top of page

Search Results

87 items found for ""

  • Why Build a Class A Office Building in Downtown Westfield?

    A cornerstone of Westfield's downtown redevelopment plan is to build a 200,000 SF Class A office building on the South Avenue train station parking lot. On the Town of Westfield's One Westfield Place FAQ page, questions 6 - 10 address address the South Ave office building and the Lord & Taylor office space. Question 6 succinctly asks: Will there be tenant demand for 300K square feet of office space given changes in workforce patterns? What assurances do we have that the office buildings will be leased? The answer is brief and unsatisfying. This past week, HBC’s development company StreetWorksDev had a meeting to explain the rationale behind the office project. To understand why this project will either succeed or fail, it is important to understand three things. 1) How are corporate real estate teams using office space to attract and retain top talent? 2) Has demand for Class A space returned to pre-pandemic levels? 3) Why are the project’s supporters so confident the space will be leased. 1. How are corporate real estate teams using office space to attract and retain top talent? The 2022-2023 CBRE Global Workplace & Occupancy Insights report analyzes data from 60 organizations who collectively occupy 493 million SF. Several themes emerged from the study. Purpose-driven flexibility office management recognizes that employees expect their work environment to offer physical and virtual spaces to comfortably collaborate and build connections with their colleagues. Hybrid Work combines working in an office and working remote. Progressive companies want a flexible office portfolio. When their business grows or slows, along with their headcount, the office space should be able to accommodate the change. 2. Has demand for Class A space returned to pre-pandemic levels? Almost. Leasing demand is just 5% behind 2019. During the third quarter of 2022, 1.32 million SF of office space was leased and this was the fourth consecutive quarter of over one million square feet. Year-to-date leasing totaled over 4.36 million SF and lease renewals increased 56% over 2022 Q2. 3. Why are the project’s supporters so confident the space will be leased? On December 8th, HBC/Streetworks held a community meeting to discuss the office component of the project. Here is why they are confident about the market. 1) Quality corporate tenants have been migrating from office parks to suburban markets. 2) Most of the Class A office buildings are outdated and do not meet the needs of today's corporate users. New construction is more appealing. 3) Tenants are drawn to buildings near train stations. 4) Westfield would appeal to tenants who want to walk to amenities such as restaurants, coffee shops, bars, and retail. 5) The planned 200,000 SF “mass timber” office building on South Avenue would attract state and national attention. Mass timber construction is a wood product that is strong and is a low-carbon alternative to concrete and steel. It will be the first in New Jersey. 6) HBC will not begin construction until they have leased at least 50% of one building.

  • One Westfield Place - The Financials

    WESTFIELD NEWS ▸ One Westfield Place – The Financials On September 19, 2022, the Town held the first part of a Live Facebook discussion on the One Westfield Place financials. Mayor Brindle was joined by Councilwoman Linda Habgood, Chair of Town Council Finance Policy Committee, Robert Powell, Partner, Nassau Capital Advisors, an expert in redevelopment finance, Steve Mlenak, Partner, Greenbaum Law, Legal Counsel, and Matt Jessup, Partner, McManimon, Scotland & Baumann, LLC, Bond Counsel. Mayor Brindle began the meeting with a brief history of the project and recited the goals set forth in the Town’s Master Plan Reexamination, adopted in 2019 – ● Reduce the Town’s dependence on personal residential taxes by expanding the tax base ● Create a vibrant downtown ● Offer diverse housing options for residents who are downsizing ● Advance affordable housing options ● Address traffic congestion ● Upgrade aging infrastructure and improve stormwater management. The Mayor also commented on the Town's slow population growth. The project will add 354 new residents. This is needed since Westfield has 2,700 fewer residents than it did when its population peaked in 1970 at 33,720 residents. The project will also add new employees to Westfield. Employment is down 2,000 since 2015. Brindle said, “Our businesses can’t survive on nights and weekend traffic alone.” Steve Mlenak began with an overview of the project phases. The West Zone encompasses the Lord & Taylor vacant properties, totaling 7.3 acres. It will include 100,000 SF of office in the Lord & Taylor building, two residential buildings with 138 age restricted (55+) apartments, 16 townhomes for age 55+, 13,300 SF of street-front retail, and one residential building at North & Clark. The North Zone is on a 0.22-acre portion of Municipal Parking Lot 8 on North Ave. It will include one residential building of 35 market-rate loft-style apartments, 2,110 SF of retail, and a public parking garage with 300 spaces. The South Zone is on a two-acre portion of Municipal Parking Lot 3 on South Avenue. There will be two Mass Timber office buildings totaling 210,00 SF, 12,000 SF of retail, and a public parking garage with 200 spaces. Within the scope of One Westfield Place, there are $54.2M of planned public improvements. This includes the large public pedestrian areas on Quimby Street and by the train station, the North Avenue Town Square and South Avenue Town Green, two parking garages, traffic system upgrades, and pedestrian safety improvements. ▸ Why Partner With A Private Developer? It would not be possible for Westfield to undergo these public improvements without private sector investment. The financial structure that undergirds the relationship between the Town and Streetworks is Payment in Lieu of Taxes (“PILOT”). This is a state law that enables municipalities to negotiate and execute agreements with developers when certain criteria are met. Mlenak described PILOT as a “powerful tool used as a financial incentive to attract private investment in an area in need of redevelopment in a manner established by the municipality in a redevelopment plan that would otherwise not be financially viable.” Mlenak highlighted that a developer could come into Westfield and develop some pieces of the Master Plan, but it would not be possible to complete all aspects of the redevelopment plan without a PILOT. While the terms of the PILOT have not been finalized, the process involves the Town evaluating: 1) the cost of the project; 2) projected revenue to the developer; 3) sources and uses of funds (developer’s equity contribution and financing); 4) need for new services; 5) impact to the school district; and 6) the sale of municipal property. After the Town completes its analysis and negotiations with the HBC | Streetworks, the redeveloper submits a PILOT application to the Mayor. The Mayor submits the application to the Town Council and if the Council approves it, it will be drafted as an Ordinance. If the Ordinance is approved, a financial agreement is entered into with HBC | Streetworks. The agreement will include the term of the PILOT (usually 30 years) and an annual service charge (“ASC”) which is paid instead of the taxes. The annual service charge is a percentage of the project’s gross revenue. Mlenak underscored that gross revenue is top line revenue and “every cent of revenue is counted.” Under NJ law, the annual service charge must be at least 10% of the revenue. Also, to ensure that HBC | Streetworks is paying the proper amount, they are required to have an annual audit by an independent accounting firm and the audit is sent to the Town. Five percent of the ASC payment will go to Union County and 95% to the Town. Similar to a resident’s property tax, the Streetworks property tax is bifurcated into a tax on the land and a tax on the property improvements. The land taxes will be paid to the Town and then a portion goes to Union County and the Westfield School District. This is a new source of property tax revenue because the land was previously owned by the Town. ▸ Digging Into The Numbers Robert Powell advised Westfield on the financial aspects of the project to determine its feasibility. Powell examined the development costs, projected rents for each property type, estimated operating costs, funding sources, and projected increases in rental income and operating expenses over time. The numbers are used to calculate the developer’s projected return if they make the expected equity investment. Powell said the return has to be at least 10% or 11% to be competitive. Some of the developer’s investment is for a public purpose. This includes 36 low and moderate income apartments, $8M for streetscape improvements, and $3M for private property improvements. "Take Me to the PILOT" 🎵 If there was not a PILOT and the developer had to pay full taxes, the project would generate a return on equity in the mid-single digits. This would not be “adequate in today’s capital markets to justify a projected equity investment in excess of $150M,” Powell concluded. The Town negotiated an agreement that struck a balance between the maximum financial benefit to the Town and the minimum financial viability for the developer. Powell said the agreement will generate an internal rate of return on equity in the low double digits (10% range) and factors in construction cost and lease-up risks. The projected PILOT payments represent 70% of theoretical full taxes in years 1 - 5; 75% of taxes in years 6 - 15; and 81% of taxes in years 16 - 30. The annual payments that the developer pays are based on the project’s gross revenues. Years 1 through 5, it is 13%. Years 6 through 15, it increases to 14%. Years 16 through 30, it increases to 15%. If the revenues are lower than expected, the developer will have to pay additional funds to ensure the minimum payment of taxes. PILOT revenues will increase over time as the project is built and leased. For example, in year 5, 2032, the revenues are projected to be about $5M and will ramp up to $11M in 2056. The total PILOT revenue is projected to be $214M. ▸ HBC Will Pay For Redevelopment Area Bonds Matt Jessup explained the necessity of Westfield issuing bonds and how the developer will pay the debt service. The $54.2M of public improvements are on land owned by the Town. Initially, the improvements will be funded by the developer and three Redevelopment Area Bonds (RABs): ● $16.5M for the North Parking Garage ● $13.0M for the South Parking Garage ● $16.5M for the other public improvements. Streetworks will provide $8M to the Town early in the project for improvements such as the North Avenue Town Square. Jessup explained that the bonds will be issued over time as the Streetworks development reaches milestones. Here is how the project will be staged: 1) West Zone construction reaches milestones 2) North Parking Garage bond is issued 3) South Zone construction begins after 50% of office building 1 is pre-leased 4) South Parking Garage bond is issued 5) South Zone construction reaches milestones 6) Public Improvement Bond is issued Jessup added, “The staging ensures that we don’t get ahead of project revenues and over issue bonds relative to Streetworks buildout and completion of the redevelopment project.” The Town has a “PILOT sufficiency test” which monitors the revenues to ensure that 80% of revenue is available to pay the debt service for bonds issued. Each bond is issued for 25 years, at a level debt service, and at a 4% interest rate based on the Town’s AAA credit rating. Jessup said the 4% interest was conservatively high. Jessup addressed a question about the possibility of improvements exceeding cost projections. He said, "We have a debt service cap. We will measure the debt service interest rate against 80% of the PILOT. If there is not sufficient revenue, we are not doing all of the projects. ... We will never issue more in bonds than the project can support." ▸ Paying the Debt Service Over the life of the project, the average annual debt service for all three bonds will be $3M. Revenues to the Town will ramp up from $4.6M in 2030 to $10.98M in 2056. This averages to $7.13M per year, or $213M over the life of the project. Since the total debt service over the project is $73M, the Town will net $140M over 30 years. This averages to over $4M per year in tax revenue which can be used for general municipal use. Mayor Brindle interjected that the project will produce "public benefits that the Town would never be able to afford and taxes will be stabilized for the long term." ▸ Ensuring Streetworks Pays Westfield A special assessment is a tax imposed on land that received improvements. The tax is paid to the municipality. Special assessment taxes are typically used when new sidewalks or sewage lines are installed. Property owners who receive the benefit of the improvement are taxed for the cost of improvement. The Town can use a special assessment on Streetworks property if Streetworks does not pay the full amount of PILOT revenue. If the special assessment is not paid, Westfield would acquire a first lien position on the property ahead of all other parties (equity investors and construction lenders) who have a lien, or right to a lien. The potential for Westfield to acquire a superior lien position is a strong incentive for Streetworks to pay Westfield the owed PILOT revenue. A special assessment remains in place for three consecutive years.

