The Wolf Of All Streets - Why The Largest Banks Want Your FTX Claims | Matt Sedigh Explains How Bankruptcy Market Works

Episode Date: February 5, 2023

XClaim is a marketplace that connects bankruptcy claim holders with potential buyers. They recently made the news when it was announced that FTX claims were trading at 13 cents on the dollar. In this episode, Matt Sedigh, founder of XClaim, explains how this market works, why claims will be tokenized, and who the biggest buyers of bankrupt crypto companies claims are. Matt Sedigh: https://www.linkedin.com/in/matinsedigh ►►NORD VPN An essential crypto product to protect your privacy and keep your crypto safe! Sign up on my link below & enjoy the benefits of NORD VPN from just $4 a month. 👉https://nordvpn.com/WolfOfAllStreets ►► JOIN THE FREE WOLF DEN NEWSLETTER https://thewolfden.substack.com/ GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget Follow Scott Melker: Twitter: https://twitter.com/scottmelker Facebook: https://www.facebook.com/wolfofallstreets Web: https://www.thewolfofallstreets.io Spotify: https://spoti.fi/30N5FDe Apple podcast: https://apple.co/3FASB2c #Bitcoin #Crypto #Trading Timestamps: 0:00 Intro 0:52 What is Xclaim 1:58 Crypto bankruptcies 3:15 Business model 5:40 FTX case 7:00 Voyager 9:20 How people find out about Xclaim 10:40 Trading claims 13:18 How price of Bitcoin influences the price of the claims 17:30 Tokenizing claims 21:10 Distressed assets players 24:25 Crypto native funds trading claims 25:20 $35 billion of funds locked 26:00 Genesis claims 27:22 Lack of regulation 31:20 Fraud is still legal 34:50 Price discovery 35:55 Use cases for claims 37:26 Bankruptcy claims & tokenization 40:45 Is contagion over? 43:55 Claims business is huge 45:40 Wrap up The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

2022 was arguably the worst year in the history of crypto. People lost everything on platforms like FTX, Voyager, BlockFi, Celsius, and now even Genesis going into Chapter 11 bankruptcy. Now, these cases can take years to play out, but there is a way to immediately monetize your claim. You can buy and sell on platforms like Xclaim. Today, I spoke with Matt Sadiq, the CEO and founder of Xclaim, which was not actually created specifically for crypto bankruptcy claims. Bankruptcy claims have been traded for years,

but they've seen a massive, massive inflow of business as a result of the contagion in the crypto market. You don't want to miss this conversation. So where does the idea for something like Xclaim come from? I spent my entire career in this industry. I've been here for about 20 years in all different sides of it, the legal side, the trading side, the advisory side, and just saw this market from all these different angles and saw that it's a very inefficient and opaque market, but there's a ton of value that's being left on the table. Cullen Rochefoucault Cullen Rochefoucault

And people don't really understand how easy it is to liquidate that value and turn it into cash. Most people don't want to be caught up in bankruptcy court. And I think it's just the better mousetrap idea, right? This is just a better way to do it. And I believe it's inevitable. I think that most markets are going to become, or maybe all markets are going to become electronic. And this was one that was surviving on paper for forever. And we started working on it almost five years ago. And it's really just taken off in the last few months on the back of the crypto bankruptcies. So this isn't just for crypto.

It's for basically everything. And you've had this major acceleration because effectively every platforming crypto that was consumer facing has collapsed. That's exactly right. We actually, obviously, five years ago, when the idea was born, we had no idea that the crypto winter was coming. This was a general bankruptcy claims platform for any type of bankruptcy in the world for their creditors to transact their claim to get cash. But I mean, admittedly, we actually struggled to get off the ground because one, COVID created so much stimulus that nobody was going bankrupt. But two, it's just a really hard market to crack into

when you have these entrenched players there for decades. But crypto presented a very compelling opportunity for us to make a pivot and it's been wildly successful. And we've been able to help a ton of crypto account holders cash out and recover value, otherwise than waiting years for the bankruptcy to play out. Trey Lockerbie So we all know who's on one side of this trade, obviously, all the creditors and they make up the sellers. Who are the buyers?

