiled fraud and unregistered securities charges against crypto founder and Grenadian diplomat Justin Sun, alongside separate violations against the celebrity backers of his tronics and BitTorrent crypto assets, which included Jake Paul, Lindsay Lohan, and Solja Boy. The SEC alleged that Sun engaged in fraud

by manipulating the trading activity of the two tokens, creating the appearance of active trading when it did not exist. The unregistered offer and sale charges, on the other hand, are similar to charges the SEC has unveiled against other crypto offerings and exchanges, including Genesis, Gemini, and Du Kwan's Terraform Labs. Sun allegedly induced investors to purchase TRX and BTT tokens by, quote, orchestrating a promotional campaign in which he and his celebrity promoters hid the fact that the celebrities were paid for their tweet, Gensler said, in a a statement. Those celebrity backers would promote the TRX and BTT tokens on social media and recruited others to Tron-affiliated Telegram and Discord channels. Tron and his backers' alleged

behavior was part of a, quote, age-old playbook to mislead and harm investors. S.C. enforcement chief Garbir Grewell said in a statement, end quote. By the way, it's just coming across the transom right now that Du Kwan might actually have been arrested this morning in, I believe, Montenegro, but I don't have confirmation of that yet. So just noting in case that pans out. Entirely unrelated to that, this morning in pre-market trading, shares of block, which you probably better know as square, dropped more than 20% after Hindenberg Research disclosed a short position in the stock and released a paper and memo alleging the company overstated user counts and understated customer acquisition costs. You might recall Hindenberg as the firm that recently alleged

fraud at the Adani group, that huge Indian conglomerate. I think we talked about that. I'm not sure, though, quoting Bloomberg. Hindenberg published its report after a two-year investigation. The firm run by Nathan Anderson said in a report published on its website and distributed via Twitter. The firm in January triggered a sell-off in shares of billionaire Gautum Adani's companies with allegations of accounting fraud and stock manipulation. Hindenberg's report on electric vehicle maker Nicola in September 2020, sent that stock plunging and led to criminal charges against the company's founder Trevor Milton. He was convicted in October of defrauding investors, end quote. And quoting Reuters, our two-year investigation

has concluded that Block has systematically taken advantage of the demographics it claims to be helping, the shortseller said in a note published on its website. The U.S. shortseller behind a market route of over $100 billion in India's Adani Group said in its report that former block employees estimated that 40 to 75% of accounts they reviewed were fake, involved fraud, or were additional accounts tied to a single individual. Hindenberg added that block, quote, obfuscates how many individuals are on the cash app platform by reporting misleading, transacting active metrics filled with fake and duplicate accounts, end quote. Sources are telling Bloomberg that Apple is considering bidding for the streaming rights to a range

of English soccer games, including showing Premier League games in the UK. That year of sports for the streaming wars really has been panning out, quoting Bloomberg. The rights under consideration would allow Apple to show Premier League games in the UK, as well as lower league matches run by the English Football League, said two of the people who asked not to be identified because the deliberations are private. Such a move would build on Apple's recent expansion into live sports in the U.S., where it forged a $2.5 billion-ten-year deal with Major League soccer to show games on its TV Plus platform.

The company also streams Major League Baseball on Friday and night, and one of the streaming services most popular TV series, Ted Lasso, follows a fictional Premier League team coached by an American. Pushing into English football would pit Apple against entrenched media companies such as Comcast's Sky and Warner Brothers Discovery, which last year agreed to a joint venture with BT Sport. It could also throw down the gauntlet with Amazon, which has become a force in streaming European football. Apple has enlisted sports media veterans Jim D. Lorenzo and Frank Udo in building its streaming platform, and they will, quote, know the value that international football can bring to the system, said Peter Hutton, who previously served as a media partnerships executive at Meta.

Offering the games may be a more effective way to attract viewers overseas than other fare, he said. Apple will be looking closely at their early data on MLS and MLB experiments, but the unique ability of sport to change a predefined audience's behavior means it's a safer bet than entertainment content to grow the Apple TV international market, said Hutton, who's also the former head of the Eurosport, network. The EFL is offering the rights to seasons starting in 2024. The Premier League has a deal with Sky, BT Sport, and Amazon for live games that runs through the 2024-2020 season. The Premier League sold domestic rights for 2022 to 2025 for $6.3 billion, end quote. And in a separate piece,

Bloomberg is also reporting that Apple plans to spend $1 billion a year to produce movies for large-scale theatrical release, not streaming. Well, eventually streaming. But first, theatrical release, a big increase in spending in this area from years past, and this is all, again, to seek to grow awareness of TV Plus. Quote, Apple has approached movie studios about partnering to release a few titles in theaters this year and a slate of more films in the future, said the people who ask not to be identified because the plans are private. The list of potential releases includes Martin Scorsese's Killers of the Flower Moon, which stars Leonardo DiCaprio, the spy thriller Argyle from director Matthew

Vaughan and Napoleon, Ridley Scott's drama about the French Conqueror, a spokesperson for Apple declined to comment. Most of Apple's previous original movies have either been exclusive to the streaming service or released in a limited number of theaters. The company has pledged to put movies in thousands of theaters for at least a month, said the people, though it hasn't finalized any plans. While Apple has agreed to theatrical releases in order to please talent and out-maneuver competitors for projects, the company also views theaters as a way to build awareness for its TV-plus streaming service. If the company is going to spend hundreds of millions of dollars on a Scorsese movie, it wants to turn that into a cultural event. Apple TV Plus is estimated to have between 20 million and