  • Crypto News for Realtors – Issue 47

    January 8, 2023 | Issue 47 CRYPTO SLITHERS INTO 2023 Happy 2023 and welcome back to my take on the never boring crypto world. Here are the main crypto events from the last two weeks. FTX's former CEO Sam Bankman-Fried was arrested in the Bahamas and flown to New York City where he was in custody until released on bail. His bail was set at $250M, the largest bail amount in US history. It was 25 times higher than Bernie Madoff. SBF was released into his parent's custody when they put up their $4M home as collateral. There were two other undisclosed people who also put up funds. Clearly, the court allowed his release for less than $250M. The bail conditions did not include prohibiting Bankman-Fried from using the internet. Experts who track crypto transactions discovered that a crypto wallet previously linked to Alameda (the hedge fund tied to FTX and controlled by Bankman-Fried) transferred $1.7M out of Alameda into a series of crypto mixing services and then exchanged for bitcoin. Shortly after articles appeared in crypto publications about this transfer, Bankman-Fried tweeted, "None of these are me. I'm not and couldn't be moving any of those funds; I don't have access to them anymore. I believe it is likely the case that various legit legs of FTX have the ability to access these funds; hopefully that's what's happening here. If not, hopefully one steps in soon to do so. I would be happy to help advise regulators on this if any wanted." At Bankman-Fried's arraignment hearing where he pleaded not guilty, the prosecutor requested the judge prohibit the defendant from using the internet while out on bail. Instead, the judge modified the bail conditions prohibiting Bankman-Fried from moving any FTX or Alameda funds. Two former FTX executives are cooperating with investigators – Caroline Ellison, former CEO of Alameda Research, and Gary Wang, co-founder of FTX Trading. Both pleaded guilty. Bankman-Fried pleaded not guilty and his trial is scheduled for October. New York State Attorney General Letitia James filed suit against Alex Mashinsky, former CEO of bankrupt Celsius Network. Celsius was a crypto lending company. James said, "As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin... Mashinsky made numerous false and deceptive statements about Celsius’s safety, number of users, and investment strategies to recruit investors, and repeatedly asserted that Celsius was safer than a bank. However, investors’ assets were routinely exposed to high-risk counterparties and strategies, many of which resulted in losses that Mashinsky concealed from investors." Crypto is in a deep reckoning phase and as the new Congress begins setting its agents, crypto hearings will be plentiful. Regarding this newsletter, many of you have noticed that I started writing another weekly newsletter, Important Stuff in Westfield. This is unrelated to crypto and instead focuses on Westfield, New Jersey. It is not feasible for me to write both newsletters on a weekly basis. Beginning this year, I will be writing the crypto newsletter every two weeks. The best part of writing these newsletters has been meeting new people who share my interests. If you want to talk about crypto, New Jersey real estate, or how I am building audiences with my newsletter and social media, reach out to me. If you want to see past issues of my crypto newsletter, go Crypto News for Realtors. Also, check out my YouTube videos and Podcast. Let's have a great 2023 and don't forget to stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home in New Jersey, please reach out to me. CRYPTO NEWS ▸ GENESIS IS STRUGGLING TO SURVIVE Genesis Global Trading, Inc. announced this week that it is laying off 30% of its staff and is considering bankruptcy, according Wall Street Journal reporter Caitlin Ostroff. The crypto lender was hit hard in 2022 when several of its loans were not repaid by other companies in bankruptcy. Notably, Three Arrows Capital and Alameda Research. Alameda was the hedge fund connected with FTX and Sam Bankman-Fried. Genesis had lent hundreds of millions dollars to Alameda. As Genesis struggles, it has not paid back its own creditor loans. Crypto exchange Gemini relied upon Genesis for its earn program and this week Gemini's Cameron Winklevoss and Genesis' parent company's CEO, Barry Silbert, attacked each other on Twitter. Genesis is owned by Digital Currency Group which owns Grayscale Investment and crypto publisher CoinDesk. Breaking news – Bloomberg just reported that the Securities and Exchange Commission is investigating a transfer of funds between Genesis and Digital Currency Group. ▸ Crypto Legislation Hopes Dim The crypto supporters on Capitol Hill have gotten very quiet since the FTX collapse. Rep. Jake Auchincloss, a member of the Congressional Blockchain Caucus, was awarded a "digital future award" by the Crypto Council for Innovation. Recently, however, he is not so bullish. Auchincloss expressed exasperation by saying that in crypto's 14 years of existence, it only delivered "white papers and podcasts." Another member who appears more open minded, Rep. Patrick McHenry (R., NC) will lead the House Financial Services Committee. The committee could introduce crypto bills for a vote. McHenry said, "We have to separate out the bad actions of an individual from the good created by an industry and an innovation. So let me be clear: I believe in the promise of digital assets.” Instead of comprehensive crypto legislation, the focus on Capitol Hill will likely to be on expanding existing regulatory authority for banking, securities, taxes, and anti-money laundering. Additional resources are likely to flow to enforcement. ▸ Crypto-Friendly Banks Are Bleeding Since the collapse of FTX, banks that welcomed crypto have suffered major losses. Silvergate Capital stock has dropped 80% since early October. It reported this week that customers withdrew $8.1 B in the fourth quarter. Shares in three other crypto-friendly banks are down double digits since October. This contrasts with the broader banking industry which has risen a bit more than the overall market. Thanks for reading! See you in two weeks. Go to Crypto News for Realtors to read previous issues.

  • Crypto News for Realtors – Issue 46

    December 18, 2022 | Issue 46 THAT'S A WRAP, 2022 In this final 2022 issue of Crypto News for Realtors, I thought it would be fun to give you a 10 question crypto quiz. The questions differ in difficulty – Beginner, Intermediate, Expert, and Expert Only. The answers are at the bottom. Enjoy it and shoot me a quick email reply with your score. Wishing you a wonderful holiday and a Happy New Year! Best, Rich richard.hopen@compass.com | 908.917.7926 Thanks for reading! See you in 2023. Go to Crypto News for Realtors to read previous issues.