The buyers are hedge funds, banks, institutional investors. In crypto particularly, we've seen a lot of retail investors come in. People that are true crypto bulls have come into this market and look at it as an opportunity to buy crypto at a discount. That's an investment strategy that some people want to employ, and we're a marketplace where risk is being traded effectively. You've got buyers and sellers on both sides making a decision on would they rather take the cash now or wait for an uncertain amount of time for an uncertain recovery? Robert Leonardus And how does it operate? Does it look like a

centralized order book on an exchange that anyone's familiar with? How are you matching the buyers and the sellers? How's the market being made? Nick Huberman So it's mostly, it's not an order book at this time. It's a marketplace. So I think we're more similar to an eBay for bankruptcy claims than we are an exchange at this stage. We have about $200 million worth of claims from five different bankruptcy cases listed on the platform. We've got about 400 buyers that are actively bidding on claims.

An account holder can receive bids from multiple account holders, from multiple buyers, and evaluate those bids and make a decision on if they want to counter or reject or if they want to accept it. There's diligence that occurs and we're matching buyers and sellers every day. And then there's also a brokerage component to this, which is some of our largest buyers want to be buying $100 million positions. And it's a lot easier to do that with one claim, one very large claim than it is small claim, but we're able to start packaging small claims into a position that a buyer can take down.

Robert Leonardus Makes perfect sense and is just really, really an interesting approach to, as you said, getting people liquidity. But do you find that the pricing is generally a, 17 cents, and that the market was expecting three to five cents. I would say there's more optimism as they find more assets at this point. But where do you think it's being priced for the risk? So there are several components that go into that analysis. It's not just as simple as what are the assets and what are the liabilities? Bankruptcy is in court. So you're dealing with a judge. And as most Celsius creditors would say today, they don't like the judge very much. He's taking time, making decisions. And there's really no reasonable expectation to say, I'm going to get my money back next month or even next year. It could take years. You know, people talk about FTX as an analog to the Madoff bankruptcy. And Madoff was 2008 and claims are still being paid off. So, you know, I would put money on the fact that FTX creditors are not going to see their value recovered in the next few years.

It's going to take a very long time for this to play out. So the reason I bring that all up is you can do the assets versus liabilities analysis, but then you got to discount that recovery back X number of years and say, even if I expect to get 100 cents on the dollar eight years from now, it's worth 10 cents on the dollar today. Robert Leonard Right. The opportunity cost of what you could have done with that money over the next 10 years alone, obviously, is a massive consideration. And you kind of hinted to the idea that not all claims are created equal, right? I think there's a lot more pessimism around Celsius than most, as you alluded to. FTX is fraud. Then there's cases like Voyager, where it's pretty

straightforward as to what assets are there. Of course, you're continually spending money on advisors and lawyers the longer the bankruptcy proceeding goes on. But do you see that claims on something like Voyager, which I am a creditor of, are selling much higher? David Collum They're higher than the other cases right now. And that's partly because there's more clarity on what the assets are, but because there's also a plan. People know what's going to happen with Voyager, or at least they believe they know what's going to happen with Voyager. Preston Pysh We thought we did before, yeah. David Collum Exactly. Exactly. So,

you know, when FTX was the stock team horse bidder for Voyager, claims were trading as high as 40, 50 cents on the dollar. Voyager, four months ago, was trading as high as 40, 50 cents on the dollar. Right. And then FTX, the FTX deal blew up. Now Binance is in there. It's at a lower valuation, at a lower price, and the claims are trading at 30 cents on the dollar. So we hear often that these account holders don't want to sell for less than what it's worth. Nobody does. But the ones that sold out for 50 cents four months ago did really well. They did much better.

They can also go buy a claim for 30. Right, right. So this is a marketplace just like any other market. And Voyager, like you said, it's a sales case. So there's a pool of money out there that people know what is going to come in and how it's going to be distributed. Whereas all of these other cases, they're nowhere near that kind of understanding or expectation.