40 million subscribers fewer than rivals such as Netflix and Disney Plus. Apple still hasn't figured out how it will distribute these movies in theaters. The company doesn't have the expertise internationally to release movies in thousands of cinemas worldwide at once, which is why it has approached third-party distributors. But first, Apple needs to come to terms on distribution fees and marketing budgets with potential partners. Movie studios can spend $100 million or more to market their biggest titles, far more than streaming services spend on promoting new shows or movies, end quote. Among the folks who should be nervous about the rise of generative AI, Canva. They've built an empire out of making it easy for folks to create visual documents largely through making templates

easy to edit and manipulate, right? Well, all this generative stuff pretty much obviates the need for templates. It's a completely new computing paradigm where you can just say things and they get created. So, no surprise that Canva has debuted AI-based tools, including magic design that makes personalized templates from images and magic presentation that creates slideshows from prompts, quoting Forbes. More than 125 million people now use Canva's design software tools each month, up 35 million in the past six months. Back then, Canva launched a product overhaul to help evolve it from a software tool for graphic designers to a more wide-ranging, work-team-friendly suite of tools, including collaborative documents, virtual whiteboards, and website creation.

Now the company is announcing a range of additional products for business brands and the topic of the day, artificial intelligence. At a Thursday event in Sydney that Canva expected to live stream to a million remote viewers, the company announced a range of AI features under the magic name, including Magic Design, which allows people to create personalized design templates from an image or style, magic presentation, which can create a slideshow style presentation from a prompt, and Magic Write, a copywriting tool. Canva users can also use its AI software to identify places in images or add or remove elements with a couple of clicks, as well as for translation into additional languages. Founded by Australians, Melanie Perkins, her husband Cliff Obrecht

and Cameron Adams in 2012, Canva gradually grew from overlooked Australian upstarts to a global phenomenon, with Perkins appearing on the cover of Forbes in December 2019. After raising funding at a lofty $40 billion valuation in September 2021, Perkins and Obrecht pledged to give the vast majority of their personal wealth to Canvas Foundation, the company's valuation was later cut to about $25 billion by some investors in the tech market's poolback. Since its peak valuation was announced, the company has more than doubled monthly users, it said. After taking five years to reach 10 million users, it added the same total in the past 30 days. Annualized revenue now stands at $1.6 billion up from $1 billion to close 2021.

Canva has been working broadly on AI tools since 2019, Perkins said, when it started working with Austrian startup, Collido AI on Drag and Drop background removal from videos and images. It acquired Collido the following year and announced the move in early 2021. To build its magic tools, Canva's own in-house AI team worked with foundational models from Open AI and Stable diffusion and also trained its own, Perkins said. Ask what Canva's increasing automation and AI tools will mean for the graphic designers and other creative professionals who use its software. Perkins was optimistic that such tools will allow them to spend less time on mundane, repetitive tasks, such as swapping out logos. I think brands are going to start asking for different things

from agencies and different things from a graphic designer, she said, end quote. Quick note that chatbot startup character AI raised $150 million led by A16Z at a $1 billion. valuation after a $43 million seed round just this past December. And Character AI plans to raise more from what they're calling strategic partners, quoting the New York Times. The new funding round in Character AI, which is based in Palo Alto, California, was led by Andreessen Horowitz, one of Silicon Valley's best-known venture capital firms. In December 2021, the company raised $43 million in seed funding, while at Google, Character AI's founders, Nome Chazir and Daniel DeFritas led a team that built a technology called Lambda, short for a language model for dialogue applications.

The chatbot project gained attention last summer when a Google engineer, Blake Le Moyne, told the Washington Post that he believed Lambda was sentient. Mr. Shazir said in an interview that Character AI would soon raise additional funds from one or more strategic partners. That could mean taking investments from cloud computing companies and using the money to buy computing power from those companies, end quote. Again, I think I've said this before, but remember two or three years ago when we report news on a company raising a huge round and then turn around and report on another huge round less than

one year later. Yeah, well, the dream of 2021 is alive in the AI space and pretty much only in the AI space at the moment. Finally, today I wanted to clue you in to a player in the space tech space that you might not be aware of. Relativity space, quoting from TechCrunch. Relativity space achieved a massively important milestone at just before 11.30 p.m. Eastern time on Wednesday, with the first ever flight of its 3D printed rocket technology. Its Terran 1 rocket took off from Cape Canaveral in Florida, successfully clearing the pad and launch structure and achieving max queue, or the point during the launch sequence at which the vehicle is under the most pressure in terms of atmospheric resistance and stress, and also succeeded at cutting off its main engines

and separating its first stage as intended. The launch did not reach orbit, which is an extremely rare thing to happen on a new space launch platform's first ever flight anyway. Relativity said during the launch that they encountered an anomaly with the second stage engines after main engine cutoff and stage separation that meant Taryn 1 didn't continue on its intended path to low Earth orbit. This test launch did not include a payload or faring, but instead carried a demonstration weight in the form of an early 3D printed part from the company's rocket development process. Relativity's space's first launch should definitely be counted as a success, with the company proving that its 3D-printed rocket body can withstand the extreme forces at play during that crucial

max-Q period. Basically, MaxQ is the part of any launch when everyone in mission control holds their breath because it's the point at which the odds are most stacked against the rocket surviving the various arrayed forces of physics. Tim Ellis and Jordan Noon founded relativity space in 2015, and the company has been iterating and scaling its 3D printing tech ever since, expanding to larger and larger manufacturing facilities. The company announced a 1 million square foot rocket factory in 2021, where it intended to build its larger capacity, Terran R rocket, the bigger sibling to the small payload Terran 1 that launched on Tuesday, end quote. Nothing for you today, but since I discussed Hamilton yesterday, here are the lyrics from that show

that I chant every time I pown my college friends when we're playing Fortnite or Mario Kart online. Usually when I break a streak of theirs or something, never going to be president now, Never going to be president now. That's one less thing to worry about. Talk to you tomorrow.