  • Important Stuff in Westfield – Issue 01

    December 1, 2022 | Issue 01 WHAT IS THIS? Hi - When I moved with my wife and three kids from South Florida to Westfield in 2000, we felt as if were dropped into a small town movie set. There wasn't a traffic light at the busiest intersection in the center of town. Instead, a police officer stood in a painted circle directing traffic in front of the Rialto movie theater and Baron's pharmacy. Baron's had a handmade poster in the window advertising, "We Repair Lionel Trains." Two years later during a very cold winter, we ice skated on Mindowaskin Pond. Living here was a dream. We fell in love with Westfield. The Town Council issues that we discussed at the Tudor Oval block parties seem quaint today – Should the town add a traffic light at Broad and Central? Is it appropriate to have a Victoria Secret downtown? What about the pastel painted James Ward buildings? Today, the issues before the Town Council are significant and transformative. They are also complex. I thrive on digging into complex topics and then sharing what I've learned. That is what I'll be doing with this newsletter, Important Stuff in Westfield. I'm Rich Hopen and I'm a real estate broker with COMPASS, committed to Westfield. In addition to writing about the significant real estate issues in front of the Town Council, I'll cover real estate trends and transactions. I will dive into important topics in the Explainer section. Some topics, like this issue's look at real estate wire fraud, will require a longer analysis and I will link to a blog post. For example, in Commuting to NYC From Westfield, NJ I looked at 12 ways Westfielders commute and compared the time and cost. In Cyber Criminals Are Targeting Home Buyers and Sellers I discuss what home buyers and sellers can do so they don't become a victim of wire fraud victim (like I was). Let me know what you think of the newsletter and reach out to me with any ideas you might have. If there is anyone you know who would enjoy reading the newsletter, please reply to this email and send me their name and email. Or, you can forward this newsletter to them and they can subscribe here. I hope you enjoy this newsletter. Thank you! Best, Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me. WESTFIELD NEWS ▸ Town Council Approved Edison Field Project. Now what? After a long 16 months, the Westfield Town Council approved entering into a shared services agreement with the Board of Education to install an artificial turf field and lights at Edison Middle School. The "Edison Field Project" is estimated to cost of $9M. There was widespread agreement that Westfield's existing athletic fields did not meet the demand of the local athletic teams. The disagreement and debate centered on three issues: 1) Should a new field be artificial turf or natural grass? 2) Where should the field be located? 3) How should the fields be used? The Town Council received professional guidance from Brandstetter Carroll, who led the Strategic Parks Plan and Spiezle Architectural Group, who led the Edison project design. The Council also retained an independent assessment from the engineering firm, CME. CME examined the following issues: expense, capacity, reliability, maintenance, synthetic turf concerns, stormwater management, surface temperature, field scheduling, and field lighting, CME's report recommended synthetic turf fields. The report concluded, "Based on the demand for fields within the Town and the fact that recreation teams, especially soccer and lacrosse, are currently using fields out of Town for practices and in some cases home games, a synthetic turf project is the best way to maximize field usage for both the Board of Education and Recreation Leagues." In Mayor Brindle's "Mayor's Update: Week Ending November 4" she said, "I personally spoke to turf and grass fields experts, as well as municipal and county Recreation Directors whose grass fields maintenance programs were those Westfield could emulate. Interestingly, each of them concluded that maintaining proper multipurpose grass fields was not sustainable and mentioned that their sports teams often sought artificial turf options over time due to the deterioration of their grass fields." Not all council members supported the project. Town Council members David Contract and Mark LoGrippo voted against the Edison Field proposal for several reasons. Among their objections, they disagreed with CME's assumptions on replacement and disposal costs, the lifespan of the field, maintenance costs, and playable hours. Brindle acknowledged the vote was not unanimous. "While the majority of the Council has been satisfied with the documentation, research, and financial analysis on this project, it’s no secret that not all of the Council members agree. But to say that our conclusions are biased or ill-informed, simply because they don’t produce the desired outcome some seek, does not make it so. There will never be full consensus on any field project because it is always safer to say no than yes. This is exactly how we got here. But with the plan now in front of us, I’m confident that we can forge ahead with a safe and fiscally responsible solution that strikes a balance between the needs of our students, athletes, and the neighboring residents." The next steps for the project include: ● Financial bonding for final project design ● DEP permit for stormwater runoff ● County report on additional fields in Tamaques. ▸ One Westfield Place Traffic Analysis The One Westfield Place project will attract people to live, work, and shop in Westfield. More people means more cars and traffic. This week, the project's developer, Streetworks Development, has invited the public to learn more about its traffic report. Streetworks submitted a preliminary traffic impact study ("TIS") to the Town and a draft report is targeted to be released over the next few weeks. The TIS focuses on 18 intersections including the project's entry and exit points – ■ South Ave & Boulevard ■ North Ave & Clark ■ North Ave & Elm ■ South Ave & Central There will be a Facebook Live session on December 12 at 5:30 pm with Mayor Brindle, Chris Colley of Topology, the Town's redevelopment planning firm, and John Federico of WSP, the Town's traffic consultant. Additional public sessions covering the planned office space and the project plan and design are scheduled. Go to One Westfield Place's scheduling page to attend. In 2021, the average mortgage rate on 30-year fixed mortgage was 2.96%. A few weeks ago it was over 7%, the highest level in 20 years. Higher mortgage rates forced many buyers out of the market. When mortgage rates started climbing beyond 3% early this year, the house buying frenzy slowed down. In Westfield, there were fewer homes sold each month in 2022 than in the same month in 2021. Looking at January through November, 30% fewer homes were sold this year compared to the same period in 2021. However, the average sale price in 2022 ($1,051,951) increased by 9.16% over 2021 ($963,665). This is because of the low inventory of homes for sale. In a stable real estate market, the sweet spot between a buyers' market and a sellers' market, has four to six months of homes on the market. For example, if an average of 40 homes are sold per month in Westfield, a stable market would have 160 to 200 homes for sale. For most of 2022, there was barely one month of inventory. Homes typically sold within 25 days of being listed. This means that Westfield is an extremely strong sellers' market. It is a great time to be a seller. In November 2022, 29 homes were sold in Westfield. Twenty-two were single family homes and the others were town homes, duplexes, or condos. Here are six homes that sold. EXPLAINER – Real Estate Wire Fraud When my wife and I sold our house in Westfield, NJ in 2017, our $239,000 mortgage payoff was stolen. The money was never recovered from the criminals. We were victims of real estate wire fraud. I’m not only a victim, I’m also a real estate agent and lawyer. Shame on me for not knowing about wire fraud when I sold my house. Shortly after I sold my house, a Westfield client was also targeted by criminals, they came very close to losing their $225,000 down payment. After this occurred, I vowed to learn about wire fraud and educate my clients and other real estate agents about the problem. Over the past five years, I have written about wire fraud prevention and educated real estate agents around the US. I sat on a wire fraud panel with a U.S. Senator, participated in a roundtable discussion with the FBI in Washington, and was interviewed and quoted by the Wall Street Journal and other publications. Unfortunately, real estate wire fraud is still unknown to most consumers. There is not an effective consumer education program and there are no bank wiring safeguards in place to ensure home buyers and sellers are safe from scammers. Also, real estate agents are not required to discuss wire fraud with their clients. Instead, brokerages and Realtor associations have clients sign wire fraud disclosure forms. These are ineffective. Real estate wire fraud is becoming more prevalent. According to the title industry’s trade association, ALTA, one in three real estate transactions are targeted by wire fraud criminals. Wire fraud experts estimate that the average real estate wire fraud loss is $360,000. If you are in a real estate transaction or about to buy or sell a home, here is my blog post, Cyber Criminals Are Targeting Home Buyers & Sellers, which details how your money could be stolen and what you can do to protect yourself. Also, here is a video where I was interviewed by Jon Steingraber of Signature Realty about the details of my wire fraud incident. Reach out to me if you have ANY questions about real estate. Thanks for reading this first issue!! PLEASE let me know what you think and if you have any ideas. If you want to read more about Westfield and other topics that interest me (like crypto), check out Rich's Blog. Rich Hopen | 908.917.7926 richard.hopen@compass.com

  • Crypto News for Realtors – Issue 45

    CRYPTO NEWS ▸ US Prosecutors Looking At Fraud & Market Manipulation Bloomberg reported on December 9 that US prosecutors were gathering evidence for a fraud case. The prosecutors are looking at whether hundreds of millions of dollars were transferred to accounts in the Bahamas in anticipation of FTX's bankruptcy filing. They are also focusing on whether funds were improperly transferred to Alameda Research, FTX's sister company. Concurrently, the US Attorney's office in the Southern District of New York met with FTX investigators. Prosecutors are looking into whether Bankman-Fried steered the price of TerraUSD and Luna to benefit the entities he controlled, FTX and Alameda Research. ▸ CEO of The Block Took Money From FTX Perhaps one of the most highly regarded crypto industry publications is The Block. This week, the former CEO of The Block, Michael McCaffrey, resigned after he failed to disclose that he had received loans from FTX. The first loan, $12M, was used to buy out other investors. The second loan, $15M was for operations at The Block. And a third loan of $16M was used to purchase real estate in the Bahamas. The new CEO said, “No one at The Block had any knowledge of this financial arrangement besides Mike. From our own experience, we have seen no evidence that Mike ever sought to improperly influence the newsroom or research teams, particularly in their coverage of SBF, FTX and Alameda Research.” ▸ FTX Invited to House Financial Services Committee Hearing After Sam Bankman-Fried and Rep. Maxine Waters, D-CA, Committee Chair tweeted to each other about SBF testifying before comment, Bankman-Fried agreed to testify at Tuesday, 10:00 am. SBF gave $40M to politicians and PACs before the midterm election. He was the second largest donor to Democrats after George Soros. CRYPTO CLASS – How to Prevent the Next FTX A subscriber/friend/industry insider shared a terrific Bloomberg article entitled, "A Handful of Simple Rules Might Have Prevented FTX's Demise." Reporters Allyson Versprille and Linda Beyoud lay out five topics for regulators to consider as they begin hearings on regulating crypto. The most glaring reasons the digital asset industry has been pummeled with unscrupulous behavior leading to spectacular failures is lack of regulations and jurisdictional control. The reporters interviewed security experts and regulators. 1. Commingling of Assets FTX lent its customer funds to Alameda Research, a hedge fund controlled by Sam Bankman-Fried. Alameda lost those funds in poor investments. The Securities & Exchange Commission Chair Gary Gensler has argued that most digital assets are securities and subject to securities laws. Had FTX registered as a security, customer funds would have been required to be segregated. Crypto currencies considered commodities, like bitcoin, would fall under the Commodities Future Trading Commission. However, CFTC authority is limited to crypto derivates, like futures. CFTC has asked Congress to expand its authority. 2. Separate Business Lines Traditional financial firms with separate lines of business comply with regulations for each business. In crypto exchanges, there are no clear boundaries between market making, trading, custodianship, and securities lending. 3. Disclosure SEC disclosure requirements exist to protect retail investors. Regulating crypto so that investors are aware of the risks can be accomplished by applying existing SEC rules. Also, state securities regulators are looking at disclosure requirements for companies with valuations greater than $700,000. 4. Advertising Standards Celebrities have been paid to endorse crypto products. The SEC fined Kim Kardashian for her failure to disclose a payment she received to promote a crypto company on an Instagram post. The Federal Trade Commission (FTC) has not assertively used its authority to prevent crypto promotional activities that are "deceptive or unfair." 5. Corporate Governance FTX's new CEO, John Ray III, who is overseeing the bankruptcy has reported to the bankruptcy court about FTX's disregard of corporate governance. However, privately held companies would not need to share their internal financial audits with the US regulators. Resource – Video, Podcast, Blog Cathie Wood, CEO Ark Invest, explains why Sam Bankman-Fried did not have bitcoin in his entities' accounts. Wood said, "Why didn't he like it? It's decentralized, it's fully transparent, and he couldn't control it." CRYPTO WORD – Shadow Banking Many crypto commentators refer to crypto's decentralized finance (defi) products as shadow banking. Here's Investopedia's definition: " The shadow banking system is a group of financial intermediaries which facilitate the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. These companies are often known as nonbank financial companies (NBFCs). The shadow banking system also refers to unregulated activities by regulated institutions." OH, ONE MORE THING – If Bitcoin is Popeye, what is his spinach? Is it central banks, government distrust, fear of CBDC, big banks, remittance fees, and the bankless? Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.