So the crypto thing obviously was a slam dunk kind of out of left field. How do you actually go get people interested in the platform, figure out who's going into bankruptcy, what kind of claims are out there and actually get them actively using xClaim? Nick Neuman , We're very fortunate that obviously crypto is a very high profile and newsworthy topic these days. So we are getting a lot of word of mouth and just viral marketing really of people understanding this. And as more people learn about bankruptcy and what to expect, there's more creditors that have a friend that say,

why waste cash out? It's much harder to know which company is going to file for bankruptcy next. I don't have a crystal ball and I don't know how it's going to play out. I don't think we're done. I think there's going to be more. I think that the contagion and the interconnectedness of all of these exchanges leads to more bankruptcies, for sure. And as that happens, the underlying confidence in the crypto industry is part of the consideration of what goes into whether you buy or sell. But it's a fascinating market to be a part of right now. Trey Lockerbie, So how does somebody actually vet the claim? How does that transfer actually happen? Because there's quite a bit of legalese and obviously management even of your own

claim as a creditor? So a claim is a legal assertion of your right to repayment. So anybody who's an account holder has a claim. And to assert it, you have to fill out a form. It's a government form. And you submit it to the bankruptcy court. And that is you standing up and saying, I'm owed money. As soon as you do that, it becomes a tradable asset. It's either the thing that's going to be figured out and reconciled over the next several years to who gets paid, or it's the thing that can be sold. Trading it is actually very simple. It's a one-page document. It's buyer buys from seller. And that one-page document is public. It gets filed with the court. It's a legal transfer of the right to repayment. And we try to remove as

much legalese out of it to make it as simple as possible for people who aren't lawyers and who don't want to spend the money on lawyers to figure out how to cash out quickly and easily. What percentage of claimants would you say are interested in selling at a discount and how many are sort of, you think, holding out as you talked to before hoping for the best case scenario in the actual procedure? That's a fun question. I would say 100% of people are hoping for the best case scenario. I would say 100% of people also want to know what their options are. And we are an alternative option. We allow you to market test the value of your claim, receive a bid, check what the value is, see what someone else is willing to pay for it. And if it's not good enough, don't sell it.

But the market is very fluid at this point. We have a lot of buyers and a lot of sellers coming to a fair market value price. The discount is, if a discount just means anything less than 100 cents on the dollar, well, unfortunately, you're in bankruptcy. There's just no way to avoid that at this point. And again, if it's going to take eight years to recover what it's worth, it's not worth 100 cents on the dollar and you shouldn't hold it expecting 100 cents on the dollar. There's obviously a ton of volatility to crypto, which means that there's a ton of volatility to these claims, right? So not only are you pricing it in this moment, you can be pricing it differently an hour from now or five hours

from now or 10 hours from now. So how do they actually determine the exact price, the timing, the execution? Because literally a 10% move in Bitcoin in a week could put your prognosis at 50 cents up to 60 cents on the dollar or something like that. And even by the time you agree, then it could dump another 10%. There is quite a lot of volatility and there is and there isn't. There's a ton of information. There's a ton of discussion around what's going on in the market. But the only true official information is coming out of the bankruptcy court, which is coming out of court hearings that people are having conversations in and disclosing information in um the price of bitcoin is a is a um is a potential uh modifier of the value of a claim and the reason i say that and i think this is really important for people to understand if you have a if you had an account with call it a hundred thousand dollars in it in in voyager

and um and voyager goes bankrupt and then bitcoin goes on a tear and doubled in value you will not get back two hundred thousand dollars oh no chance no i I mean, even if you're getting paid 100 cents on the dollar, even if it's full value payoff recovery, you're not getting the benefit of the appreciation in crypto. You're getting a maximum of what your account was worth. That's the value of your claim. And people don't understand that if you had to then buy back the crypto, you're getting much less in coin than you ever would be getting, obviously, in cash, which is where that happens. And I do think that a lot of people are confused by that. But basically, the price going up means that the entire pie grows in dollar value, and therefore you can get a larger dollar amount back

than you would have expected. But it takes a lot of mental gymnastics for people to realize that that means less and less coins, in theory, as the cash value goes up. That's exactly right. And we have people who have done those mental gymnastics and come to us and said, you know, if I sell it for 40 cents on the dollar right now, I can take that cash and put it back into the market and do better than I would have done if I just let it ride as a claim and maybe get 80 cents on the dollar back two years from now. Right. And that's the base case for the bullish scenario, as you said. That's someone who wants to trade crypto and is trying to find a unique way to do it. That's right. So is that what you're finding, is that most of these are people who are crypto traders or who have a thesis on what the future price will be?