  • Crypto News for Realtors – Issue 44

    December 4, 2022 | Issue 44 TIRED OF SAM BANKMAN-FRIED? I'm not. With each interview I watch, he either describes a business practice I am familiar with or he mentions something new. If it's new, I research it and try to understand it so the next time it is mentioned, I will have a basic understanding of the concept. For example, this week I learned about the multiple functions of FTX: crypto exchange, market maker, broker-dealer, lender, and custodian. In traditional finance, no one firm could offer all those services. The inherent conflicts-of-interest, self-dealing, and investor risks would be too great. When I started paying attention to crypto last year, I did not understand those functions. Heck, I was a starry-eyed enthusiast who believed crypto, blockchain, decentralized finance, NFTs, and the metaverse were going to change the world and our little real estate corner. My views have evolved. After watching massive wealth destruction caused by crypto companies led by unsavory characters, I now view crypto as a set of valuable tools that will only gain acceptance once the risks are understood and, where appropriate, properly regulated. Today, I watched a Senate hearing and was heartened by what many Senators said. They believe in crypto's potential and feel urgency to craft smart legislation. Also, I'm encouraged that in the midst of the latest crypto bankruptcies, the crypto market's volatility has narrowed. Perhaps crypto is transitioning from a highly volatile speculative investment with a $3T market cap to an $855B stable asset positioned for wide adoption and growth. We'll see. However, there's one thing that I'm sure about. The industry is in its infancy. If you want to talk crypto, reach out to me. If you want to see past issues of my crypto newsletter, go Crypto News for Realtors. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Have a productive week and stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me. CRYPTO NEWS ▸ SBF: "LOOK, I WASN'T RUNNING ALAMEDA" Sam Bankman-Fried, former CEO of crypto trading firm FTX, was interviewed by Andrew Ross-Sorkin at the DealBook conference, George Stephanopolous at Good Morning America, Jen Wieczner at New York magazine, and others. Agreeing to long interviews is unusual for a fired CEO who inevitably will be hauled in front of Congressional committees and put on a witness stand by a prosecutor. What have we learned watching SBF struggle to answer tough questions? He is sorry so many people lost money. He should have spent some time on risk management instead of just growing revenue. He is not the only person who bears blame. Many questions were specific to trading and unless you are in finance, it is not easy to understand what precipitated FTX's collapse. Here's how I understand what happened. FTX had many types of services for its crypto customers. There are the novice investors who bought crypto and were not active traders. They didn't loan money to FTX to earn a yield. They simply wanted to own crypto and keep their assets at FTX. These were custodial accounts. Think of these people as bank customers who put valuables in a bank's safety deposit box. It's clear that custodial account funds belong to the customer, not the custodian. Yet, FTX treated these customer funds as FTX assets. Their action violated the customer terms of services and FTX's misrepresentation that the funds would not be used by FTX will likely trigger allegations of fraud. Another type of customer were leveraged traders. These traders borrowed funds from FTX to make risky bets, high risk for potentially high reward. This is where exchanges can make a high return IF they manage the margin of risk. While there were some questions about FTX previously claiming these leverage traders' customer funds were also segregated, that does not make a lot of sense. However, FTX claimed they had a highly sophisticated risk management software system that tracked all trades and customers' collateral. If any trade was too risky based on the collateral, FTX would "close the position" to ensure FTX would not lose money. Ironically, FTX's failure to do this very thing is what brought the company down. It failed to manage the margin of risk for the biggest trader on its exchange. Here's how Matt Levine of Bloomberg described FTX's risk management system: "FTX was going around misrepresenting how it managed risk. That stuff about a computer that saw everyone’s positions, knew the value of their collateral, and acted instantly to close any positions without a loss to FTX all seems to have been misleading. In fact, FTX apparently managed its most important market risk — Alameda’s huge leveraged position — more or less by someone writing Alameda’s position on a napkin, and getting the math wrong, and then handing the napkin to Bankman-Fried, and Bankman-Fried being afraid to look at the napkin." The contagion from FTX's failure is ongoing. FTX owes $3.1B to its largest 50 customers. Crypto lender BlockFi filed for bankruptcy this week after FTX affiliate Alameda Research defaulted on $680M owed to BlockFi. ▸ Treasury Sec Yellen Calls For Crypto Regulations Yellen said at the DealBook Summit, "I think everything we've lived through over the last couple of weeks, but earlier as well, says this is an industry that really needs to have adequate regulation and it doesn't." Yellen acknowledges benefits of digital assets, such as low service costs to underbanked customers. However, she is focused on the "substantial harm to investors, and particularly people who aren't well informed about the risk." ▸ US Department of Justice submitted a court filing to the bankruptcy court requesting an independent examiner look into potential wrongdoing at FTX. DOJ Trustee Andrew R. Vara said, "An examiner could – and should – investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct and mismanagement by the Debtors." ▸ FTX Invited to House Financial Services Committee Hearing Rep. Maxine Waters, D-CA, Committee Chair tweeted to Bankman-Fried, "We appreciate that you've been candid in your discussions about what happened at #FTX. Your willingness to talk to the public will help the company's customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th." CRYPTO CLASS – Crypto's Regulatory Gaps On December 1, 2022, Commodities Futures Trading Commission Chair Rostin Behnam testified before the US Senate Committee on Agriculture, Nutrition, and Forestry. Behnam was asked to testify about the regulatory gaps that allowed for FTX’s mishandling of customer funds and FTX’s subsequent bankruptcy. In answers to the Senators questions, Behnam referred to the close cooperation among regulatory entities and the shared goal to identify the areas where regulations are needed and which regulatory entities should be granted the legislative authority. Benham’s fundamental argument is that crypto exchanges offer functions that create inherent conflicts of interest that hurt investors. This includes being a market maker (creates a market for investors to buy or sell), broker-dealer (buys and sells for its customer or for its own account), lender, and custodian. Below are excerpts from his testimony. "The events of the past few weeks embody – in the most regrettable way — the perilous state of the digital asset market. For years many have recognized that a patchwork of federal and state-based regulation is an unsuitable substitute for a comprehensive approach. In the absence of stringent and uniform standards, the digital asset market rapidly expanded. With nominal barriers to entry for new products and new consumers, massive speculative interest has taken the place of legitimate market forces, putting the American public at significant risk. Failure to act will leave consumers who have made investments in digital commodities largely unprotected. Unlike other federal financial regulators, the CFTC lacks the necessary and direct authority to write rules and to oversee this marketplace. Instead, we may only reach it through more limited authority activated when fraud or manipulation has already occurred. The CFTC does not have direct statutory authority to comprehensively regulate cash digital commodity markets. But as I suggested over a year ago, the fraud that we are able to prosecute is likely a fraction of what exists in the shadows. Limited enforcement authority is no substitute for comprehensive regulation in which trading platforms, dealers, custodians, and other critical infrastructure participants are required to be registered and subject to direct oversight by a regulator such as the CFTC. To understand why comprehensive regulation of trading platforms is critically important to protect the largely retail customer base of these speculative digital commodity markets, one need look no further than where the CFTC’s regime intersected with FTX. Most of the coverage about FTX in the past weeks has focused on the over 130 different entities that filed for bankruptcy, which includes an offshore-based exchange for trading digital assets and digital asset-based derivatives, a highly leveraged market making firm trading throughout the digital asset market, and a US-based spot exchange. Of significantly less focus is the entity registered with and overseen by the CFTC – a derivatives exchange and clearinghouse called LedgerX LLC (“LedgerX”). Since 2017, LedgerX has been registered with the CFTC as a designated contract market (DCM), swap execution facility (SEF), and derivatives clearing organization (DCO). 6 LedgerX is one of the few FTX entities to not file for bankruptcy. …LedgerX customer property remains secure and LedgerX has the financial resources to continue operating for the foreseeable future. LedgerX is required by CFTC regulations to ensure segregation and security of customer property (including digital assets), maintain capital to cover up to a year’s worth of projected operating costs on a rolling basis, and maintain accurate books and records, in addition to numerous other important requirements. LedgerX must engage an independent certified public accountant to audit its digital asset balances and issue an opinion on accounting treatment of digital assets held by LedgerX annually.8 Many public reports indicate that segregation and customer security failures at the bankrupt FTX entities resulted in huge amounts of FTX customer funds being misappropriated by Alameda for its proprietary trading. But the customer property at LedgerX – the CFTC regulated entity – has remained exactly where it should be, segregated and secure. This is regulation working. CFTC regulations further require that LedgerX be completely walled off from the other unregulated FTX entities in order to properly protect customer property. To that end, as part of the ongoing bankruptcy, FTX has reported that LedgerX holds more cash than all the other FTX debtor entities combined. Whereas this separation has seemingly been extremely important to protecting the customers of the CFTC-registered entity, it is critically important to emphasize that it also means that the CFTC lacked any legal authority to examine any entity other than the registered entity, and had no insight to the operations and treatment of customer property in the unregulated FTX entities. At the CFTC, we lacked the authority to comprehensively regulate the digital commodity market, and to prevent this from happening again, we must be provided appropriate authority by Congress. Without new authority for the CFTC, there will remain gaps in a federal regulatory framework, even if other regulators act within their existing authority." Resource – Video, Podcast, Blog Sam Bankman-Fried has been interviewed a lot over the past week. He is a master at obfuscation and skirting pointed questions. George Stephanopolous did an excellent job on Good Morning America in his follow up questions whenever SBF danced away from the question. CRYPTO WORD – ERC-20 tokens ERC-20 tokens are based on the Ethereum blockchain. Just like mainstream cryptocurrencies such as Bitcoin, they can be used to make purchases — or traded for fiat currencies and crypto. Generally speaking, ERC-20 tokens are fungible — meaning that each of them are identical and can be easily exchanged. Some of the use cases for ERC-20 tokens include as in-game assets, and these assets have also been shaping up the world of loyalty points. (From CoinMarketCap) OH, ONE MORE THING – When FTX declared bankruptcy, many observers asked if VC investors conducted a thorough due diligence process. Here's how they do it in Silicon Valley... Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.

  • Crypto News for Realtors – Issue 43

    November 27, 2022 | Issue 43 "CRYPTO IS DEAD, RIGHT?," ASKED STEPHEN AT OUR THANKSGIVING DINNER TABLE. I should have anticipated my brother-in-law's question by having a concise answer on hand. Instead, I leaped into a long rambling response that caused his eyes to glaze over. Darn, another missed opportunity to impart knowledge. Stephen is a news junkie, but mostly political news. However, when a business news story about crypto dominates all media it's impossible not to read the headlines and see the face of a young man with a head of curls. Sam Bankman-Fried is crypto's face of shame. Pharma has Elizabeth Holmes of Theranos. Energy traders had Ken Lay of Enron. Commercial real estate owners had Adam Neumann of WeWork. Financial advisors had Bernie Madoff. (Hmm, how long before HULU has a series about FTX?) As more of Bankman-Fried's disastrous practices are uncovered, crypto industry leaders are on the defensive. Investors are asking tough questions, like "How can you prove to me that you are not using customer funds for risky loans?" Expect to see adequate reserves held on the blockchain where anyone can verify the balance. There will be thorough financial audits by reputable accounting firms and, Congress will step in with legislation. FTX's failure is horrible for their customers, investors, and those interested in crypto who have been watching from the sidelines. It set the industry back because its failure and inevitable contagion to other weak companies will support crypto naysayers. The industry however, will adjust, improve, and move ahead. At my Thanksgiving dinner, I could have said all this to Stephen, but that wouldn't have left time to debate politics. If you want to see past issues of my crypto newsletter, go Crypto News for Realtors. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Have a productive week and stay crypto-curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me. PPS - Here's our Thanksgiving menu if you want some ideas for 2023. CRYPTO NEWS ▸ Uh Oh, Is Crypto Lender Genesis Going to Fail? As in any ecosystem, the crypto ecosystem is built on connections. When FTX collapsed, we knew that its failure would impact many other companies. Over the past week, a lot of attention has been on Barry Silbert and Digital Currency group, the owner of Genesis Global Capital (GCD). Genesis was a trading partner with FTX and had $175M in assets with FTX. The money was frozen when FTX filed for bankruptcy. Shortly after FTX's bankruptcy, Genesis halted withdrawals and on Tuesday, November 22, Silbert said, "Genesis leadership and their board decided to hire financial and legal advisors and the firm is exploring all possible options amidst the fallout from the implosion of FTX.” Essentially, Genesis is seeking expert counsel to avoid bankruptcy. A failure of Genesis could be worse than the FTX failure. The Financial Times said, "Genesis is the biggest trading desk for professional investors in cryptocurrency markets." The Genesis website shared these 2021 stats: $116.5B in Spot Volume Trading (financial instruments are traded immediately), $130.6B in Loan Origination (loans provided), and $53.8B in Derivatives Trading (financial contracts, usually leveraged, that either mitigate or assume risks). Genesis was the biggest creditor to Three Arrows Capital when it went into bankruptcy. Genesis' parent company GCD covered the $1.1B loss. Genesis sits at the center of crypto markets. Large crypto traders ("whales") and family offices rely on Genesis to pay the yield on their crypto funds. Also, retail crypto exchanges like Gemini use Genesis for their "Earn" product. DCG has over $2B in debts. Other crypto companies owned by DCG include Grayscale, the world's largest digital currency asset manager and Foundry, the largest bitcoin mining pool. ▸ Binance Shares Reserve Info Binance, the largest crypto exchange, released its proof-of-reserves systems to show the world it is financially sound. For those holding bitcoin at Binance, the company showed it has a surplus of 6,742 bitcoin, or $111M. Overall, Binance has a 101% reserve ratio. ▸ Perils of a Crypto-Friendly Bank Silvergate Capital Corp. remade itself from a small commercial lender to a bank serving the crypto market. It had FTX deposits, but no loans to FTX, according to company statements. However, given its close ties with the crypto industry, it is being viewed as vulnerable. The Wall Street Journal reported that "short bets against Silvergate have doubled this year. It is the second-most heavily shorted regional bank, based on percent of shares outstanding, according to data from S3 Partners." Silvergate has an exchange network that connects the bank accounts of investors to exchanges. This is known as an on-ramp to cryptocurrency exchanges. CRYPTO CLASS – A Run On The Crypto Bank Whenever there is bad news about a crypto company, customers become nervous, panic ensues followed by requests from customers to withdrawal their funds. If the company cannot assure its customers that they are solvent, frenzied withdrawals overload the system resulting in a crisis for the bank and its customers. We saw this two weeks ago. On November 6, 2022, the largest crypto exchange, Binance, announced on Twitter that is was selling hundreds of millions of FTX's token FTT. The announcement precipitated a "run on the bank" and $4B was withdrawn that day. The next day, $6B. And then on November 8, FTX could not meet customer withdrawal requests. Three days later on November 11, the CEO resigned and the company filed for bankruptcy. To most of us, bank runs are associated with the Great Depression and the classic movie "It's a Wonderful Life." In the 1930s, people heard stories about banks not being able to return funds to customers and panic spread across the country. In 1933, the government responded to the banking crisis by creating the Federal Deposit Insurance Corporation (FDIC) which insured customer deposits. Today, the amount is $250,000. Banks become FDIC insured by meeting rigorous standards.Bank customers know that their funds are safe because the FDIC protects them. If a bank is overwhelmed by withdrawal requests, the bank can borrow funds from other institutions. Also, most bank customers probably do not realize that banks do not have cash reserves on hand for all customer deposits. This is by design. It allows banks to use the capital for lending. This system is know as fractional reserve banking. There is no FDIC for crypto lenders or exchanges, especially those outside the US. However, this does not mean that bad actors can't be prosecuted for fraud and existing laws. The SEC has been aggressive in filing enforcement actions against crypto companies it believes violated securities laws. Crypto bank runs will continue. Responsible companies will support smart legislation and publish their reserve amounts in an attempt to stave off customer worries about inadequate available funds. INFLUENCERS - People to Follow Barry Silbert – @BarrySilbert Silbert is the Founder/CEO of Digital Crypto Group (DCG), parent of Grayscale, Genesis Trading, CoinDesk and other companies. DCG has invested in over 200 crypto startups. Prior to DCG, Silbert sold his company, SecondMarket, to Nasdaq. Forbes estimates his network at $2B. RESOURCES – Books, websites, podcasts, interview, articles THE SCOOP. A podcast by The Block by Frank Chaparro with a lot of fascinating guests. CRYPTO WORD – Rehypothecation Rehypothecation is the practice where banks, and even the brokers themselves, use assets that have been posted as collateral by their clients for their own purposes. Clients that permit rehypothecation of their collateral can be compensated through a lower cost of borrowing or a rebate on fees. (Source: Coinmarketcap) OH, ONE MORE THING – In the 1946 movie "It's A Wonderful Life," bank president George Bailey (played by James Stewart) tries to persuade customers not to withdraw their money during a bank run. Today, crypto CEOs try to reassure nervous customers on Twitter.