And then this is a novel approach for them to maximize value. I would say it's roughly split down the middle of kind of bankruptcy, distressed debt generalists who are buying and then crypto bulls who are buying. Everyone wants to maximize value, of course, but the opportunity to buy something at a discount and recover more is attractive. Luke Gromen, And also keep in mind, from the perspective of the account holder, if they had something that was worth 100 cents on the dollar or $100,000, and they end up selling it for $40,000, it's a 60% loss. But if the guy who buys it for $40,000 ends up recovering $100,000, it's two and a half times gain. So that's the type of volatility and that's the type of analysis and that's the type of

motivation that differ between the buy side and the sell side and finding the middle ground i think that's the coolest part about this that's like the sweet spot that's where risk and reward converge and everybody agrees that like this is the fair market price and i i believe that's the the definition of any efficient market can we tokenize it yes is that something that's in the eye that's the definition of any efficient market. Robert Leonard Can we tokenize it? Nick Huber Yes. Robert Leonard Is that something that's in the eye? That's not the answer. This just seems like the most natural sort of usage of crypto at its very base level is you just tokenize the claim. You have a single asset that's transferred as an NFT or whatever format you want to do it in and you're done.

Nick Huber We're already working on it. This is a fantastic idea and we see a lot of value in it. If you do something like that, you're really taking away the legalese completely. You're taking away the diligence process completely because what we've done is we've commoditized an illiquid asset and allow it to trade freely, we see that as a way for this market to explode. Because it's not one-to-one trading in a marketplace, it's many-to-many trading in an exchange. Trey Lockerbie So effectively, the due diligence is done before the tokenization. So it's already vetted in the minute that it's already a token, you know that what you're getting is authentic and… Nick Huber That's right. That's right. And

the nice thing about having the token is we can actually package up pools of tokens, right? And then you have fractionalization of pools of tokens and it just goes as low, as wide as possible, and it's where you get the liquidity. Robert Leonard So you started this five years ago. Obviously, crypto somewhat became your killer use case to some degree by luck, obviously, right? The situation benefited you. Was the thought process on tokenization already happening or was it a result of seeing all of this opportunity in crypto? David Collum It was happening, although we were calling it something different.

We were calling it securitization. Yeah, securitization. Right. We were talking about taking claims and packaging them up and selling slices of claims, kind of like tranches as, you know, a senior secured piece or in a junior piece and a mezzanine piece. And why not do it that way. But crypto presents a different opportunity. They really are much more commodities to start with.

Each claim is basically the same. And the audience is familiar with tokenization. They're traders. They're traders by nature. So it's a much easier market for us to access. Robert Leonardus Yeah. Actually, I would probably argue that people who are crypto native and are interested by their nature in these claims would be more interested if they were tokenized because they're exactly the people who are familiar in trading these sort of assets through a decentralized platform or something similar. Nick Huber For sure.

For sure. You're trading. it's crypto derivative at that point. And if you can trade crypto derivative on a free exchange, there's a lot of value to be had there. Right. So the strategy of securitizing, I mean, that's nothing new, right? That how mortgages are bought and sold. That's how all, I guess, distressed debt and claims would be done. So this is just really a function of the tech and how you do it and how you transfer it. But it's not reinventing the wheel. It's not reinventing the wheel at all.

Securitization was the approach because most of our buy side were institutional investors. And they want to be buying a round lot, securitized product that there's good documentation and everything around. Crypto can be a tokenized product with not a security and trade freely with all the underlying portfolio behind it. It's the exact same thing under a different technology. Trey Lockerbie, So we talked about the buyers being somewhat of a split between just crypto bulls and then of course, institutions or whatever we call them that are interested in distressed debt in general. Are those crypto natives? Are we now seeing the bigger players that were buying distressed debt in other markets becoming interested

in crypto? Because we have this narrative of institutional adoption in crypto, and I'm hearing a huge buzz about distressed asset funds being raised by the largest hedge funds in the world to buy crypto assets. But a lot of that is miners and the actual companies, not the claims themselves. So who are those institutions? Who makes up that other half? Every global bank you've heard of, you've ever heard of. And they're buying crypto and they're buying distressed crypto. They're buying these crypto claims. Yes. Yes. I am. I am aware. I have seen a 500 million dollar FTX claim being shocked amongst the largest banks. It's a claim owned by a DAO.

And this is that's the type of claim that, you know, a Morgan Stanley can come into and say, I'm willing to write that check and and watch what happens because I believe there's value there. That's a claim a Goldman Sachs could write a check into. All of these banks have historically been claims trading. They've always had claims trading as part of their operation. Crypto presents a different opportunity. It's just a different industry, though. And ultimately, the banks don't really care about the industry. They care about the value that's possible to make, just like any investor. Right. Because once it's in Chapter 11, it ceases to be some unique asset class. It's just a Chapter 11 claim.

That's right. A Chapter 11 claim is actually not crypto. And it's not a security. It is a right to repayment. It's merely standing up and saying, I'm owed money. So selling a claim is who gets paid when that claim pays off. Trey Lockerbie, So Goldman and Morgan Stanley, they don't need a crypto native group or a new distressed asset fund. This is right within the framework of what they're already doing, exactly what they're already familiar with. There's nothing new here for them to man up to figure out how to do. It falls right into their existing framework.

It is a distressed asset like any other. The unique part of it is what is the underlying asset? Because if you believe that crypto will exist five years from now, then it's just some expectation of, well, is Bitcoin going to be worth this or this or what's the what's the range of likely outcomes? But you don't need to be a crypto bull or crypto bear. You just have to have kind of a realistic range of a bell curve of this is what's going to happen. And at that point, you're buying something at a discount because you believe it has value in the future. Now, are you seeing any crypto native distressed asset funds starting to participate or starting to be raised?

Or is that something you can't really tell? We have several crypto native distressed debt, crypto native hedge funds on the platform, buying, trading, and asking for the tokenized product we spoke of earlier. Trey Lockerbie, It's interesting because right before the FTX collapse, I spoke with a hedge fund and the guy who leads it, obviously, is in the news, is kind of in the leader on this. And they were offering 60 to 65 cents on a Voyager claim, which I quickly jumped on and FTX collapsed that night.

Ouch. I was like, I got the call from my friend and he said, I'm selling my claim. I just did it. You need to talk to them. And I said, you know, at that time they were pricing at 72 cents, according to the bankruptcy court. 65 sounded really good. Right. But to just show how volatile and quick this market can move, that was when it was FTX,

and FTX was still the darling of the industry. The market can move very quickly, as we've seen in the last few months. There are now five very large crypto exchanges in active bankruptcy court. We estimate that there's about 15 million crypto account holders between those five cases globally. And there's about $35 billion of funds tracked in those accounts. And they're sitting there until a judge rules otherwise. So the alternative is us. FTX, Voyager, Celsius, BlockFi, VAULT? Genesis.

I was going to ask, is Genesis on the list? So VAULT is not even on the list. Because there's obviously other ones, CoinFlex, VAULT, smaller platforms all over the place that have gone, but you're not seeing those claims. So the Genesis claims are somewhat new. I believe we are the first to trade a Genesis claim. We actually did. We traded a $4 million Genesis claim on the day it filed for bankruptcy between two institutions. Do you have any idea what the cents per dollar was on that

deal? 25 to 30 range. People are pretty pessimistic about these bankruptcy proceedings in the crypto space. Well, you know, we were speaking earlier about like what the distinction is between those five cases. So let's go through it. Voyager is a sale. Celsius is a nobody really knows. Nobody knows. That's a dice roll. We'll call that a dice roll.

FTX is fraud. Okay. BlockFi, nobody really knows. Genesis is litigation. So you say, what is the outcome of litigation between Genesis and Gemini? That's going to make a huge piece of the value of these cases be determined. And until you have an understanding of how these cases develop, that's where the volatility comes from. So you've been in this space for quite a while, as you said, before crypto. Do you find any of this shocking, what you've now seen and how fast the dominoes have fallen in the crypto space? I mean, you talk about BlockFi having the question mark. I mean, BlockFi about BlockFi having the question mark. I mean, BlockFi, I've sort of likened to Neo

and the Matrix dodging bullets for the last three or four years, like just magically somehow going past them. But I mean, they took a bailout from FTX and seems like maybe they gave that money right back to Alameda, which then lost it in the same hole, the washing machine circular effect there.