  • Crypto News for Realtors – Issue 42

    November 20, 2022 | Issue 42 – SPECIAL ISSUE: FTX SAM BANKMAN-FRIED, A VERY BAD DUDE Over the past 42 weeks, I’ve documented the rise of crypto, the short-lived excitement of using NFTs to purchase houses, the sudden collapse of several exchanges during the summer that decimated the crypto market, and crypto's transformation from an asset that was a hedge against inflation to one that followed the S&P. During this volatile time, crypto news found a new face for crypto. Instead of the relatively reclusive founder of Ethereum, Vitalik Buterin, the media started profiling 30-year old Sam Bankman-Fried ("SBF"). Bankman-Fried was the CEO of the $32B crypto exchange FTX and Alameda Research. He was commonly described as a wunderkind. He built a personal brand of a nerdy, brilliant, crypto leader whose mission was to bring crypto to the masses and redefine finance. SBF dressed the part – shorts, t-shirts, wild head of curls. He was on the cover of influential magazines, such as Fortune. He shared a stage with Tony Blair and Bill Clinton. He projected an anti-greed capitalist image by embracing the new Effective Altruism philosophy of earning as much money as possible, living modestly, and donating everything else to help others. When SBF was interviewed, he didn't come across as arrogant or disingenuous. He seemed brilliant, likable, and most-importantly, trustworthy. SBF used his money and fame to gain access to Washington's power brokers. He met with leaders and staff of the SEC and CFTC, US Senators and Representatives. And then.... poof. It was all gone. In a shockingly short period of time, FTX, Alameda Research, and the 100 plus other entities controlled by Bankman-Fried went into bankruptcy. Bankman-Fried was fired. The impact of FTX's failure on the crypto industry will be profound. In this issue of Crypto News for Realtors I will unpack what happened. Before we jump into the FTX debacle, you are likely wondering how will this impact crypto and real estate. Extensive news coverage of this spectacular crypto business failure and its financial impact on investors and FTX employees has ignited a fire under the collective butts of the legislators and regulators. The crypto industry will be reined in. Investors will be protected and the benefits of crypto will be realized – lower transaction costs, exponentially faster transfers of international payments, increased security and transparency on a decentralized and public ledger (blockchain), and opportunities for world's bankless population to acquire property and build wealth. Don't give up on crypto because of the FTX headlines. Crypto isn't going to disappear. In 2023, the crypto industry will grow up. The benefits of crypto, institutional endorsements, and regulatory safeguards will give people the comfort and confidence that crypto is more than a speculative investment. It will become another asset in your homebuyers' portfolios. Keep the faith and never stop educating yourself about crypto. If you want to see past issues of my crypto newsletter, go Crypto News for Realtors. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Have a productive week and stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me. CRYPTO NEWS – FTX IMPLODES ▸ The Life & Death of FTX Sam Bankman-Fried's $32B crypto trading firm FTX not only imploded, it caused a $150B loss in the crypto market in three days after FTX's token FTT, dropped 80%. Here are the key events explaining what happened: 1. 2017 - Alameda Research was founded by SBF. 2. 2019 - FTX was founded by SBF. He had a majority stake in both entities and the businesses were intertwined. 3. Binance, the largest crypto exchange, invested in FTX. 4. FTX grew rapidly and Binance sold its equity back to FTX. A portion of the payment was in FTT tokens. 5. Spring and summer 2022 - FTX purchased and provided loans to several large failing crypto firms. 6. Nov 2, 2022 - CoinDesk published an article by Ian Allison that disclosed a leaked Alameda balance sheet. It showed of $14.6B of assets, the biggest asset was $3.66B of FTT and after that was $2.16B of FTT collateral. 7. Nov 6, 2022 - Binance announced it would sell hundreds of millions of FTT. This precipitated $4B in withdrawals. A backlog of FTT sale requests started. 8. Nov 7, 2022 - $6B of FTT was withdrawn. 9. Nov 8, 2022 - FTX could not meet customer demand for withdrawals and there was a "liquidity crisis." Binance signed a Letter of Intent with FTX to acquire the company. 10. Nov 9, 2022 - Binance withdrew its offer after starting its due diligence. The Wall Street Journal reported that FTX used billions of customer funds for its crypto trading firm. The failure of FTX to segregate and protect customer funds is the central reason for FTX's failure. 11. Nov 11, 2022 - SBF resigned and filed for bankruptcy. It was the largest crypto bankruptcy filing. ▸ The Autopsy Begins FTX's new CEO, John J. Ray, III, oversaw Enron's bankruptcy. He reported to the court in a filing, "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” Among the major problems flagged by Ray... ● No accounting department. ● No human resources department. Ray could not obtain a list of employees. ● No records of real estate purchased by the company. ● A $1B loan from FTX to Sam Bankman-Fried. ● Alameda spent over $8B to acquire startup by trading on credit that no other firms received. ● No records of board meetings. ● No records of customer asset deposits. After reviewing available financial statements, Ray said that he lacks confidence in the records. He cited examples of inadequate procedures, such as payment request submitted on chat platforms with supervisors giving approvals with emojis. Bloomberg opinion columnist Matt Levine questioned how other FTX leaders could claim to be shocked by these practices. Levine wrote, "On the one hand, it does seem like FTX was what you’d get if a half-dozen college buddies ran a global financial exchange with no supervision. On the other hand, there were in fact hundreds of employees, including a chief regulatory officer. They resigned in shock when they learned about FTX’s insolvency and its misuse of customer money. But presumably they knew about the … emojis in the chats? It is one thing for a small group of top executives, who all live with each other, to do intentional fraud and keep it secret from the rest of the company. But the 'complete failure of corporate controls and … complete absence of trustworthy financial information' seems like something someone might have noticed." Expect to see continuous coverage of FTX's failure and hearings on Capitol Hill. OH, ONE MORE THING – Crypto leaders have been making the rounds on business shows to explain why the FTX failure will not kill bitcoin. Strike CEO Jack Mallers explains why bitcoin is insulated from FTX. Thanks for reading! See you next week.