I mean, as someone who is not crypto native or maybe tracking this market, do you just shake your head? A little bit. I've been here a long time and I'm embarrassed and I shake my head. That's why I asked. I've seen a lot and I've seen a lot of fraud and Ponzi schemes in my career. And I've seen all this stuff kind of go down into other industries. When you ask that question, I think of,

I think of the oil and gas industry where, you know, the price of oil goes from a hundred to 30 and everybody gets wiped out. Okay. And that's, that's amazing to watch. Like an entire industry implode that quickly. This is so different. This is, this is a, again, forgive me as a non crypto native, but this was, this was a, a gold rush mindset that for people pursued for a long time. And it was incredible to watch the depth of the belief that people had, like the inner true believers that have it. I'm not saying they're wrong at all.

I'm the marketplace for people to trade that belief, right? But I think we're in this position, position my opinion because of the lack of regulation it's because it's because of the lack of insight to what's going on when you have a gold rush everybody's willing to do anything to get stake their claim for different usage of the word but to stake their claim and make their money and grow their business. And you see individuals come out that are willing to say things that in most other industries, if you heard someone say, I guarantee you 14%, you run the other way. But here's an industry where people heard, I guarantee you 14% and then doubled down. And to be fair, the people who were saying, I guarantee you 14% were backed by some of the largest institutions on the planet, which gave a lot of credibility, right?

It's hard almost to parse who's at fault here. I would argue, obviously, bad actors are, if you're a fraud fraud but if those frauds are backed by a sequoia or a black rock who's supposedly done due diligence and you have a regulator that's failing to do anything about it in advance and is just you know regulating by enforcement when everybody's already been hurt that really created a powder keg i think in sort of this perfect environment for a these frauds to exist and, for people to just get completely wiped out. Robert Leonard , Completely agree with everything you just said. Without regulation, people can do all of that. Without any accountability, people can do all of that. And I don't think it's necessarily about who's to blame. Sequoia is a well-known brand and they are a money-making machine and they will chase the

money just like any other investor. So when there's no regulation and they dump money into FTX and FTX does what they do, is Sam to blame for everything? Is Sequoia to blame for everything? Is the government to blame for not keeping a watchful eye? Yes, yes, yes. Nick Neuman Yeah. They all shared it to some degree. I think that's fair. But interestingly, I think I agree with you generally that we need very sensible regulation in this space. I think it would be disingenuous for anybody to say otherwise at this point. But fraud is still illegal and it doesn't have to be in cryptocurrency or otherwise. So my feeling is that that should have been identified earlier, right? I mean, Sam Beckman, Bernie Madoff did this without the access to cryptocurrencies. I mean, I would argue that crypto made it a hell of a lot easier for Sam.

Fraud is fraud. Crypto does make it easier. There's like an ethos around crypto that it shouldn't be regulated and the government should be out of it. That's all fine. But, you know, banks, banks are restricted from having too much debt on their balance sheet. Is that such an invasive thing or is that common sense regulation so that we don't have another Great Depression? OK, that's the type of stuff that we need regulation. That's the type of stuff that needs to be, in my opinion, in place so that you don't have these types of issues. I suspect, just guessing here, but I suspect the 9 million FTX account holders, many of them believed no regulation was necessary. And today they believe, where was the government to protect me? Yeah.

Okay. So this will happen again and again and again. These types of markets develop again and again and again. Look, I bought crypto. I owned crypto. I lost money on crypto like a lot of other people. But I also look back and say, like, should I have taken my gains when they were 10x? Of course I should have. Hindsight is 20-20.

Always 20-20. Yeah, for sure. I would actually make the argument with FTX that, to your point, the people who lost their money there were the crypto funds and the crypto traders and the guys who really, really believed in the ethos of crypto. And so probably were very much against regulation, even with the Voyager and the Celsius and BlockFi. I think those were more everyday people who were confused that they weren't putting their money in a bank. But FTX was really the people who understood crypto and were using that as their platform for trading it and letting their view be known and taking their position. And it is interesting now to see the same people calling for regulation.

I don't blame them. It's a lesson learned. David Collum, Nobody likes to lose money, right? We're a venture capital backed company. And when I talk to investors, I talk about how we are just a function of capitalism, right? There's always going to be winners and there's always going to be losers. And it's not an opinion on who's right and who's wrong. It's just a necessary part of capitalism. And I think that the regulation is about protecting the losers from the winners flying too high.

And Sam was the wunderkind of venture world and the crypto world for a couple of years. And then here he is facing significant prison time. You could argue that one of the main points or functions of capitalism requires price discovery, right? You need to know what something is worth. That's why markets exist. And at the end of the day, price really is the story. What a buyer is willing to buy it for, what a seller is willing. And you're providing that somewhere that it's actually very hard to get any clarity on value. It's impossible to get clarity on value. Even on our marketplace, we see fairly widespread between bid and ask on a regular basis. And it's getting closer, which is why we know that what we're doing is working because we're

providing more price discovery and more liquidity. But price discovery is critical. An open bid ask, right? There's a concept in finance, the efficient market hypothesis, where if all information is out and everybody knows everything, then it's an efficient market. And that's just not the way that most markets operate. We're trying to make it better. That's the free market that doesn't exist anywhere on this planet, unfortunately. So are there other places that you've identified, maybe Xclaim isn't providing yet, but other places

where you identify where there's glaring discrepancies in value or price discovery, where your platform could theoretically be used? Well, I think that right now, there's claims at every level of a bankruptcy, right? And you've got senior claims, junior claims, account holder claims, and we're operating in the non-security level of that. But what we're really talking about is that we can value all stack, the whole stack.

We can value companies. And you're talking about the fair market value of private companies is a really fascinating data point or basis for trading ownership. I think that's where we want to go. It's where we're trying to go. Securitization is exciting. I also see the secondary market really developing. People trade buying, selling, and then reselling. It's reminiscent to me of, honestly, when you describe it, it's almost like NFTs

on OpenSea, right? I mean, I know you would describe it as an eBay, but there's the continued selling and buying and selling of these sort of, I get these are fungible assets, but you get the idea. And now that you're in crypto, have you gotten any surprising pushback? I mean, you're talking about when you hear about securitizing things and you hear about crypto, people usually run, right? They get out of the United States, they head down to the Bahamas or somewhere else. Nobody likes the term security or securitize in crypto. Have you gotten any unexpected pushback from regulators or from the government or anything because you're allowing these crypto claims or do they just view them as

bankruptcy claims like anything else? Nick Neumanis They view them strictly as bankruptcy claims. Bankruptcy claims trading has been around for truly like hundreds of years. This is not a new thing. The modern market has existed for about 45 years. It is settled law and precedent and everyone understands that claims are not security. Okay. Well, when I talk about securitization, it's like, okay, I now have 2 million claims. What's the best way to package them up? Okay. So securitization is one word for it. Tokenization is another word for it.

Warehousing, collateralization, these are all different words to describe a similar treatment. But the idea of how do you make it accessible? I think tokenization for these types of assets makes a lot of sense. I think tokenization of almost any transferable or asset that you can buy or sell makes a lot of sense. We won't see it because the incumbents that would be displaced are the biggest companies in the world. So I don't think it happens anytime soon. But there's no reason that stocks shouldn't be tokenized and traded directly without 48-hour clearing and the nonsense that I think was highlighted by GameStop and all what happened with Robinhood. Mortgage, car title, shouldn't all of these things be tokenized now that you've been looking at this?

Anything that requires a wet ink signature to effectuate should be tokenized, right? These types of document-based transactions, when smart contracts exist, when tokenization exists on commoditized pieces of value, yes. And I believe we will get there. It's just, you've got a lot of the old guard required. Also, the lawyer lobby makes a ton of money on reviewing every word of every template. Yeah.

If you tokenize everything, does that put a company like yours or others at risk for being successful? Because, you know, somebody will just create some sort of DEX or decentralized exchange and people will just go start trading the tokens. Or maybe if you're the one who's doing the tokenization, there's a value there before any of that happens. Because that really is that secondary and tertiary market that you talked about before. I don't know if it's a risk, because there's just an interesting development that we'll have to see how it comes about. But I think of the New York Stock Exchange isn't the marketplace. The marketplace is the stock market.

It's what you see when you log into your E-Trade account. The New York Stock Exchange is just where the asset is listed. And if we are the original tokenized source, then there's still like a book of record somewhere. And I think that we can be that. So you said that you don't think it's over. I agree with you. Hopefully the really big brand names collapsing may be over, but that, you know, there's some optimism there.