  • Crypto News for Realtors – Issue 41

    November 9, 2022 | Issue 41 – BREAKING NEWS! CRYPTO'S LEHMAN BROTHERS MOMENT? As the US focused on elections and which party will control Congress, the crypto world experienced a major shock. FTX and Alameda Research, led by the dynamic 30-year old billionaire CEO Sam Bankman-Fried, signed a Letter of Intent with Binance, agreeing to be acquired. What? Why? What does this mean for crypto? Is this why crypto prices are plummeting? I wanted to share this major crypto news with you as soon as possible instead of waiting until Sunday. Also, I will be unplugged for the rest of the week and through the weekend to celebrate my daughter's wedding. Keep an eye on the crypto news over the next week. There will be a lot of crypto stories as soon as election news quiets down. If you want to see past issues of my crypto newsletter, go Crypto News for Realtors. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Have a productive week and stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me. CRYPTO NEWS – BREAKING NEWS ▸ #1 CRYPTO EXCHANGE BINANCE RESCUES #2 FTX FROM COLLAPSE On Tuesday, Binance agreed to buy FTX and Alameda Research after FTX experienced a fatal "liquidity event." This occurred after a multi-day public spat on Twitter between Sam Bankman-Fried ("SBF"), founder of crypto trading firm Alameda Research and FTX, and Changpeng Zhao ("CZ"), founder of Binance. The tweets started on Sunday in response to a report from CoinDesk which revealed that Alameda's balance sheet relied upon FTT, FTX's token. The market cap of FTT was $3 B, but it was illiquid. Large selling orders of FTT would cause a cascading drop in price that could damage FTX. CZ announced on Twitter that Binance would liquidate its FTT holdings, worth about $580M as of Sunday. CZ and SBF have a history of publicly disagreeing how to handle regulators. SBF regularly visits DC and wants to help shape the dialogue among industry leaders, legislators, and regulators. CZ, by contrast, is less visible in DC. CZ compared FTX risk with the Luna cryptocurrency that collapsed earlier in 2022. The drama that began on Sunday, ended Tuesday when CZ and SBF announced that Binance would acquire FTX.com. They tweeted: "To protect users, we signed a non-binding LOI [letter of Intent], intending to fully acquire FTX.com and help cover the liquidity crunch." SBF added, "A huge thank you to CZ, Binance, and all of our supporters. Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in.” Until this incident, SBF's companies were viewed as crypto's savior when they bailed out firms on the brink of collapse like BlockFi and Voyager Digital. ▸ SBF... WHAT HAPPENED? Bloomberg Opinion columnist Matt Levine, explained, "A crypto exchange is a weird sort of business, in many ways more like a brokerage than a traditional exchange. The simplest way to run the business is to take deposits from customers, buy crypto for the customers, keep everything segregated, and make money on commissions." A friend who works at US crypto exchange explained, "I view this as a failure of Alameda Research, which is inextricably linked to FTX, which caused a bank run that necessitated a rescue. The thing that kicked this off was Alameda held a ton of FTT and Solana, which are not liquid, and then to make matters worse they borrowed USD using their FTT and SOL as collateral. When FTT and SOL fell apart, Alameda fell apart. This caused a bank run on FTX, causing Binance to be able to scoop them up." ▸ MESSAGE FROM THE VICTOR CZ said that the lessons learned from FTX's forced sale to Binance: ● Never use a token you created as collateral. ● Don’t borrow if you run a crypto business. ● Don't use capital 'efficiently.' Have a large reserve." Jeremy Allaire, co-founder and CEO of Circle, said this was crypto's Lehman Brothers moment. Allaire used FTX's crisis as an opportunity to highlight the financial stability of its stablecoin, USDC, which is backed by US treasury bonds and cash. US Senator Cynthia Lummis, R-WY, said that her crypto bill that was co-sponsored by Sen Kirsten Gillibrand, D-NY, provides essential regulation "ensuring customers are protected while still promoting responsible innovation." Shaan Puri explained what happened in a tweet thread that recites the key moments (Think... slow motion analyses of a horrible car crash.) ‣ "Here's the 30 second summary of the FTX drama that is blowing up in crypto. ‣ 1/ How FTX (a multi billion dollar co) almost died overnight ‣ 2/ And why this is a god tier strategic move by Binance. OK so it starts years ago. Binance was an early investor in FTX. ‣ But FTX starts growing like crazy. They become the #2 biggest exchange. ‣ Steph curry, tom brady, they cut huge marketing deals. ‣ SBF becomes the famous "fro of crypto." ‣ They started as friends, now competitors. Binance #1. FTX #2. (coinbase and others are smaller) ‣ Binance decides to sell it's stake in FTX. As part of the buyout, they agreed to take $2B of it in "FTT" -- a token that FTX created that it uses for trading fees. ‣ So now - Binance and FTX are friendly competitors. ‣ Binance owns a sh*t ton of FTT ($2B). There's not a lot of FTT trading volume (this is important soon). ‣ Two days ago, CZ comes out and says SBF has been talking sh*t about them to regulators lobbying in a way that would hurt binance. So he announces publicly on twitter to his 7M followers that he's going to DUMP his entire $2B FTT stash. ‣ Anyone holding FTT knows this is bad news. $2B of sell pressure would crush price, so they start to panic sell. ‣ Price of FTT drops like 15-20% overnight. ‣ Nobody wants to buy FTT (too risky, a whale is about to dump) and everyone wants to sell. Numbers go down. ‣ Enter Alameda - the hedge fund/market maker Sam started before FTX. ‣ They are kings. But news leaks showing the emperor has no clothes. They have ~$12B in assets, $7b ish in liabilities...but half their "assets" are in FTT token which is plummeting & illiquid. ‣ Alameda might die. ‣ If Alameda is in trouble, FTX might be too. They are sorta sister companies. Market makers on FTX. And possibly hold/trade customer deposits. The relationship has been unclear for years. (achilles heel?) ‣ But most people think of FTX as a blue chip company. Sam is famous. He's a genius right? ‣ They wait for him or Alameda to show they are in good health. *narrator* but they were not in good health. ‣ Sam tweets saying everything is "fine" but it feels to all of crypto like a girlfriend saying "I'm fine" but she's not fine. ‣ Alameda's CEO comes out and says they will "happily" buy the FTT token as it plunges. But something tells us that it's not so happy, even with the exclamation mark. ‣ 24 hours pass. If they had the financial strength, they would have shown it by now. ‣ This starts to feel like the "steady lads" moment right before luna collapsed. ‣ People freak out, start withdrawing funds from FTX. Ya know, just in case it collapses like celsius, blockfi, voyager, luna all did in the past year ‣ $1B+ of withdrawals. FTX is facing a liquidity crunch. ‣ More silence (wtf), withdrawals paused on FTX (double wtf). ‣ Then today - @SBF_FTX comes out and says they are entering a "strategic transaction" with binance strategic transaction? ‣ CZ clears it up "FTX was in trouble. We bought them to save them." ‣ Binance basically started a rumor, made a threat, and ended up buying its biggest competitor overnight. ‣ For now the drama ends, crypto crisis averted. ‣ If FTX failed...that would have been devastating for all of crypto. ‣ Sam had become the main character. you never want to be the main character." CRYPTO CLASS – Crypto Industry Invests in Candidates In Paul Kiernan's WSJ article about crypto dollars flowing to 2022 election candidates, Kiernan reports that over $73 M was spent compared to $13 M in 2020. This year, the industry also spent $15 M on lobbying through September. The industry is being scrutinized by regulators like the SEC who argue that much of the crypto industry is skirting investor protection laws. Kiernan reported that there have been over 100 enforcement actions against crypto entities and the SEC has doubled the size of its crypto department. Industry leaders recognize that reasonable regulations are necessary for crypto to become widely accepted. Unlike most legislative matters, crypto enjoys support from both political parties. “These midterms are the most important elections for this crypto community,” said Hermine Wong, a policy director at Coinbase, the largest U.S. crypto-trading platform. “We believe that the legislators who will be coming in this cycle will be able to finally draft legislation to govern this space.” Crypto contributions exceed political contributions from the auto and defensive industries combined. The industry is urging its favored members of Congress to support legislations that provides regulatory protection to investors without being overly burdensome. INFLUENCERS - People to follow Lev Menand – @LevMenand A professor at Columbia Law with expertise in money, banking, central banking, economic governance, admin law, and separation of powers. His recent book on the Fed, "The Fed Unbound" got terrific reviews. It's on my reading list. RESOURCES – Books, websites, podcasts, interviews, articles, videos Robinhood's investment app has an excellent library on investment concepts and also foundational articles on crypto. CRYPTO WORD – Store of Value A store of value can be an asset or currency, as well as a commodity. Many commodities are actually products that maintain their value throughout a prolonged period of time. An item can be considered as a store of value if its value is either stable or can increase over time, but does not depreciate. Gold, as well as other precious metals, are a good store of value due to the fact that their shelf lives are perpetual. A nation's currency has to be a reasonable store of value for its economy to be able to function smoothly. (From CoinMarketCap) OH, ONE MORE THING – There will be a flood of crypto memes about CZ's acquisition of Alameda/FTX. This one shows CZ carrying a sink into Alameda's office. It's a play on an image that Elon Musk tweeted showing him carrying a sink on his way into Twitter's office. Thanks for reading! See you next week.

  • Crypto News for Realtors – 40

    November 6, 2022 | Issue 40 Elon Musk's purchase of Twitter has captured a lot of headlines. The stories highlight Elon's flip-flopping – – I'm thinking of buying Twitter. – No, just kidding. – Oh wait, here's a real offer with proof of funding, let's do it, I'll sign an agreement. – Damn, the economy changed. I'm not going ahead with the deal because my offer price is way too high and by the way, Twitter has a gazillion bots who aren't real users. – Let's lawyer up. See you Twits in court. – This lawsuit is stupid. Ok, I'll buy Twitter as promised. Now that Elon's purchase is done and it's his company, the conversation has shifted to how he will transform the company. There are concerns about one man having control of the world's public square. How will Elon, a guy who is known to be pretty filterless with his own speech, handle inflammatory, racist, or antisemitic tweets? How will Elon transfer Twitter into a thriving business enterprise? Lots of big challenges, but Elon has an unmatched track record of solving difficult problems. Tesla – Transforming the auto industry from fossil fuel to electric vehicles. SpaceX – Modernizing and privatizing space exploration. The Boring Company – Building a transportation network underground. Neuralink – Engineering a connection between the brain and computers. This is man who should not be underestimated. An important piece of Twitter will likely be a payments protocol that would incorporate crypto. Keep an eye on how Elon transforms Twitter. If you want to talk crypto, reach out to me. If you want to see past issues of my crypto newsletter, go Crypto News for Realtors. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Have a productive week and stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me. CRYPTO NEWS ▸ CHIEF TWIT ELON MUSK WILL REMAKE TWITTER After being forced to comply with his contractual agreement to purchase Twitter for $44B, Elon Musk followed through with his stated plan to make Twitter a private company. It will be delisted from the New York Stock Exchange on November 8. Firings started immediately with executives and the board of directors. On Friday, close to half of the employees received an email stating – "Today is your last working day at the company." Musk's immediate focus was to cut costs and find a revenue source in addition to advertising. He announced that Twitter users could pay $8 a month for a blue check-mark that verifies the account is legitimate. This service had been free and was used by influencers, celebrities and journalists. What's his vision for the company? During an investment conference, Musk said Twitter could become the most valuable company in the world. One way to accomplish this would be for Musk to replicate WeChat's "super app" model and transform Twitter into an app that offers the services and features that most of us use on multiple apps. WeChat provides services to over 1.2 billion users. Some of the app services include text and voice messaging, video calls, conference calling, photo and video sharing, gaming, creating a "public account" that displays location, and digital payment services. Given Musk's history as a PayPal founder and his interest in crypto, many crypto commentators expect that he will explore Twitter becoming a crypto payment platform. ▸ SEC Charges Trade Coin Club Founder and Promoters The Securities & Exchange Commission brought charges against four individuals alleging that the crypto-trading membership club Trade Coin was a Ponzi scheme. The SEC claim that the defendants enticed over 100,000 investors with false promises of making a 0.35% daily return on their investment from a trading bot. Instead, the trading club paid out returns with investor deposits. SEC Chair Gary Gensler said, “Fraud is fraud, regardless of the types of investors you have defrauded and the types of securities used in the fraud.” ▸ NY Fed Tests Digital Currency Speed Foreign exchange (FX) transactions take two days. In a simulation of central bank digital currency (CBDC) sending digital currencies, the process took 10 seconds. The NY Fed's New York Innovation Center tested the speed of FX transactions using distributed ledgers. The experiment was part of a research project looking into CBDC benefits. Michelle Neal, the head of NY Fed's market group, said, “This indicates that a modular ecosystem of ledgers has the potential for continued scalability, and that distributed ledger technology could enable settlement times well below the current industry standard of two days, with the added guarantee of atomic settlement.” CRYPTO CLASS – Digital Asset Industry Standards – A Draft by FTX's Sam Bankman-Fried On October 19, 2022, the CEO of FTX, Sam Bankman-Fried aka "SBF," published "Possible Digit Asset Industry Standards." It caused a lot of industry conversation because it followed news reports about Bankman-Fried meeting with key legislators on Capitol Hill. The report discusses many important industry and regulatory issues. Here are a two of the seven standards: ● Hacks & Accountability Hacks are an unfortunate risk to the crypto ecosystem. A common scenario is for a hacker to find a vulnerability in the computer code and steal funds from a crypto company. The hacker then communicates with the victim company (or protocol) and the parties negotiate. The protocol seeks to recover the stolen crypto and the hacker requests immunity and a reward for identifying the software vulnerability. SBF proposed an industry response: Customers must remain whole. The hacker would not receive any money owed to customers. The hacker agrees to cooperate and return the bulk of the assets. The hacker gets to keep 5% or $5m, whichever is the lesser amount. The hacker must return the funds within 24 hours. ● Tokenized Equities Blockchain technology has a lot of potential to improve traditional market infrastructure. Retail stock transactions go through a large number of entities and can take days to settle. He gave an example where there can be over 15 entities for a single investment. A settlement in USD can take months for ACH and credit cards. SBF cited an example – On January 28, 2021, retail investors bought large amounts of certain equities (GameStop and AMC) and there were billions of dollars of unsettled gains. By contrast, digital assets can trade and settle instantly. "If Alice wants to buy SOL from Bob in return for USDC, Alice sends the USDC on-chain to Bob, Bob sends back the SOL, and a few seconds later–with just ~$0.0005 in fees–the trade has fully settled, with no outstanding settlement uncertainty or risk, and so essentially no regulatory capital necessary. And if two platforms had a transfer or transaction between them, they could just send the appropriate asset on the blockchain to the other one, once again clearing up settlement risk in seconds.... I think that tokenizing stocks could help simplify securities settlement, providing a stronger and more equitable market structure for retail." INFLUENCERS - People to follow David Hoffman – @TrustlessState Hoffman is co-founder of BanklessDao, a decentralized community with a mission to help the world be bankless. Hoffman began his professional career starting in the cryptocurrency and blockchain industry. Hoffman has been consulting and advising blockchain startups since 2017. RESOURCES – Books, websites, podcasts, interviews, articles, videos Most real estates and entrepreneurs know Gary Vaynerchuk (Gary Vee). One of his childhood businesses was collecting baseball cards. In 2021, when collectible NFTs became popular, he jumped into the new industry and created a line of collectible NFTs, Vee Friends. CRYPTO WORD – Binary Code Binary code is the most basic form of programming data that a computer can directly comprehend. It is made up of a series of 0s and 1s that is organized and structured so that it can be received and processed as part of a bigger computer application. (From CoinMarketCap) OH, ONE MORE THING – Elon Musk tweeted on Nov 1, "Totally stole idea of charging for insults & arguments from Monty Python tbh"

  • Crypto News for Realtors – Issue 39

    October 30, 2022 | Issue 39 VIEWING CRYPTO FROM OUTER SPACE We can look at crypto from different perspectives. We can focus on the details, like how Ethereum transitioned from the proof-of-work protocol to proof-of-stake. We can look at an entire area of crypto like NFTs. Or we take a 30,000 foot view and look at the broad constructs of crypto. I have done this during presentations when I discussed crypto currencies, stablecoins, NFTs, and crypto real estate in a short 30-minute presentation. However, there's another way to view crypto, from a satellite 12,000 miles high. Satellites can zoom out and see the entire field of vision or zoom in to see great detail. This week, the great Bloomberg Opinion writer Matt Levine wrote a 40,000 word story about crypto which is Bloomberg Magazine's entire issue. It is entitled, "The Only Crypto Story" and it is a satellite view on crypto. Levine, formerly a lawyer and investment banker, has a huge following because he explains complex business and finance topics with wry humor. I often laugh out loud when I read his emails. I have been reading The Crypto Story and it's wonderful. He covers crypto in four parts: 1) Ledgers, Bitcoin, Blockchains; 2) What Does It Mean?; 3) The Crypto Financial System; and 4) Trust, Money, Community. Here is one excerpt that I highlighted: "I don’t have strong feelings either way about the value of crypto. I like finance. I think it’s interesting. And if you like finance—if you like understanding the structures that people build to organize economic reality—crypto is amazing. It’s a laboratory for financial intuitions. In the past 14 years, crypto has built a whole financial system from scratch." As real estate brokerage takes a breather from the past two years and if one of your goals has been to learn about crypto, start reading The Crypto Story. If you do, shoot me an email and let me what you think of it. I love to talk about crypto. All past issues of Crypto News for Realtors can be viewed on my website. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Have a productive week and stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me. CRYPTO NEWS ▸ How Was Venture Firm Andreessen Horwitz's Timing When It Invested Heavily in Crypto In 2021? Andreessen's 2021 $4.5B crypto fund lost about 40% of its value the first half of 2022. This was a much larger loss than other crypto funds. The Wall Street Journal reported that Chris Dixon, Andreessen's lead partner on crypto, states that crypto is still in its early stages of finding its users and he is unsure when there will be mass adoption. Dixon said, crypto “is about the political and governing structure of the internet. We have a very long-term horizon.” The firm also purchased tokens of many of the firms they funded. This paid handsomely during the crypto bull market and the firm made over 10 times its initial investment after fees. ▸ UK Prime Minister Rishi Sunak Appears Focused on Crypto Before becoming Prime Minister, Sunak was the finance minister and argued for UK to become a crypto hub. UK law makers are now focused on how to regulate stablecoins, crypto currencies whose value is tied to a stable currency or commodity, like the US dollar or the British pound. Economic Secretary to the Treasury Andrew Griffith said, "Certain crypto assets and distributed ledger technology could drive transformational changes in financial markets. The government's position is to start with those most stable, least volatile coins likely to be used by intermediaries as a settlement currency and then we will go forward and consult from there." The Labour party is bit more cautious, but acknowledged that delaying crypto laws is also problematic. Tulip Siddiq, spokesperson for Labour party's Treasury matters, said, "A delay to crypto laws risks leaving our country behind in the fintech and blockchain race. In the absence of a comprehensive regulatory regime, the U.K. risks becoming a center for illicit finance and crypto activity.” ▸ Digital Artist Beeple Builds a Digital Art Museum In Charleston, SC In March 2021, NFTs captured headlines around the world when digital artist Mike Winkelmann, known as Beeple, sold a digital collage at Christie's for $69M. The attention garnered by the sale was the catalyst for the NFT craze. At a recent Wall Street Journal tech conference, Winkelmann announced that he is building a museum in Charleston that will profile the work of digital artists. His goal is to showcase "the actual experience of digital art, rather than the speculation surrounding it." Winkelmann wants to help emerging artists during the downturn. As reported in the WSJ, Winkelmann said, “We are definitely in a crypto winter. People are hyper focused on prices and things like that, and I think the correct focus would be who is building things that will have long term value in the space…The fundamental technology has not changed in the last six months. If you’re focused on delivering products that people find enjoyable or useful, you’ll be fine.” CRYPTO CLASS – Blockchain Trilemma Blockchains have three goals: scalability, decentralization, and security. However, only two of these goals are attainable. Scalability allows the blockchain to process a lot of transactions. Decentralization means that the blockchain does not rely on a small number of computers. A secure blockchain means that a minority of computers on the network cannot successfully attack it. The two largest blockchains, Bitcoin and Ethereum, account for almost 60% of the crypto industry market cap. They focused on decentralization and security. Their challenge has been speed because their network of computers are vast. If instead, those blockchains were on a handful of computers, they would operate faster. But, they would lack security. A solution to scalability is to build another layer on top of the blockchains. The Lightning Network is a "Layer 2" payment system on the Bitcoin blockchain that facilitates payments without running them through the blockchain. INFLUENCERS - People to follow Tim Draper – @TimDraper A third generation investor whose investment track record includes, Skype, Baidu, and Tesla. In 2014, Draper purchased 30,000 bitcoin for $19M ($633 per BTC) in a US government auction of bitcoin seized from Silk Road. Draper funded Twitch, a live-streaming video gaming platform, which was sold to Amazon for $1B. A not so successful investment was Draper's early investment in Elizabeth Holmes' Theranos. Draper also invested in Robinhood, Coinbase, and eShares. RESOURCES – Books, websites, podcasts, interviews, articles, videos Bloomberg Magazine's special issue on crypto. Written by Bloomberg Opinion columnist Matt Levine. CRYPTO WORD – REKT In the crypto community, rekt often refers to someone who has experienced a heavy financial loss due to a wrong trade or investment. For instance, let’s say Bob invests more than half his savings on XRP just after its price soared. And a week later, the price of XRP nosedived to less than 20% of the previous week’s value due to problems with regulation. In this case, Bob has gotten REKT. (From CoinMarketCap) OH, ONE MORE THING – Thanks for reading! See you next week.

bottom of page