How much more contagion do you think? And do you think, you know, just seeing it from your perspective, that even if we get a bit more, maybe it could start to be priced in at any point? Or is there a point where you would see that being the case? Where I see the contagion? I think Genesis is a huge failure in chapter 11, but the price of the market continued up because everybody knew Genesis was going to enter. Right, right. It was already priced in.

Yeah. I see, it's hard to predict what's going to happen next, but Genesis could very easily lead to Gemini. Binance has been rumored, which would be unreal, catastrophic. Okay. At some point, just the faith in the industry is shaken enough where everything is in jeopardy okay um i that's not out of the realm of possibility no no yeah non-zero look at where we are versus just one year ago um And I could have said that six months ago. So I think that there's a ton of volatility

and a ton of concern in the market right now that I will also add in bankruptcy, disclosure is everything. So everyone knows who owes who. So as soon as- It's all the same people. It's all the same people. So the next time

ftx publishes their creditor list and you see that they owed i'm totally speculating here this is just like wild statement but if they owed one and a half billion to coinbase okay like yeah something like that would shake like i they just the most recent list now off the top of my head, I'll have it, but it was like airlines. Somehow, everybody is, at least in small part, accredited at FTX. The amount of people that I did not expect was incredible. I agree. However, I think there's something that's worth clarifying there. All of those people, that just means they're owed money by FTX. That doesn't mean they held an account.

It could be some tiny claim. They didn't invest in there. That doesn't mean they were actively generating 100x leverage. It's like everybody has a claim against fake Meta. Okay? Because you're going to do some Meta ad. So you have this unpaid invoice to Meta. Suddenly,

Meta is a creditor. That doesn't mean that Meta had an account with FTX. Meta, suddenly Meta is a creditor. That doesn't mean that Meta had an account with FTX. Meta's not trading 100x leverage Ethereum perpetual swaps on FTX. That's why I thought Meta was going to finally get the bailout. That might have been a better bet than the Metaverse. Maybe the Metaverse will get the last laugh eventually. So outside of crypto then, I mean, this, we'll call it imminent recession, bear market, whatever you want to call it, has been not unique to crypto, right? We've had our contagion, of course, and it's, I would say, had more downside than other markets.

But as we sort of settle into this idea that a recession is coming, do you think you're going to see a lot more business outside of crypto that you've been seeing? Yes, is the answer. I mean, my comment earlier about capitalism, bankruptcy has always come and go. And it's a cyclical market, cyclical industry. But on average, over the last 20 years, there's about 2 million bankruptcies in the United States every year, which means if each one of those owes people 100 people something, that's 200 million people per year that have a bankruptcy claim. That's an astounding number. There was actually a poll that I participated in recently, and it was interesting what came out. And it was a prediction of which industries are going to suffer the most over the next 18 months. And it was home builders and auto

and airlines. Trey Lockerbie The big boys. Nick Neuman The big boys. The big boys. I mean, this is, I mean, airlines are kind of perpetually on the list for the last 40 years. But other than that, I mean, this is a market that exists

where there's value locked up and very large companies owing a ton of money people can, owing a ton of people money, can get out in an open and transparent way. That's what we're trying to offer. I hope that your company does well, but maybe not too well because not looking forward to the financial apocalypse that might come alongside that happening. So where can people check you out, follow you, and also go participate in this marketplace and check out Xclaim? So visit www.x-claim.com. You can become a buyer and or a seller right from the site.

We're very active on LinkedIn and Twitter and all the other and trying to get the message out. We host webinars. We try to host webinars once a week for either side of the market to understand what's going on from each case and each value from a buyer perspective and a seller perspective. And we're very fortunate to be getting a ton of press these days. We've been covered globally in all the mainstream press over the last month or so. I'm holding out for higher prices, man. Says everyone. I'm going to go check it out myself, let's be honest. Thank you so much for taking the time. I really think it's a novel approach and I'm excited

definitely to see what happens when you guys start tokenizing these assets to me that uh is a massive massive opportunity well i look forward to talking to you again then um but in the meantime thank you so much yeah thank you so much for having me on and uh i appreciate it enjoyed it thanks thanks matt it. Thanks, Matt. Bye.